Individual Report: PESTLE Analysis of Starbucks Business in the UAE

This individual report provides a comprehensive PESTLE analysis of Starbucks' business environment in the United Arab Emirates (UAE). The analysis examines the impact of political factors, including taxation and international trade regulations; economic factors, such as interest rates, exchange rates, globalization, economic growth, and competitor pricing; social factors, including religion, demographics, health consciousness, and globalization; technological factors, such as coffee brewing machines and the Starbucks Now app; legal factors, including trade restrictions, employment laws, customs, and caffeine regulations; and environmental factors, such as plastic straws, reusable cups, supporting the Puerto Rico coffee industry, and renewable energy initiatives. Additionally, the report includes SWOT analyses for both Starbucks and IKEA, providing insights into their strengths, weaknesses, opportunities, and threats. The report references various sources, including The National, PESTLE Analysis, Scribd, Entrepreneur, and Export.gov, to support its findings.

Business and Business
Environment
Individual report
By: Olja Duseckin
Student ID: 20191221419

PESTLE analysis of Starbucks
PESTLE analysis is going to show how 6 important factors affect the business of Starbucks in
UAE. It will show the effects of Political, Economic, Social, Technological, Legal and
Environmental factors within the country.
First Starbucks store in UAE opened in old Dubai Airport in June 2000. Since then they
expanded to over 60 locations within UAE.

Political:
Starbucks is affected by political factors in the United Stated which is its home market as well
as political factors of the countries where they source the raw materials.
-Taxation:
Company has to consider the high taxation that is imposed on coffee farmers which can lead to
raise of coffee bean price. In June2003. Tanzania’s Minister of Finance has lowered taxation for
small holder farmers which positively affected the purchasers of coffee.
-Deregulation:
In June 2018. USA has withdrawn from International Coffee Agreement for the second time.
First time USA left ICA was in 1989. And they rejoined in 2005. International Coffee
Organization (ICO) is global intergovernmental organization whose members are producing and
exporting coffee countries as well as consuming and importing countries. This had effects on
coffee quotas and price control. Some smaller farmers earnings dropped since deregulation and
they had to drop out of coffee farming as they were struggling to make a living. International
trade regulations and tariffs will affect Starbucks when importing and exporting goods. Other
country’s governments can now impose tariffs which can significantly increase the price when it
comes to large imports.

Economic:
Interest rates:
Rising of interest rates results in expansion and investment plans being put off which results in
sale fall for Starbucks and its suppliers. Rise of mortgage repayments mean that the consumers
have less of disposable income to spend on items like coffee.
Exchange rates:
When dealing with international trade Starbucks is affected by exchange rates. In today’s
market exchange rates are always changing. If coffee supplier country’s currency falls this
would enable Starbucks to get more value for their money which could also positively affect the
consumers by lowering the product price.
Globalization:
Globalization of coffee industry happened in 1970. which has affected coffee producers and
sellers. After the globalization some coffee bean farmers’ profits dropped which resulted in
some farmers dropping out of the business. Decrease in coffee production can reflect on drop
of Starbucks’ supply levels and profits.
Economic growth:
UAE is expected to be one of fastest growing Gulf economies in the current 2019. year with
current estimated 2.6 percent growth. GDP growth of 3 percent is estimated by the next year
2020. This could mean higher domestic credit growth, higher employment level and bigger
number of tourists which would definitely increase number of customers in Starbucks and
increase of the profit.
Competitor pricing:
Competitor’s prices can drive down profits and profit margins. This could start a “price war”
which is when a company believes that price-cutting will increase market share but it doesn’t
have a real cost advantage. Starbucks main competitor in UAE is Costa Coffee.

Taxation in the UAE:
UAE Government has implemented VAT on Jan. 01st 2018. At the standard rate of 5%. All
businesses must register for VAT if their supplies and imports exceed AED 375,000. This meant
increase of prices by 5% which affects the customers.
Social:
Religion:
Religion has a big impact in the UAE. All Starbucks food and beverages have to be made
according to the Halal principals which means that there cannot be any traces of alcohol or
pork derivatives in them.
Globalization:
Globalization results in many different cultures within the UAE. Starbucks can attract different
Nationalities with different food and drink option which cater to everyone’s preferences.
Demographics:
Baby boomer generation is retiring which means less spending by older generation. Starbucks
should now target the Generation X and Millennials as its prime customers. Case studies of
people who drink artisan coffee showed that most of the consumers are age 35-54, however
Starbucks should also target group 18-24 as they can win them as customers early on and have
them stay loyal in the years to come. UAE population continues to grow. By Nov 2019.
population has grown by 1.45% which means more potential customers.
Health consciousness:
Health consciousness has a big impact on today’s market place and is a trend that is occurring
at the moment. Customers are increasingly looking for healthier alternatives and are more vary
of their diet. Starbucks should keep in track with this trend by offering more healthy food
options as well as low calorie coffee and more non- dairy milk alternatives.

