Contemporary Management Issues: Impact on Starbucks

This assignment discusses the impact of contemporary management issues on Starbucks, including the drivers of change, current response, and recommendations for improvement.

Contemporary
Management Issues

Table of Contents
INTRODUCTION ..........................................................................................................................4
MAIN BODY...................................................................................................................................4
Background of Starbucks............................................................................................................4
Concept of Change......................................................................................................................5
PESTLE Analysis........................................................................................................................6
Porter's Five Forces Model..........................................................................................................8
Current Response to the Impact on Starbucks Due to Drivers of Change................................10
Recommendations Related to Improvement in Performance Over Next Decade.....................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................14

INTRODUCTION
Management Issues refers to the process of identifying the issues or problems which have
been faced by internal and external factors related to any organisation and impacting upon the
performance of the organisation as well (Alon and et. al., 2016). This makes it is necessary for
every company to focus on the working of their organisations so that continuous evaluation of
performance could be done as well as improvements could be made. The company selected for
completing this assignment is Starbucks. It was founded in year 1971 and it has its headquarters
located in Seattle, Washington, U.S. The company believes in providing their customers with
varieties of products & services such as Coffee Beverages, Smoothies, Tea, Baked Goods,
Sandwiches and many more for satisfaction of various needs and demands of their customers.
This assignment is based on two drivers of change along with their critical evaluation on the
impact created by it on both the operational as well as commercial activities of the company. In
addition to this, the discussion of the nature of the pressures for change about the selected two
drivers. Further, the critical evaluation will be made about the current response of organisation
towards these changes. Lastly, the discussion will be made about how the organisation could
make improvement in their response, performance and situation over the next decade in order to
make sure about its proper growth and survival.
The Aim of this report is to understand and know about the impact of drivers of change
on Starbucks and the impact of these on its performance. Objectives of this report is to know
about the ways to deal with these changes, evaluating organisation's responses to key dynamic
forces and to recommendation related to improvement in response to these changes. The issues
which have been faced by Starbucks is related to dealing with pressure which have been made by
public to make development of “fully recyclable and compostable cups” which is an effort made
by company to contribute to environment and pledge made by it in 2008 and is not fulfilled yet.
The two drivers of change which are impacting upon the performances of this organisation is
Public and Government.
MAIN BODY
Background of Starbucks
Starbucks is a company founded by Jerry Baldwin, Gordon Bowker and Zev Siegel by
opening of their first store in the year 1971. Their first store was opened across the street from

the historic Pike Place Market in Seattle. Among all the three owners, there were one quality
which was founded as common among them and was about their coming from academia and
they all were lovers of tea and coffee (Atzori, Shapoval and Murphy, 2018). Investment was
made by borrowing money to open the first store names as Starbucks in Seattle. Peet, who was a
entrepreneur who used to roast coffee, was prove to be an inspiration for founder of Starbucks.
So Peet become the first initial supplier for Starbucks Company as peet's business was
specialises in import of first rate coffees and tea. By the early 1980s, the company was able to
open their four more stores in Seattle and give tough competition to competitors with their high
quality fresh roasted coffees. In 1987, Bowker and Baldwin made their mind in selling off their
business and Schultz was ready to purchase their business. Combination of Schultz's business
and Starbucks was made and this brand committed to the concept of cafe for business along with
additional sales related to equipment , beans, and other items in Starbucks. This company made
its entry in meteoric expansion period which continued till the time it went public till 1992 and
Starbucks soon become the largest coffee houses chains of world. Currently, their business is
having presence in many countries and is currently having over 20,000 stores.
Mission: To nurture and inspire spirit of human- one cup , one person and one neighbourhood at
a particular point of time.
Vision: To make Starbucks as Premier purveyor of one of finest coffee in world along with
maintaining of principles to grow.
Concept of Change
It refers to the process wherein an organisation deals with transition and the purpose of
which implement those strategies in the working of organisation with the help of which it will
become possible for the company to make achievement of their goals and objectives (Boone and
et. al., 2019). Chain Management is important for every organisation in order to make their
employees retain in the organisation for a long period of time and not to impact upon the
working and processes of the organisation. As it helps in development of skills and knowledge of
employees. But sometimes, business faces some critical situations which makes it difficult for
them to deal with that. In the case of Starbucks, it is clear that the business is facing critical
situation. The company has made promise to develop fully recyclable and compostable cups as
they are environmental friendly and will also reduce pollution. This pledge was taken by
Starbucks in 2008 and has not been achieved yet. It has made these kind of commitment three

