Starbucks Coffee Case Study 2022

Running head: STARBUCKS
Starbucks
Name of the student:
Name of the university:
Author note:

1STARBUCKS
Executive summary
There are various drivers for change. Climate change and emerging technologies are some of
the external drivers for change. The impact of climate change and the technology can also be
observed for Starbucks. The main purpose of this study is to identify how a change in climate
and the emergence of new technologies affect the business performance of Starbucks. The
study finds that though Starbucks has some noticeable policies for sustainable farming it
struggles to implement these policies. It is more due to ineffective leadership at the
organizational level as well as at the external level. A linkage between strategic visions and
strategic actions is missing. Starbucks is committed to attaining zero-deforestation policy.
However, it affects the policy for its unethical procurement policies. It has failed significantly
in guiding the farmers towards strategic actions. The recent announcement to facilitate the
recyclable coffee cup is viewed by many experts as less effective in comparison to people
becoming aware of how to dispose of the cups effectively. Starbucks is moving faster
towards the Fourth Industrial Revolution with the likes of technologies such as the Internet of
Things (IoT), Reinforcement Learning Technology and Blockchain Technology. However,
needs to find solutions on barriers to be faced both at the internal and external levels.

2STARBUCKS
Table of Contents
1. Introduction............................................................................................................................3
2. Two change drivers impacting upon strategic decision-making and other activities
(commercial or operational) of Starbucks..................................................................................3
1. Impact of climate change...................................................................................................4
2. Impact of technology..........................................................................................................5
3. Evaluation of Starbucks's response to these change drivers..................................................5
3.1 Evaluating Starbucks’ Approach to Climate Change.......................................................5
3.2 Evaluating Starbucks’ Approach to Technology.............................................................9
4. Conclusion............................................................................................................................12
5. Recommending how to enhance its response over the next decade.....................................13
References................................................................................................................................16

3STARBUCKS
1. Introduction
Many companies make strategies and take decisions as their response to external
change drivers; however, very few make it in a noticeable way. Those few companies have
more capable leaders. By having strategic leaders such firms attain more capabilities in terms
of innovation as compared to companies lacking strategic leaders. Strategic leaders identify
innovative ideas frequently as a response to change drivers. These are the leaders who are
categorized as effective leaders instead of the dreamers and less-involved leaders (Munguia et
al. 2017).
The description covered so far has a significant linkage with this study. The purpose
of this study is to understand how external change drivers impact the decision-makers at
Starbucks. It identifies their capabilities in terms of strategic decisions that convert external
change drivers into real business opportunities. This study specifically discusses two change
drivers to have the most impact on the case study company “Starbucks”. By doing so it
assesses the strategic capabilities of the company’s decision-makers. The study evaluates the
decisions in terms of its effectiveness to address the change drivers. Few recommendations
will also be given provided if there are rooms for improvement for the decision-makers at
Starbucks.
2. Two change drivers impacting upon strategic decision-making and other activities
(commercial or operational) of Starbucks
Change drivers are many for the coffee industry. From the impact of the political
landscape in a country to its progress in terms of emerging technologies all these affect the
coffee industry. However, this study focuses on two change drivers that have the most impact
on Starbucks. These change drivers are:

4STARBUCKS
1. Impact of climate change
2. Impact of technology
1. Impact of climate change
Climate change in countries that are the world’s significant producers of coffee is a
danger signal to the coffee industry. The levels of atmospheric greenhouse gasses are
constantly increasing (Samper and Quiñones-Ruiz 2017). This constant change can
noticeably affect the coffee industry. A half-degree-Celsius change in the temperature can
have observable impacts on the coffee beans in terms of its flavor and aroma. Rising
temperature is leading to some other problems. It is boosting the presence of pests and
invasive fungi in areas where coffee is produced. These pests and fungi affect the production
of coffee by lowering the overall crop yields. The warmer temperatures and inconsistencies in
the rainfall patterns will expectedly cut down on the coffee production. Studies suggest that
by 2050 there will be a decrease by up to 50% in the total suitable area for coffee production
(Samper and Quiñones-Ruiz 2017). History has witnessed production shortfalls due to this
climatic change. In 2014, Brazil met with production shortfalls as a result of drought
periods coupled with changing rainfall patterns. Brazil produces one-third of the entire coffee
produced in the world. The farmers of India and Guatemala faced more or less a similar issue
(Samper and Quiñones-Ruiz 2017).
The climate change shown above can impact Starbucks both in its short-term and
long-term operations. In the short-term, it may have to tackle increased raw material costs.
The problem can be even severe in the long-term. On an approximate basis, the Company
serves 2.25 billion cups of coffee each day (Annualreports.com 2019). The demand for coffee

5STARBUCKS
across the Asian and African countries is constantly rising. Hence, Starbucks must ensure to
develop a more sustainable coffee ecosystem.
2. Impact of technology
Technology is impacting worldwide industries significantly. The fact is nothing
dissimilar for the coffee industry as well. The world of coffee consumers is not just reliant
over a single coffee brand for a cup of coffee. Instead, they have many options to choose
from. Hence, the ability to attract new customers and retain existing customers creates an
unending competition between major coffee brands in the world. Indeed, a competition exists
between the world's leading coffee brands concerning several factors. These factors will
impact their competitive advantage. These factors are speed to produce a cup of coffee,
the taste and the ethical sourcing of raw materials (Rabah 2018). Each of these factors
requires the appropriate use of relevant technologies to compensate for the changing
consumption pattern. Hence, the importance of the inputs from the decision-makers will
eventually grow. Their decisions will be tested in terms of the effectiveness of the
technologies implemented in the system. The wave of the Fourth Industrial Revolution
(Industry 4.0) is quickly becoming a part of the coffee industry. One with a better
understanding of these technologies in terms of where to and how to use these technologies
will have maximum success. The technologies to have the most impact on the coffee industry
are Machine Learning (a sub-area of Artificial Intelligence), the Internet of Things (IoT) and
Blockchain (Rabah 2018).
3. Evaluation of Starbucks's response to these change drivers
3.1 Evaluating Starbucks’ Approach to Climate Change

6STARBUCKS
Despite traditionally being the consumer-facing retailer Starbucks as suggested in
studies is moving down its value chain to work closely with the farmers and ensure
sustainable practices. It is into this practice since 2004 when it established a Support Center
for Farmers. The purpose was to align their farming practices with the industry guidelines
for sustainable farming. These Support Center provided training in soli management, milling
processes and field-crop production. These are the areas that hugely impact the sustainable
sourcing of coffee beans (Annualreports.com 2019). The vision was to educate farmers on
these interrelated factors of farming and to attain a worldwide recognition of being an ethical
coffee brand. On the contrary, a few pieces of evidence suggest that Starbucks still needs to
cover a long distance to become an ethical brand. There are instances when Starbucks was
criticized for its questionable and unsustainable procurement policies for palm oil, wood and
paper products. These raw materials are the major drivers of deforestation. These instances
question the zero-deforestation policy of Starbucks. It raises questions on Starbucks'
decision-makers as well. The leaders should understand a fact that is “the best way to predict
the future is to create it” (Annualreports.com 2019).
By not being able to create a sustainable future and still heading towards it raises
questions on Starbucks’s Strategic Leadership. It appears as if the decision-makers at
Starbucks have the visions; however, they seem to like having inadequate strategies in place
to turn these visions into the realities. There is a need to look at the overall list of goals and
objectives to be achieved from sustainable value chain operations. Indeed, great leaders use
goals and objectives to reach closer to their ultimate mission of a process. The leaders at
Starbucks based on the information covered so far can be considered more of a dreamer than
visionary leaders. Strategic leadership is the ability to ensure that the objectives are fulfilled
(Mwangi et al. 2017). Strategic leaders do not just figure out the objectives but also have
plans to make it happen. They know exactly what to be achieved and how to drive their

