Measures and Indicators: GDP, national income, unemployment, inflation - Essay Example

Starbucks The purpose of this paper is to provide a critical discussion of the impact that external variables have on the bottom line of Starbucks. The format that this paper will utilize is to first provide a brief background on the organization followed by a discussion as to what extent the company is affected by Federal tax policy and make some predictions as to what changes might be forthcoming to Starbucks. Furthermore, this paper will discus what other parts of the Federal budget might have an effect on the organization.

According to the company website (2010) it is the case that Starbucks was founded in the 1970’s in Seattle with just a single store which operated as an independent coffee retailer, wholesaler, and vendor. The company kept a focus on regular American style coffee. It was not until the 1982 that Howard Schultz joined the company and introduced specialty coffees (Cappuccino, mocha etc) after a trip to Milan. With this business model in place the company began a massive expansion across the United States and internationally however it is important to not that the company kept this success without resorting to franchising their business model.

A Starbucks location is still centrally run from corporate. In regards to how the company is affected by Federal tax policy presents a tricky distinction for the company. Firstly it is the case that the company is truly global, with operations located across the entire globe and supplied by a vertically integrated supply and distribution network, it becomes difficult to place specifically how each federal tax policy affects the company in each country that it operates. In the American context it is the case that the company is most definitely affected by Federal tax policy.

According to Warnka (2009) it is the case that the tax measure 67 which affect businesses with operations in Oregon. Measure 67 places an additional tax rate amounting to 1/10 of 1% with a cap of $100,000. What this could translate to is a disproportionately higher tax increase on small businesses but a larger corporation such as Starbucks sees a negligible increase in their tax rate which ultimately would be capped at the $100,000 mark, whereas their smaller, independent competitors are likely to see this affect their bottom line.

What this translates to is a clear policy that ultimately has a negative effect on the bottom line of Starbucks however will ultimately negatively affect their smaller competitors more significantly. In regards to upcoming plans for the company, according to a 2008 investor relations press release the plan right through to 2011 expects a revenue growth of 5% with a three year annual growth rate of about 6% with compound revenues expected to be U.S.$14 by 2011 to be achieved through improvements across the distribution network and a more modest store expansion schedule.

In regards to some other aspects of the federal budget that might affect the operations of Starbucks, the first thing that comes to mind is federal funding for upgrades to seaports and airports. As it is the case that Starbucks ships in a great deal of the coffee to the United States and federal budget money that goes to these transportation network upgrades could positively affect Starbucks. According to The Baltimore Sun (1999) more than $11 million of federal money was allocated to upgrading airports in Maryland at the turn of the millennium which in the long run probably helps the distribution of the company’s products.

ReferencesThe Baltimore Sun (1999) Proposed Federal Budget has Millions for Maryland. [online] Available at http://articles.baltimoresun.com/1999-02-02/news/9902020079_1_research-proposed-federal-budget-montgomery-county Accessed on March 15th 2010.Starbucks Company Website (2010) About Starbucks- History. [online] Available at http://www.starbucks.ca/en-ca/_About+Starbucks/History.htm Accessed on March 15th 2010.Starbucks Investor Relations (2008) Financial Release. [online] Available at http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-newsArticle&ID=1137657&highlight Accessed on March 15th 2010.Warnke, E. (2009) Tax Policy Measures 66 & 67.

Salem News. [online] Available at http://www.salem-news.com/articles/november032009/taxes_2_ew.php Accessed on March 15th 2010.