times, so this time due to public pressure and government intervention, the company is required
to take severe actions and again it made its commitment to develop these cups within a period of
three years (Coombs and Holladay, 2018).
The first driver of change has impacted upon the performance of the organisation as the
sudden pressure on Starbucks will make it to change their attention to the current issues faced by
company apart from making its focus on improving their production processes. So this has made
the organisation to invest their money on the development of full recyclable and compostable
cups apart from the planning which has been done by company in relation to their other projects,
investments, financial decisions and many more for the achievement of objectives and goals of
organisation. So performance, operations and future investment decisions of the company are
directly impacted due to the influence created by public.
Further, the second driver of change is Government which is also playing an important
role in influencing the working of an organisation (Grant, 2016). The Independent Cut the Cup
Waste Campaign is also one of the important reasons due to which government is intervening the
working of organisations to find out different and better solutions with the help of which
problem of disposable cups could be eradicated. As there are different ways by which it could
impact upon the working of Starbucks so it is important for the organisation to focus on the
current external issue which have been faced by the organisation. As neglecting of this element
will cause severe damage to organisation such as fines, penalties and may even closure of the
organisation as well.
PESTLE Analysis
This case is not only important to consider for Starbucks but also for other companies
also. As organisations in the society must work ethically and keeping up promises is also a part
of ethical working of the organisation. With the help of this,it is possible for companies to
maintain long term relationship with their customers and gain their trust also. But this situation
confronted by Starbucks will impact negatively on goodwill and brand image of the organisation
as ethics are not followed by organisation and is making use of false means to operate good in
the working environment (Harrington, Ottenbacher and Fauser, 2017). So with the help of ethical
working of n organisation, it will be possible for it to make achievement of company's goals &
objectives in a proper and efficient way. The impact of macro environment on overall working of
Starbucks has also been provided with the help of using PESLTE Analysis. Following analysis is

used to know about the impact of external factors on overall working of organisation and the
application of analysis on Starbucks has been done below:
Political Factors: Some factors which covers the influences that has been created by factors
such as political stability, governmental policies and regulations, consumer laws, laws related to
employment many more impacting upon the working of an organisation. The regular increasing
pressures in the home market of different countries is also playing vital role in creating political
awareness and make the companies to follow rules & regulations have been made by
government (Hogsden, 2018).
Economical Factors: The following factors influences the working of every organisation as with
the help of factors like as disposable incomes of customers, inflation, deflation, bank rate, GDP
of a country and many more factors impacting both in positive as well as negative on the
functioning of organisation. The continuous changes are there in exchange rates and banks rates
is also impacting upon the business of Starbucks it gives rise to increment in labour costs and
operations costs for the company as well.
Social Factors: The consideration in these factors which are related to understanding the impact
of tastes and preferences of people, feelings, facts, ideas of people in relation to their products
and services of organisation. It is related to ethical working of organisations as it is not fulfilled
and has impacted on the feelings and beliefs of society and people in negative way. As the issues
has already been discussed above about the non fulfilment of pledge which has been taken by
Starbucks related to development of fully recyclable and compostable cups that will help in
reducing the level of pollution and bad impact on environment (Kang and Namkung, 2018)(Liu
and Jie, 2015).
Technological Factors: Following factors have an impact upon the working of companies as the
factors included here are related to changes made in working processes of company, change in
the way of production being done in company and changes in various types of equipments used
in the process of production. Starbucks has also made its partnership with Apple and with this
organisation, it has developed app based on various discount coupons which will help in ride
mobile wave easy manner. Additionally, it has also introduced Wi-Fi in their outlets and access
to Internet that helped them in creating positive image in minds of their customers and also got
positive results from the work.

Legal Factors: The following factors considers about the specific rules & regulations that have
been made by government in relation to specific business which impacts overall working of
organisation both positive as well as negative ways. The factors which are considered here are
related to introduction to stricter customs & trade regulations along with regulations related to
license with other industry, so this increases the risks for Starbucks which it needs to consider so
that by fulfilling the obligations with government as well as their rules and regulations, negative
impact could be eradicated (Martínez-Torres, Rodriguez-Piñero and Toral, 2015).
Environmental Factors: These are factors which have an impact on the working of
organisation due to impacts that has been drawn by working of organisation on external
environment such as issues created related to global warming, environmental degradation,
pollution, emission of gases which are very harmful and many more that influences the
organisation's working in positive or negative way. However, working of Starbucks not
impacting the external environment but the contribution done towards environment will help in
building good brand image & awareness in the marketplace and also in the minds of customers
and the society as well.
So looking on these aspects, it can be easily said that Starbucks is dealing good with the
external environment and is quite stable to deal with it. However, there are some grounds of
improvements on which it is essential for company to make its focus which will help in
improving the organisational efficiency of Starbucks (Parsons, Maclaran and Chatzidakis, 2017).
However, PESTLE Analysis helps in knowing about the impact of external factors and
also helps in formulating strategies but there are some instances also where this analysis fails to
provide an organisation with accurate results as such continuous changes in external factors. For
this analysis, an organisation needs to hire expert research and development workforce which
increases the cost of an organisation as well.
Porter's Five Forces Model
Following model is used to know about the competition occurring in industry with the
help of five competitive forces that provides shape to the industry. The application this analysis
will be done to Starbucks with the help of which it will be possible to know about the level of
competition in the industry and how Starbucks is dealing with it. The description has been
provided as under:

