Analysis Of Sustainability Of Starbucks Franchise Using Its Corporate Social Responsibility Approaches

Introduction into Micro Environment

Starbucks is a well-known coffee company that serves Arabica coffee. They are a striving company that aspires “To inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time. ” according to their mission statement. Their vision statement is “establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow”. Therefore their mission can be summarized in four main goals being premier purveyance, finest coffee in the world, uncompromising principles and finally growth. Starbucks also has 6 core values that include:

1. Providing a great work environment and treat each other with respect and dignity.
2. Embrace diversity as an essential component in the way we do business.
3. Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee.
4. Develop enthusiastically satisfied customers all the time.
5. Contribute positively to our communities and our environment.
6. Recognize that profitability is essential to our future success.

Starbucks’ organizational structure has four main features that consist of functional structure (grouping based on business function), geographic divisions (3 divisions consisting of China and Asia-Pacific; Americas; Europe, Middle East, Russia, Africa are given a senior vice president to report back to), product-based divisions, teams. This organizational structure has 8 levels. The organizational structure of 8 levels is formulated by the following:

Level 1 – CEO

Level 2 – Board of Directors

Level 3 – Upper Management/high level management

Level 4 – Middle level management

Level 5 – Store Managers

Level 6 – Shift leaders (in charge when manager not on duty)

Level 7 – Clerk Supervisors (research work)

Level 8 – “Baristas” (people that make and serve coffee).

All this information gives good insight into the fast food franchise, Starbucks’ micro environment. Porters five model for Starbucks includes competition which is strong for Starbucks; bargaining power of buyers is strong; bargaining power of suppliers is weak; threat of substitute products is high or strong; threat of new entrants is moderate.

Corporate Social Responsibility and Sustainability

CSR stands for Corporate Social Responsibility as can be describes as an organizations initiative to assess and take responsibility for the company’s effects on environmental and social wellbeing. Starbucks in involved in multiple CSR projects and these include (1) recycling and waste reduction by providing disposable cups, involving themselves in commercial recycling of milk jugs and cardboard used and also held a “Cup Summit” where they had discussed better recycling methods and chose to used reusable cups instead of cups made out of paper. (2) They are also involved in energy conservation as 20% of the total electricity that make use of comes from renewable sources and invested into lighting that consumes less gas and other substances that would lead to a higher carbon footprint (energy efficient lighting). (3) Starbucks is also involved in water conservation by using new technology/machinery that needs consumes less/minimal water (e. g. dishwashers). (4) Green Building is also included in their CSR projects as Starbucks makes use of material that is not “endangered” and will not harm the environment; they decreased their water consumption and use more energy efficient technology; use recycled floor tiles and use paint that has a low VOC (Volatile Organic Compounds). (5) Starbucks also ensures that their coffee is responsibly grown and therefore made a partnership with Conservation International that has guided; CAFÉ (Coffee and Farmer Equity) Practices has helped Starbucks grow their coffee in a way that is safe for people as well as the environment. (6) Starbucks created a water fund names “Ethos Water Fund” and this project creates awareness about the fact that numerous amount of people do not have access to clean drinking water and if a customer decides to purchase a bottle of Ethos water, the funds then provide clean drinking water for children around the world.

Starbucks’ involvement in Corporate Social Responsibility through recycling and waste reduction; energy conservation; water conservation; green building; growing coffee in a responsible way; and finally creating a water fund. All these projects abide to their initiatives of “sourcing ethically”, “creating opportunities”, “lead in green detail”, and “strengthen communities”. All the factors such as recycling waste, waste reduction, energy conservation, water conservation and green building contributes to their initiative of “leading in green detail”. The factor of growing coffee in a responsible way contributes to the initiative of “sourcing ethically” as there will be no harm to the people and the environment. Finally the factor of creating a water fund contributes to the initiative of “strengthening communities” by providing to those who do not have and offering same rights to every person as well as “creating opportunities” as the Ethos Water Fund does create jobs. All of their CSR projects abide to their values and ethics that increase sustainability of the projects.

