The Issue of Ethical Consumerism as a Business Strategy in Starbucks Corporation - Case Study Example

ETHICAL CONSUMERISM AND BUSINESS Client Insert Name Client Insert Institution Client Insert Date Executive Summary Ethical consumerism is a business strategy that is informed by the idea of businesses being socially responsible in their undertakings. Under this concept, consumers base their purchasing decisions on ethics and morality preferring to purchase and conduct business with those organizations that are socially responsible and ones that give back to the society. The way ethical consumerism is understood in different industries differs appreciably based on the kinds of products and services that are provided in these industries. For instance, in the food industry, ethical consumerism refers to the perception that consumers have regarding the manufacturing, processing, and distribution of the food products sold. Where animal meat is involved for example, consumers would prefer those products where the animals were raised ethically and killed humanly and where drinks are involved say coffee, consumers will be keen to support companies that pay their workers well and respect and protect the environment. This paper discusses the issue of ethical consumerism as a business strategy and how it affects businesses around the world. Starbucks Corporation is used to shade light further on this concept talking about different strategies that the company has that can be linked to ethical consumerism. Table of Contents Table of Contents iii Introduction 1 A Brief Overview and Analysis of Ethical Consumerism 1 Potential Business Responses in light of Ethical Consumerism 3 Review of Starbucks Concept of Ethical Consumerism 4 Details of Starbucks Sustainability Report and Social Agenda 6 Results of a Short Opinion Survey 6 Conclusion 7 Recommendations of Improvements for Starbucks Corporation Social Programs 8 Bibliography 9 Appendix: Survey Questionnaire for Factors affecting Purchasing 10 Introduction The concept of Ethical Consumerism refers to the preference by most consumers to purchase goods that have been produced and manufactured following good ethics and in respect to the environment. According to Mcdaniel (2011), ethical consumerism introduces an element of market forces focusing on the way products and goods are manufacture, distributed, and marketed within the market to their intended audiences. The concept introduces an ethical consumer as someone who buys only those things that are produced ethically within the market. Ethical production varies widely depending on the context of the product expanding the perception of ethical consumerism to incorporate such attributes of production as recycling, production using proper labour channels (not slavery etc), or producing foods that is free range and organic in nature (Mcdaniel, 2011). This paper provides a detailed discussion about the ethical consumerism and how it affects business. The paper does this by discussing various perceptions proposed by ethical consumerism as far as business development is concerned and will provide the case of Starbucks Company and how it operates ethically within its market. A Brief Overview and Analysis of Ethical Consumerism As has been defined in the introduction, ethical consumerism is a broad business philosophy that informs the transformation of business strategies towards providing products that are appealing to the consumers’ best selves. Ideally, the concept seeks to combine ethics and business as a driving force for business development informed by the fact that consumers are becoming largely influenced by morals and ethics of business in their purchasing behaviours (Weiss 2009). This means that consumers will generally prefer to engage in businesses that are ethically sound and ones that support some given causes within the community. For instance, the concept argues that most consumers would prefer to engage in purchases that include donations to some charitable causes as opposed to those that are purely business oriented without a social angle in their development. This is one way of looking at it. There are critics of ethical consumerism who argue that it is a business concept that does not promise much business millage for organizations viewing the whole strategic pessimistically based on the fact that ethical brands still report lower sales as compared to their profit-oriented competitors (Weiss 2009). In other words, the critics of ethical consumerism hold that if consumers in the market were to be concerned with moral issues in the purchasing behaviors, companies that are ethical and do the right thing in the market would have larger market share. This is not the case in the market as ethical brands are not necessarily the best performing companies in the market and therefore ethical consumerism may actually be a business strategy that does not have a bright future (Jones & Parker et al. 2005). Be that as it may, ethical consumerism has continued to gain popularity even if the evidential proof associating it to business success in the market is not as apparent as it was initially thought. In the words of Murphy (2002), there are specific characteristics that define the key things that determine what ethical consumers want in the market. Most consumers today want to purchase foods that are ethically prepared and sourced. For instance, consumers want to eat animal proteins (such as eggs, beef, chicken etc) that have been ethically prepared and processed. This means that when consumers know that a given type of Food Company raises and kills its animal products humanely or a coffee shop obtains its coffee from farms that properly