Competitive Rivalry: It refers to existing level of competition in the industry. In this power, the
consideration will be taken about the number of competitors in the industry and the influence
which have been created by it on the working of other organisations. Looking on this power, it
can be said that the number of competitors of this organisation is high as the company operates at
international level so the intensity of competition is not only from international competitors but
also from local competitors as well. On the very basis, the consideration ODF this power is
chosen as high (Rubin, 2016).
Bargaining Power of Customers: Here, the consideration is related to power of customers that
to what extent does the customers could influence upon the pricing strategy of the company.
Considering this aspect, it can be said that due to large number of competitors, availability of
substitutes and small size of buyers, the consideration related to this power is also high because
of large number of competitors & Low cost of switching customers, they could easily shift to
other companies so the following power is also considered very high.
Bargaining Power of Suppliers: In this power, it is considered about influencing power of
suppliers that to what possible extent suppliers are able to influence the pricing strategy of
Starbucks. So the raw material which have been used by the company in production of their
products and services provided to customers are easily available with large number of suppliers
and in case of increase in prices, it will be easy for the company to shift from one supplier to
another supplies because of low switching costs to incur (Sam and Cai, 2015).
Threat of Substitutes: The following power takes into consideration about the level of threat
from the competitor's same products & services offered by company. In case related to
Starbucks, the company is facing severe situation as there are large number of competitors of the
company and also large number of substitutes as well. So the pricing strategy of Starbucks is
made keeping in mind the prices of competitors as such a little bit increase in the prices will drop
down the demand completely. So this power is considered as strong force impacting upon
working of an organisation.
Threat of New Entrants: The level of restrictions which are imposed by government on the
entrance of organisations in some business is covered under these circumstances. So in this
industry as well, there are not much restrictions which are imposed on the entrance and exit of
companies from the industry. However, companies could enter easily in the industry but for
giving competition to Starbucks, it is not that much easy which it seems because it takes time to

establish a brand, its goodwill, and brand image which took years of good service and faith of
people (Susanty and Kenny, 2015).
Looking on the current scenario this company Starbucks it is recommended to the
company that focus should be made on the marketing by the company so as to attract more and
more customers and retain their existing customers for a longer period of time to occupy larger
market share. Recommendation is also related to make innovation in their products or processes
with the help of which improvements could be made in the overall performance of organisation
and strong competition could be given to their competitors.
This has impacted severely upon the organisation's performance and on the working as
well. As every organisation has their own future plans and preferences so the upcoming of
sudden uncertainty will have an impact upon performance and working of Starbucks. Due to the
pressure from public and government, it has made Starbucks to work immediately upon the
situation confronted by it. In case of negligence, the impact will be negative on the organisation's
performance and brand image in the marketplace. However, in the following situation as well,
complete fault is not of external factors but the contribution in the following situation is also of
company as well. As this is not the single time when Starbucks has made this promise to world
instead this is the third time when Starbucks is confronting this situation. Firstly, in 2008,
Starbucks made this promise to people that it will work and provide the customers with fully
disposable and compostable coffee cups which will help in environment protection and also to
control over waste increment (Taecharungroj, 2017). But Starbucks was not able to take stand
over their promises made not only for single time but this is the third when the company is
feeling this much pressure on their shoulders about the increasing issues of disposable and
compostable coffee cups. The non fulfilment of pledge made by Starbucks to stand currently
over this situation.
Current Response to the Impact on Starbucks Due to Drivers of Change
According to Josh Gabbatiss, 2018, it has been said that Starbucks has conducted a three
month trial in association with environmental charity Hubbub. The complete processes of the
company related to Hubbub will help US Coffee Giant Track to know about the success level of
efforts made by them and the level to which they are successful, the use of reusable cups. The
following effort has been made by Starbucks because of pressures from public as well as from
government also. Along with this, the company will also make use of some of their financial