The recycling and waste reduction by providing reusable cups is a sustainable project to follow as Starbucks’ expenses are actually decreasing instead of increasing expenditure as people are reusing cups and not many cups have to be manufactured hence reduced the amount of waste being produced by Starbucks. The energy conservation method being implemented by Starbucks is a sustainable practice most of the time but may not be in areas where not much sunlight is received or may also not be sustainable due to the location of a Starbucks franchise depending on whether enough sunlight is being received to feed the solar panel system to use as energy in the stores. Starbucks has also invested in water conservation methods by using machinery that will consume less water. This project may not always be sustainable as it depends on the financial position each franchise is in as the machinery used may be too expensive and hence not affordable at times. The same rule applies to the green building project of Starbucks. The machinery needed that is more energy efficient may be too expensive to buy or use hence will not be affordable and not be a sustainable project. The usage of material that is not endangered and will not affect that environment may sometimes be a sustainable process but sometimes not as some material may be too expensive. For example, paper is ecofriendly whereas plastic is not biodegradable but plastic is a cheaper option therefore many businesses choose to make use of plastic instead of paper even though it is not ecofriendly or biodegradable.

Socio – Economic Issue faced by Starbucks & Solution

A concerning issue that Starbucks is being faced with is the reduction in profits due to competitors that offer the same products at a cheaper price. Starbucks’ prices are high but they offer a better quality but multiple people think that the quality is worth the sacrifice as prices are becoming unaffordable. The simple solution to this problem is to relook at their prices. Starbucks needs to reconstruct their prices or else the downfall of profits will not change and will lose multiple customers. If Starbucks changes their prices, it should not be a huge risk as they already have the good reputation of “good quality” and will definitely attract customers rather than lose them more and more. There are certain steps that Starbucks should follow to guide them when relooking at their prices.

1. Consider costs and this means they should analyze their expenses wisely as they do offer good quality which doesn’t necessarily mean that their expenditure is as low as competitors expenditure is.
2. Get to know your customers and this includes choosing a specific target market that they want to attract in particular to make the procedure of changing prices much easier.
3. Be aware of competitors. Get to know their prices, products, customers etc.
4. Try different pricing strategies such as: market penetration pricing (setting a low price and attracting customers quickly); psychological pricing (has psychological impact); price skimming (highest price and lowers price over type depending on customer); promotional pricing (reduce price of product to attract customers and increase sales); cost - plus pricing (cost based method for setting price).

Sustainable CSR Program

Starbucks can change their packaging. Starbucks’ on to go/take away drinks are sold in plastic cups. They could change this by selling their drinks in packaging that uses paper instead of plastic. The plastic containers are obviously not recycled and harm the environment as the plastic is burnt and leads to air pollution or could simply by deposited in river, dams or any other water sources that contaminate the water and also affect the marine life. If the plastic containers are just throw away irresponsibly, it can also affect domestic animals that roam around and eventually they will consume it and it will kill them. On the other hand, paper is biodegradable in some conditions and paper can be recycled. The packaging of the cups aren’t the only things that can change but the plastic straws used by Starbucks can be exchanged with paper straws to be more environmentally friendly. Starbucks’ loyal customers will recognize the drastic change and realize that the company is trying to be more environmentally friendly and this in turn will result in good publicity and advertising through customers therefore this could outcompete Starbucks’ competitors and steal other franchises customers as it creates a good and trustworthy brand image.

Budget

Starbucks’ budget will change drastically as paper bags or packaging is more expensive than plastic packaging and this is why many businesses make use of plastic instead of paper. Therefore Starbucks’ expenditure will increase drastically but the profits that will come out of this change will outweigh the expenses hence the change is worth it for the business in the long run in most cases.

Impact

This change from plastic to paper packaging will have a positive impact of the business as well as the environment. This change will have a positive change on the business as many customers will eventually start realizing this change and will see Starbucks in a completely different light as this will benefit the environment and therefore Starbuck’s customer numbers will increase and profits will increase too. The environment is also positively affected by this change as paper is biodegradable whereas plastic is not. Therefore Starbucks will be more ecofriendly and will also reduce the deaths of animals caused by the consumption of plastic wastes.

Advertising

The public will be highly impressed by the change that Starbucks will take part in and will want to continue to or start to support them therefore advertising of Starbucks will take place and customer numbers will increase and profits will rise immensely.