paid the workers who grew it, they are more likely to prefer engaging in business with such firms (Jones & Parker et al. 2005). The clothing industry is equally another industry that is seeing a lot of developments towards ethically processed goods for consumers. It is the same as is the case in whole manufacturing industry which has come up with the concept informally referred to as, ‘eco-cycology’. This concept seeks through legislation, to obligate manufacturing companies to take back all of their products for recycling which has to be done innovatively and responsibly (Murphy 2002). This has led to the slogan, ‘trading in is the new buying’. In general terms, ethical consumers are mindful of the sustainability of the practices of the organizations that they engage in. They want to know that their business contribution for these organizations has a higher ethical value than just making business. It is based on this preference and perception that organizations are streamlining their social initiatives in a way that draws them closer to the society in the process making them to be perceived to be ethically responsible by their clients (Murphy 2002). Any big organization today operating in a large market has to ensure that it has an extensive social initiative program that gives back to the society as a way of making it ethically responsible. It is the new business branding strategy that is used by organization around the world. Potential Business Responses in light of Ethical Consumerism According to Murphy (2002), there are different ways in which businesses can respond in order to become ethically responsive to the needs in the market. This means that ethical consumers want more than just business success; they want something that is more than a good product sold for a good price. They are keener on ensuring that companies they trade with can demonstrate to varying levels of satisfaction the attributes detailed below of ethical business practice. These are the attributes that are important for organizations that would want to streamline themselves towards becoming more ethically responsive to increase their market base through ethical consumerism: The products manufactured use natural and pure ingredients The sourcing, production and distribution channels for the goods are ethical and acceptable For food products, consumers want to have clear information about nutrition and ingredients contained in them They want transparency and integrity in the way the business is conducted and run They want the entire business to have fair labor and honor of basic human rights for its workforce They want businesses that respect and protect the environment to ensure sustainability of environmental protection They want businesses that use ethical strategies for marketing and advertising They want businesses that prefer renewable and recycling packaging for their products as a way of being pro-environment They want organizations that give back to the society through social programs and initiatives Review of Starbucks Concept of Ethical Consumerism Starbucks Corporation is a Multinational Enterprise operating in coffee production, processing, and exporting situated in Seattle’s Pike Place market having began its operations as early as 1971 and has continued to be a catalyst of positive change in the many communities in which the firm operates (Starbucks 2011). The firm has over 17 000 stores and operates in more than 55 countries around the globe expanding its operations in consumer packaged coffee goods (Starbucks 2011). In order to refer to the company’s social initiative and how it fairs on with ethical consumerism, a review of its 2014 Social sustainability report is undertaken. The report is entitled, Starbucks Global Responsibility Report – Goals and Progress 2014. In the Starbucks’ Sustainability Report, the areas that are covered include environmental stewardship where it is discussed the manner in which the firm is adherent to the standard environmental operational requirements in the market and the industry in bid for it to be protective of the environment and prevent its degradation (Starbucks 2014). Then the report talks about the communities in which Starbucks operates and the kind of improvements that its social and community based operations have been of importance to these communities helping locals and establishing standard communal operations empowering the women, youth and the general society at large (Starbucks 2014). The Coffee market has traditionally be threatened with accusation that it has poor professional codes violating established international operation guidelines such as employing child labour in the African countries that produce the produce. The report seeks to alleviate fears that its sources of the product contain any of these violations by discussing ethical sourcing of its produce and the way the firm partners with producers as well as middlemen in its supply chain to ensure that international standards of business operation are med and adhered to through-and-through (Starbucks 2014). The report then provides information regarding areas where the community is involved in the operations of the firm as well as providing detailed information regarding its production and sales services to show the business success that has defined the firm’s operations over the years. In this regard, the report provides information regarding its 2011 sales reports and profit margins as well as costs of production and conducting business in the markets that Starbucks operates in (Starbucks 2014). This are provided under the backdrop of the firm’s goals and mission reviewed in a way that presents a clearer perception of its