7STARBUCKS
people towards it. Relating this to Starbucks, the decision-makers have still a long way to go
to develop a sustainable coffee ecosystem.
Starbucks is one of the few global companies to have proved its innovating
capabilities. Many examples suggest the same. The year 2013 marked one of such
achievements for the company when it purchased its first-ever farm. Besides, it also
established the Global Agronomy Research & Development Center in Costa Rica. The
purpose of establishing this facility was to facilitate the cultivation of disease-resistant coffee
beans. The coffee beans, which can remain protected from diseases despite the harsher
climate conditions (Mwangi et al. 2017). Indeed, it gives an example of effective leadership
that knows how to attain a vision. However, only such a facility is not just sufficient. Indeed,
there should be more like such facilities to be established in other parts of the world from
where Starbucks source the raw materials. Through such setups, Starbucks can work more
closely with the farmers (Grabs et al. 2016). They will have more opportunities to educate
their farmers on sustainable farming practices. The year 2015 marked another achievement
for Starbucks when it could trace the existence of rust-resistant coffee tree hybrids. Starbucks
with its research & development (R&D) capability could reach this significant finding
(Annualreports.com 2019). It shows that its leaders are learning with times regarding how to
make its resource capabilities count in more valuable terms. It was the strategic leadership
that encouraged increased spending in R&D capabilities. Starbucks donated thousands of
such seedlings to the Costa Rican Coffee Institute. The purpose was to commercialize the
new hybrids on a larger platform (Annualreports.com 2019).
Starbucks is now supporting farmers financially with whom it works. It has developed
a Global Farmers Fund to fund loans to farmers those need it to own the plots. As a result,
farmers are increasingly becoming the owners of 3-5 acres of a plot (Annualreports.com
2019). From the management and effective leadership perspectives, the move can be

8STARBUCKS
considered a step closer to Starbucks' sustainability process. They know it is difficult to work
closely with the global farmers. For being able to do so they will need to set up more support
centers around the locations it sources the raw materials. Additional expenditures will be
consumed in deploying support staffs at all these facilities. Despite all these, in place, global
farmers might lack motivation for sustainable farming (Borrella et al. 2015). The decision-
makers and the leaders in Starbucks have struggled in the past in encouraging the farmers for
sustainable farming. It was despite practicing the zero-deforestation policy. Ineffective
leadership was identified as the key reason behind the failure (Annualreports.com 2019).
Starbucks seems like have learned from its past mistakes. This is the reason they are more
focussed on motivating the farmers for sustainable practices along with establishing the
support centers. The motivation was offered through ownership of plots and by providing
brighter future aspects.
Starbucks’ approach to climate change is not just limited to ensure sustainable
farming but to facilitate using only the recyclable cups. Starbucks has committed to spending
$10m (£7m) in its ambitious project to use only the recyclable cups. It was in the year 2008
when Starbucks first committed to using only the recyclable cups as part of its sustainability
goals. However, it could not so far turn it into a reality. The recent announcement to spend so
much money in the recyclable cups followed a pressure being created from a coalition of
environmental organizations (Independent.co.uk 2019). It shows Starbucks' incapability to
fulfill its commitment. The vision that was thought a decade ago will now become a reality. It
shows the incapability of its leaders in terms of establishing a linkage between the Strategic
Vision and Strategic Action. The decision-makers can be considered to have lacked effective
leadership skills. Instead, the leaders were more like the dreamer, the uninvolved and the
doer. The dreamer can just dream of a vision or visions. However, they possess less
knowledge on how to turn it into a reality. Such leaders offer rare guidance to their peers.

