PEST Analysis of Starbucks

Political Factors

Political factors include government policies, legislation and foreign influences. The political factor influencing Starbucks are as follows:

Carr v. Starbucks Corporation and Shields v. Starbucks Corp

The political condition of Starbucks is not good as it should be. They are being blamed for the violation of wage and hour laws. Starbucks has two pending class-action lawsuits filed by Starbucks, California, employees for being improperly denied overtime pay. Starbucks’s is denying all liabilities in these cases, however; the company has agreed to the settlement in order to take care of all of the plaintiffs’ claims without having to get involved in any protracted litigation. Now Starbucks is paying $18 million for the settling of the lawsuit case.

Kraft and Starbucks in billion-dollar legal fight

Again Starbucks is in news for it’s within termination of the 12-year contract with Kraft. In 1998 Kraft and Starbucks entered into a retail grocery coffee business, which at the time was generating less than $50 million in annual revenues. Since then, the business has grown to approximately $500 million. This joint venture has marked a major shift for Starbucks' consumer-packed business, a key building block in Chief Executive Howard Schultz's strategy to drive future growth for the nation's largest coffee-shop chain. For the violation of the contract again Starbucks would have to payout large amount as compensation.

Economic factors

The economic factors which affect the Starbucks could be inflation rate, import laws, exchange rates, and interest rates.

As Starbucks Imports coffee from various countries so they really have to be aware of changing imports laws which could hinder the importing. On the same way increasing and decreasing inflation rate affects a lot of buying power of consumers

The Demand –price curve for the consumption of coffee commodity shows that with the increase in demand of coffee, the price of coffee increases whereas with the decrease in price of coffee, the demand decreases. So Starbucks has to be very careful while pricing looking at the consumption rate of market.

This increase in demand of coffee increases when the coffee substitutes such as cold drink, water, juice, tea, shake prices increases and if there is increase in the income of the consumers. On the other hand the demand decreases if the price of substitute decreases, there is decrease in the income of the consumers, and increase in the price of compliment.

Sociological factors

Starbucks called them as “Starbucks Shared Planet” which commits them to do best for the people and the planet both. For this they are using reusable cups and Starbucks is so responsible about the community development that they made their goal as

We’d like Starbucks partners (employees) and customers to contribute more than one million hours of community service each year by 2015.

Starbucks is trying their best to minimize the environmental impact, tackling of climate changes and inspiring others as well to do the same and joining of non-governmental organizations. Working with the NGO’s has helped them a lot to do more of community involvement, ethical sourcing and environmental stewdarship.

Using the environmental, socially and economically responsible guidelines of Conservation International, Starbucks is able to purchase the coffee under “Starbucks shared Planet”. They are just using the Fair trade labelling organizations international and Transfair USA labelled certified coffee. Starbucks is in collaboration with African Wildlife Foundation for the promotion of the environmental responsible coffee. In the same way they have partnership with such organizations like Ceres, United States green building coffee, Earth watch institute, save the children, Sustainable food lab, Product (Red), Mercy Corps, International Youth foundations and Ashoka youth ventures.

Technological Development

As technology factors shape appropriate organizational forms (McKelvey, 1982). Use of various new and innovative technology leads to improvement in services at the cafe. There are various agricultural and biotech development which has led to fast growing of coffee plants. Various technologies are being used to minimize the labour cost and save time. They are trying to find the new technologies to better serve the customer. Starbucks has introduced its card which has attracted customers a lot and has made them to visit quicker. As discussed in environmental factors Starbucks are trying to use in every store new fuel-efficient equipment for reducing the emission of the gas. They are using more of the bio degradable material for recycling. They are making their best efforts to advertise them through various means to reach to the people’s mind easily. Starbucks has made online shop locator to make the process easier for the customers to reach to the store. Starbucks is also doing online delivery of their produced coffee. If customer wants to use the coffee of their choice and want to use the brand of Starbucks they have better option of buying the whole coffee packets from the Starbucks Coffee shop as well as online coffee store.

Environmental Factors

The main efforts done by Starbucks for the best of environment are more use of fuel-efficient equipment, calculation of gas emission done by their company, use of bio-degradable material, partnership with conservation international and the environmental defense fund

As for the environmental factors, earlier Starbucks use to have environmental issues as they uses paper cup for the coffee which can’t be recycled and is hazardous for the environment. But now Starbucks has found the solution for that, they are using biodegradable material instead of plastic which can be easily recycled. According to the Fortune , Starbucks has taken the ninth position in gaining renewable energy certificates among the 500 companies. Moreover, they are trying to find many other ways to save energy by using energy efficient lightening in several shops. As per their measurement, 81% of the green house gas emission comes from the electricity in stores and 18% comes from the coffee roasting.

In many of the stores, company is trying to use the fuel efficient equipment which will reduce the natural gas consumption. Starbucks has been partner of Conservation International and the environmental defense fund and accompanying them to do the best for the environment of the world. The other effort done by Starbucks is they are providing customers 10% discount if the customers bring their own reusable cups.

Legal factors

The list of legal factors include the health and safety consideration, importance of consumer law, fluctuation in trade laws , great requirement of the firms for the recycling, agreements done internationally for human rights and environmental policy, getting licensing/planning permission and various other laws.

Global Warming

As day by day global warming is increasing, government has taken steps to reduce the amount of global warming by making some environmental policies essential for every company to be followed. One of the policies is to do recycling of the waste material which is collected in tons every day. Starbucks is trying to do the best for the environment by the use of cups which can be easily recycled or reused.

Health and Safety law

The first preference of the government for its nation is to keep the people healthy and hygienic. Before the initiation of any food sector, the government makes sure that the company is using right and ethical products for the production of the goods. Starbucks is using Coffee and Farmers Equity Practices for the growth of the coffee beans which is suitable for both the people and environment. While the production of coffee, the producers keep the contents of caffeine low to reduce its physiological effect on the consumers.

Fluctuation in trade laws

Coffee is a commodity which is often being imported from the other nations which have the suitable climate and environment for its growth. Starbucks imports coffee from 24 countries, including six in Africa - Burundi, Ethiopia, Kenya, Rwanda, Tanzania and Zambia. For import the trade laws should not be strict so that the company can maintain good relationship with the countries as well as bring in the coffee easily.

Local license/ planning permission

There is great government influence on the expansion of the company. To expand the company, they need to have a proper legal permission from the government.