resources in order to make proper management of waste in the city. Starbucks in order to deal
with the situation is also making use of management campaigns in which it educates people
about the importance of conservation of environment, the ways with the help of which
improvement could be made in the current waste management system and on many more related
concepts that could help the company to prevent themselves from indulging more in the issues
which impacts upon the performance and brand image in negative way (Tikson, 2018). The step
taken by the company in order to move a step forward to the pledge taken by the company to
develop disposable and compostable coffee cups that will help in making the environment free
from pollution and will help in creation of brand image of company in the marketplace.
According to Josh Gabbatiss, 2018, in order to be specific with the measure adopted by
the company in order to reduce the level of waste in the city, it has made a trial for the period of
six weeks in which the company will be focus on reducing waste in some of the selected retail
outlets in London. The company has also took an initiative that there it will provide special
discounts to people who will carry their own cups so that the use of recycled paper cups could
also be reduced and waste could be properly managed. However, it has also been said that the
company has already built up the fully recyclable cups for the customers but the issue which
have been faced by the company is related to implementation of appropriate waste management
facilities with the help of which this implementation could be made successful.
Recommendations Related to Improvement in Performance Over Next Decade
According to Conrad MacKerron, 2015, there are certain recommendations which are
being provided to Starbucks so that it could make improvements in their overall processes and
also to work on improving the brand image of company in marketplace. Starbucks provides to
customers with around 4 billion coffee cups every year and has pledged to recycle these all
coffee cups. Ethics refers to the working of an organisation by making fulfilment of their
morals ,values, principles and working for the survival and growth of the company along with
considering the interest of society, people and environment as well. Here, the company lacks. So
the recommendation is related to focus on making suitable strategies and policies with the help
of which it is possible for company to make provide customers with the best possible services
and cover the mistakes which have been made by it. The company is also not able to fulfil their
promises completely as the moving deadline of their pledge from 2008 to 2012 and then to 2015.
so these kind of activities impacts upon the faith of society and their loyal customers whether the

company is going to do something or not to deal with the situation. Making a promise and then
not fulfilling it, impacts negatively on the feelings and faiths of people who are making purchase
of products of the company. So it is necessary for the company to focus on their ways of working
which is needed to be ethical to gain again the trust and faith of customers in the products &
services being provided by company to their customers. In addition to this, the importance is also
related to fulfilment of CSR Activities. CSR stands for Corporate Social Responsibility which
says that an organisation is also have some obligations towards the society, people and
environment in which it is established and is also important for it fulfil those obligations as well.
So the recommendation related to fulfilment of the obligations of the company towards society is
also important as it is possible for the company to open some schools, colleges or hospitals
nearby the area to which it is established, this will help company in having a positive image for
their customers.
The importance for the company is also related to making innovation in their processes as
well because with the help of continuous innovation it will be possible to new developments and
innovations in their processes, products or services so that it could provide customers with
something new and different. This will help in achievement of sustainable competitive advantage
over their competitors as they are providing different qualities of products & services to
customers. Innovation, not only the processes, products and services of the company but also in
the fulfilment of the CSR of the company as well (Wu, 2017). It is this will help the company in
dealing good with the negative impacts which have been faced by Starbucks.
The development of five year plans, three year plans will also be very helpful for
company as it will make the company in formulating long term policies and strategies for not
only development and growth of the organisation but also betterment and development of
society and environmental protection as well.
CONCLUSION
From above assignment, it has been concluded that there are many issues which are being
faced by organisations dealing in the business environment which are important for the
businesses to eradicate in order to make efficient working of the business possible. In addition to
this, it has also been concluded that the knowledge about overall impact of macro factors and
knowledge about intensity of competition is also important to formulate suitable strategies and
tactics with the help of which improvement could be made in overall working processes of

company and growth & development of every organisation could be made sure. Furthermore, the
conclusion has been drawn about the ways which will help a organisation could reduce negative
impact of drivers of change as such with the help of fulfilment of corporate social responsibility,
ethical working and many other considerations that will assist in building positive image of
company in the market and also in minds of customers.

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Online

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[Online]. Available Through:
<https://www.independent.co.uk/news/business/news/starbucks-5p-coffee-cup-charge-
public-reaction-latte-levy-video-a8236826.html>
Gabbatiss, J., 2018. Starbucks reports 150% increase in reusable cup use since introduction of
5p charge. [Online]. Available Through:
<https://www.independent.co.uk/news/business/starbucks-coffee-cup-disposable-
reusable-recycling-waste-latte-levy-a8323921.html>
MacKerron, C., 2015. 4 ways Starbucks can fix its cup recycling dilemma. [Online]. Available
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recycling-dilemma>