progress both in the market and in its own objectives (Starbucks 2014). Details of Starbucks Sustainability Report and Social Agenda Starbucks Corporation operates and trades in coffee and its subsequent products and services in production and supply. This means that the firm partners with farmers and producers of coffee mostly from Africa, Asia and Brazil where its operations involve partnering with these farmers to ensure that the production of the coffee to be processed by the firm are adherent to the strictest standards of business operation in the world (Starbucks 2014). In this regard therefore, the report delves adequately in matters of farming and sustainable approaches reminiscent to farming business and enterprises which involves reference to research extension processes, technology involvement to improve farming practices in the coffee industry and value addition strategies appropriate for the industry (Starbucks 2014). Starbucks is a multinational enterprise operating in different countries around the world for its production and sales market and this explains why the firm does not have any specific reference to a country tipped to be of greater importance than the others in which it operates. This notwithstanding, the market in US (which is the firm’s mother country) stands out as being operationally superior in terms of sales returns and business operation as compared to other countries in which the firm operates in (Starbucks 2014). Results of a Short Opinion Survey In order to have a clearer understanding of some of the key factors that affect consumer behavior a brief quantitative research was done by administering a simple questionnaire to 15 students at GSM London. They were required to simply indicate by marking on the questionnaire the factors that they considered most important in determining their purchasing behavior on a 5- linkert scale where 1 refers to the factor that is most important and 5 is the factor that is least important. From the results, the attributes that were considered most important can be broadly categorized into four main factors as follows: 1. Cultural Factors – this refers to factors that the consumer thinks are important based on their culture such as social class, and religion. 2. Social Factors – this refers to the factors that define the social standing of the consumer. Most of the respondents indicated that their purchasing decisions were influenced when referred by members of their social class. Social role and status also affects the way consumers make their decisions for purchase 3. Personal Factors – this refers to the factors that are specific to every consumer including age and way of life, purchasing power and revenue, and lifestyle. 4. Psychological Factors – this refers to the factors that affect the consumer’s psychology such as motivation and spirit of adventure that the consumer may have when engaging in a given purchase Conclusion From the evidence gathered both from the primary and secondary research conducted in this paper, it has been indicated that ethical consumerism actually is a very significant factor that determines consumer behavior in purchasing. From the four factors identified above as being important for consumers in making decisions, personal, psychological and social factor are largely definitive of the concept of ethical consumerism where consumers want to engage in purchasing and business in programs that are ethically responsible (Murphy 2002). In the view of Starbucks Corporation Sustainability analysis, these factors also play an important role in making the organization a better place. Recommendations of Improvements for Starbucks Corporation Social Programs Starbucks sustainability report can be improved in its content regarding personnel and human resource capital. The report does not contain detailed information regarding its human capital despite the central play the human resources play in any organization. The reason this information needs to be improved is because personnel in any firm are the ones involved in the day to day running of the firm and therefore if not well acknowledged may not be as enthusiastic as they ought to be and in the process lead to poor performance and hence lower profit margins (Cory 2004). Bibliography Cory, J. (2004). Activist Business Ethics. Boston: Springer. Starbucks. (2014). Starbucks Global Responsibility Report – Goals and Progress 2014. New York: Sage Publishers. Mcdaniel, C. (2011). “Theology of the ‘Real Economy”. Journal of Religion and Business Ethics, 2(3): 12 – 23. Weiss, J. (2009). Business Ethics: A Stakeholder and Issues Management Approach With Cases (5th ed.). Mason, OH: South-Western Cengage Learning. Jones, C. & Parker, M.; et al. (2005). For Business Ethics: A Critical Text. London: Routledge. Murphy, P. (2002). Marketing Ethics at the Millennium: Review, Reflections and Recommendations. Oxford: Blackwell. Appendix: Survey Questionnaire for Factors affecting Purchasing On a scale of 1 to 5 where 1 is most important and 5 is least important; what is the main factor that determines your purchasing behavior in the market? (Please tick where appropriate) Factor affecting Purchasing 1 2 3 4 5 Social Class      Religion and Customs      Reference and membership groups      Social Role and status (how the practice will look on the outside)      Age an way of life      Purchasing power and revenue      Lifestyle      Personality and way of life      Motivation towards that purchase      Self perception and impression that the goods/services bought have on you      Spirit of adventure and exploration      Beliefs and attitudes that you have about the product/service to be purchased      Read More