9STARBUCKS
Instead, they have the least acceptability to others' suggestions. They are less motivated by
their peers. On the contrary, effective leaders do not just have plans in their minds but also
have strategies to turn it into a reality. They can transform their dreams into strategic actions.
Starbucks’ intent to use the recyclable cups only lacked strategic actions. The actions it took
now should have happened quite before. They would not have questioned their credibility
from the coalition of environmental organizations (Independent.co.uk 2019).
However, studies suggest that recyclable cups are not potential alternatives to
conventional cups. Even if the reusable cups are offered for free customers were found to
have shown the least interest for this. When they were charged for mismanagement of these
cups the results were comparatively better (Rice 2015). However, even if this works it isn’t
an appropriate solution to wrongly disposed of cups. The best solution is indeed appropriate
disposal of cups. According to a few studies, drinking a cup of coffee at home is much better
than drinking at stores as it gives way to the mismanagement of cups (Levy et al. 2016).
Considering this being true it would be interesting to see how Starbucks responds to this
challenge. Whether the invested amount is a worthy deal for the company or else. The
leadership in the company will be tested in a big way in terms of making this project an
example for other coffee brands and the industries.
3.2 Evaluating Starbucks’ Approach to Technology
The impact of emerging technologies can be observed in the worldwide manufacture
and service industries. In a likewise manner, the coffee industry also has the impact of
technology. In the era of the Fourth Industrial Revolution (Industry 4.0), coffee brands such
as Starbucks are in search of utilizing these technologies to good effect. The scope of
technology is different for different industries. In the coffee industry, emerging

10STARBUCKS
technologies can be used to improve the recipe and to increase the efficiency of coffee
machines such as espresso machine (Bragadeesh and Umamakeswari 2018). Starbucks has
been technically good in recent times. All credit should go to its leaders who acknowledge
the need to use new technologies. Without their leadership, an approach towards (Industry
4.0) would not have been easier for Starbucks. The decision-makers were not the same in
committing mistakes as they did in responding to climate change. Instead, they seem to have
learned from mistakes they did in the past. The leaders seem to have found the areas to put
into the technological development process.
Starbucks has developed a mobile app-enabled with reinforcement learning
technology. With this technology customers now have access to customized suggestions for
drinks and foods at just a click. The purpose of this app and the end goal is to establish
personal interaction with customers. With reinforcement learning, Starbucks can now predict
the demand for the products. This is not just helpful in automating the recipes but also in
inventory management. Hence, overstocking and shortage of items is avoidable now with
reinforcement learning into practice. Now, Starbucks is looking to enhance its capability in
terms of offering customized suggestions on the products. To do so, the strategic leaders at
Starbucks have come up with a "drive-thru” experience. The drive-thru experience will work
on transaction history to identify the preference of customers for coffee (de Soares Lemos
2019).
However, reinforcement learning will be less impactful in case there is no exchange
of recipes to espresso machines in real-time. At each of the Starbucks' store, it has less time
to think of appropriate recipes. With thousands and millions of customers turning to the
stores each day it becomes almost impossible to manage the recipe. The challenge is not just
limited to the recipes but also to maintaining the machines used in each store. In each store,
Starbucks uses dozens of machines from coffee machines to blenders and grinders. These

11STARBUCKS
machines have to be operations for 16 hours a day. Starbucks cannot imagine meeting with
equipment related problems or else the efficiency to offer coffee in quicker times will be
questioned. It can potentially interfere with Starbucks’ primary goal that is to offer high-
quality customer experience consistently (Van Rijmenam 2019).
Sensing the needs mentioned above the leaders at Starbucks brought a solution to
these problems. The leaders have realized the urgency to team up with Microsoft to avail of a
solution. Starbucks had needed a network to access its equipment at its worldwide stores. The
network required had needed to be technically correct to avoid any security-related threat. By
teaming up with Microsoft, Starbucks can deploy “Azure Sphere”, effective in securing the
devices connected through a Cloud network (Annualreports.com 2019). Azure sphere will
prevent the globally expanded equipment from any security-related threat. Now, with the
azure sphere in place, a much-needed Internet of Things (IoT) setup can be established. An
IoT set up is required to send and receive data to globally expanded machines in real-time.
Azure sphere will play a key role in protecting the amount of data communicated over a
globally expanded network (Annualreports.com 2019).
The decision-makers at Starbucks can be considered to have met the needs for
technological progress. With technologies such as IoT and Machine Learning Starbucks is
redefining the taste of the coffee. The appropriateness in meeting the demand is about to
reach the next level. Starbucks can soon become a brand that effectively understands the
consumption pattern of its customers. The efficiency in identifying and implementing the
technologies is not just limited to IoT and Machine Learning but also Blockchain technology.
Starbucks is facilitating the use of Blockchain technology to connect its customers with the
producers. This means making its whole supply chain much more transparent to customers.
With Blockchain in place, customers will know the suppliers for Starbucks. They will also be

12STARBUCKS
able to know whether Starbucks works with ethical suppliers or are they into ethical sourcing
(Rabah 2018).
4. Conclusion
Therefore, the study could find a few traces of effective leadership at Starbucks while
a few others not so satisfactory. Their approach to sustainable sourcing of materials meets
with challenges. First, the support center facility for farmers is limited in number. Rather,
there should be more such stores. On a more strategic level Starbucks is committed to
educating its coffee farmers on sustainable farming. It should also consider and must ensure
diversifying its product portfolio considering the risks surrounding the coffee industry are
growing. Acquisition of non-coffee products such as Teavana can help Starbucks to fight the
risk surrounding the industry. Conventional disposable coffee cups have polluted the
environment badly. These are some good resources for atmospheric greenhouse gasses. The
recent announcement to facilitate the use of recyclable coffee cups is a good concept
provided if it ensures the proper management of these cups. There should be motivation for
customers to become a part of this Starbucks’ movement. The technological shift of
Starbucks towards the “Fourth Industrial Revolution (Industry 4.0)” can be considered an
excellent move. However, the implementation phase may face few barriers in various forms.
These barriers can prevail at the internal level as well as the external level. One of the barriers
could be its employees. They are less familiar with these technologies. They may behave in
an uncertain manner. Starbucks should have effective measures of the barriers and know how
to reduce these barriers in its course to implement technologies such as the Internet of Things
(IoT), Machine Learning and Blockchain technology.

13STARBUCKS
5. Recommending how to enhance its response over the next decade
Based on the findings of the study covered above, there are few suggestions to
Starbucks. These suggestions should prove helpful to enhance its response over the next
decade. These are:
 Do Corporate-Wide Sustainability Projects
Starbucks needs to tackle the climate challenge in the long-term. It should focus on
corporate-wide sustainability projects. This includes but not limited to the LEED certification
process for its infrastructure, reducing store waste and educating customers on energy
conservation. It should consider diversifying its product portfolio to control an uncertain
future in the wake of strengthening risk surrounding the global coffee industry. Non-coffee
brands such as Teavana can be helpful to fight uncertain risks.
 Do Stop Deforestation
Starbucks should ensure a more firm stand against deforestation both for the company and its
farmers. Farmers tend to move further upslope seeking better farming conditions. Experts
believe that this upslope migration can result in accelerated deforestation. By shifting the
focus to sustainable practices Starbucks can contribute significantly to limiting deforestation.
 Do Refine the Procurement Policies
Over the past few years, Starbucks has been criticized for its approach towards procuring the
wood, palm oil and paper products. Procurement policies should be improved. These raw
materials are strong contributors to deforestation. Due to questionable policies, Starbucks has
recently been criticized for its commitment to pursue a zero-deforestation policy. It has
received a low rating for using deforestation-free palm oil. To become an ethical brand and

14STARBUCKS
pursue the zero-deforestation policy Starbucks must first refine its policies related to
procuring palm oil, wood and paper products.
 Do Link Strategic Visions with Strategic Actions
Starbucks has a long-term vision to become a leading global coffee brand in terms of
customer satisfaction for the quality of products and its services. For this, it is now spending
hugely in (Industry 4.0). The entire globally expanded stores of Starbucks will soon be
connected over a “Cloud” network using technologies such as “Reinforcement Learning
Technology” and “Internet of Things (IoT)”. Whether it will be able to achieve the vision will
lot depend on how its leaders behave to these changes. The leaders at Starbucks should have
strategies in place to turn the visions into the realities. All those who are a part of Starbucks
should know their roles and responsibilities concerning this technology acquisition process.
 Do Facilitate a Friendly Work Environment
There is a need to promote a friendly work environment to help people become open-minded
towards learning new technologies, becoming a part of the change and contributing the
process with innovative ideas.
 Do Develop Competency
Technological developments and sustainable supply chain practices are huge tasks. The
strategic goals with these processes can never be attained unless Starbucks has met the
competency needs at its organizational and external levels. At the internal level, Starbucks
should have technically strong and efficiently committed people to implement these
processes successfully. At the external level, it should have productive collaboration with
strategic partners. Moreover, it must work closely with its farmers. A collaborative approach
under the supervision of institutional guidelines for sustainable farming will only help
Starbucks to attain its zero-deforestation policy.

15STARBUCKS

16STARBUCKS
References
Annualreports.com 2019. Starbucks Fiscal 2017 Annual Report. [online] Annualreports.com.
Available at:
http://www.annualreports.com/HostedData/AnnualReportArchive/s/NASDAQ_SBUX_2017.
pdf [Accessed 7 Oct. 2019].
Borrella, I., Mataix, C. and Carrasco‐Gallego, R., 2015. Smallholder farmers in the speciality
coffee industry: opportunities, constraints and the businesses that are making it possible. IDS
Bulletin, 46(3), pp.29-44.
Bragadeesh, S.A. and Umamakeswari, A., 2018. Role of Blockchain in the Internet-of-Things
(Iot). International Journal of Engineering & Technology, 7(2.24), pp.109-112.
de Soares Lemos, G., 2019. IoT and Machine Learning for Process Optimization in Agrofood
Industry.
Grabs, J., Kilian, B., Hernández, D.C. and Dietz, T., 2016. Understanding coffee certification
dynamics: a spatial analysis of voluntary sustainability standard proliferation. International
Food and Agribusiness Management Review, 19(1030-2016-83133), pp.31-56.
Independent.co.uk 2019. Starbucks pledges £7m to develop ‘fully recyclable and
compostable’ cup. [online] The Independent. Available at:
https://www.independent.co.uk/news/business/news/starbucks-new-recyclable-compostable-
cup-campaign-latte-levy-plastic-a8267471.html [Accessed 7 Oct. 2019].
Levy, D., Reinecke, J. and Manning, S., 2016. The political dynamics of sustainable coffee:
Contested value regimes and the transformation of sustainability. Journal of Management
Studies, 53(3), pp.364-401.

17STARBUCKS
Munguia, N., Varela, A., Esquexr, J. and Velázquez Contreras, L.E., 2017. Fostering
corporate sustainability in the Mexican coffee industry. PSU Research Review, 1(1), pp.51-
62.
Mwangi, R.W., Mwenda, L.K.M., Wachira, A.W. and Mburu, D.K., 2017. Effect of Primary
Processing Practices Carried out by the Coffee Cooperative Societies on the Sustainability of
the Coffee Industry in Kenya. European Journal of Business and Strategic
Management, 2(5), pp.63-80.
Rabah, K., 2018. Convergence of AI, IoT, big data and blockchain: a review. The Lake
Institute Journal, 1(1), pp.1-18.
Rice, R.A., 2015. In the pursuit of sustainability: Lessons from the coffee
sector. International Journal of Environmental Protection and Policy, 3, pp.14-19.
Samper, L. and Quiñones-Ruiz, X., 2017. Towards a balanced sustainability vision for the
coffee industry. Resources, 6(2), p.17.
Van Rijmenam, M., 2019. The Organisation of Tomorrow: How AI, blockchain and analytics
turn your business into a data organisation. Routledge.