Technological:
Coffee brewers:
Starbucks uses the latest coffee brewing machines available on the market which makes
brewing easy and quick which benefits both their baristas and the customers who don’t have to
wait long for their order.
Starbucks Now:
Starbucks Now is company’s mobile order and pay app that allow customers to place their
order in advance before their visits and pick their food and drinks at the store as soon as they
arrive without have to wait in the line. App allows customers to choose a store based on their
GPS location. Customers can browse through catalogue on the app to choose their drinks and
food as well as customize their own beverages. Starbucks Rewards members that use the app
earn their stars 25% faster than by using their store valued card in the stores. App is customized
according to each user’s preferences and remembers the customer’s preferred drink size, type
of milk and their favorite beverages.

Legal:
Trade restriction:
Different countries have different trade laws that apply to businesses. Starbucks needs to be
aware of those and comply with them. Starbucks needs to ensure that they are not in violation
of any of the countries’ laws like the religious laws which have to be followed in UAE and other
countries they do business in. All food and beverages in Starbucks UAE have to comply with
Halal requirements. Some countries have import/ export tariffs that have to be paid for certain
goods.
Employment law:
Each country has different employment laws regarding number of hours limitation and public
holidays. In UAE holidays include: New Year’s Day, Prophet’s Ascension, Eid al-Fitr, Day of
Arafat, Eid al-Adha, Islamic New Year, Mawlid, Commemoration day and National day. During
these holidays Starbucks needs to provide all of their UAE based employees with mandatory
vacation day or shorter working time on these dates. Also many countries have mandatory
minimum wage which Starbucks has to follow.
Customs and trade regulations:
All goods imported into the UAE are subject to custom duties. On top of these all business with
annual revenue of more than 102.000USD are required to register for VAT.
Caffeine regulation:
Strict policies and regulations have been put in place regarding the production and
consumption of caffeine products. All products containing caffeine have to be clearly labelled.

Environmental:
Plastic straws:
Starbucks is planning to get rid of plastic straws by 2020 by introducing the new lids for the cold
drink cups that don’t require a straw. This will save a lot of plastic wastage and will benefit the
planet. Starbucks also promotes their reusable cups that they sell in each store that can totally
eliminate wastage of plastic.
Supporting Puerto Rico’s coffee industry:
Starbucks is planning to plant 2 million coffee seeds to rebuild coffee industry in Puerto Rico
after 95% of the coffee crops got destroyed by Hurricane Maria in Sep 2017. In this way they
are hoping to make a huge impact on local community by supporting the farmers in rebuilding
their business and in the end giving back to the Starbucks. They are providing the farmers with
disease- resilient seeds.
Renewable energy:
Starbucks invested 75 million USD into renewable energy to power all of their stores in USA and
Canada as well as 62% of their stores around the globe. By 2020. They are planning to source
locally over 50% of their renewable energy.

SWAT Starbucks:
Strengths Weaknesses
 Largest coffee house brand globally
 Financial strength (4bln$ business)
 Quality of the beans
 Recognizable logo
 Large range of coffee drinks
 Rising coffee bean prices
 Negative publicity in some countries
(China)
 Product pricing
 Limited food options
 Expansion to new markets
 Opening more chains in existing
markets
 Expanding products
 To increase the environmental
awareness
 Other coffee house brands like Costa
 Problems with coffee beans supply
 Constant rise in coffee beans and
dairy price
 McCafe
Opportunities Threats
Strengths & Opportunities:
In 2018. Starbucks’ profit was 4.2bln USD. Starbucks return of investment is 24.54% and return
of equity is 29.16% which is a good benefit for their investors. Being such a big and financially
strong corporations gives them a lot of advantage on the market and a lot of opportunities to
expand to the new or existing markets. Increasing their product range and offering more
varieties like special dietary required food options would help them in expanding to new
clients.
Weaknesses &Threats
Starbucks’ price largely depends on the price of coffee beans and milk. Due to some natural
catastrophes like hurricanes and flooding coffee plantations can get destroyed which rises the
overall coffee bean price on the market which can create a lot of loss for the company.
Smaller local markets also usually price their coffee lower which can take away the Starbucks
customers who are looking to spend less on their coffee.

SWAT IKEA:
Strengths Weaknesses
 Affordable prices
 Worldwide known brand
 Modern product designs
 Big product range
 Financially strong brand
 Store design and organization
 Not developed on Asian markets
 Lower product quality and not long
lasting
 Same product offers on all the
markets
 Far away store locations
 Expanding to new markets
 Partnerships with other brands
 Move productions to India and China
for cost saving
 Introduction of premium line
products
 Environmental friendly products
 Emerging competitor brands with
lower price
 Economic boom and salary raises so
customers want to go for better
brands
 Increasing material costs
Opportunities Threats

Reference:
The National. (2019). UAE economic growth momentum 'at turning point', says IMF. [online] Available at:
https://www.thenational.ae/business/economy/uae-economic-growth-momentum-at-turning-point-says-imf-1.856919
[Accessed 5 Nov. 2019].
Contributor, P. (2015). PESTLE Analysis of Starbucks. [online] PESTLE Analysis. Available at:
https://pestleanalysis.com/pestle-analysis-of-starbucks/ [Accessed 2 Nov. 2019].
Petkov, G. (2011). PESTEL Starbucks | Inflation | Starbucks. [online] Scribd. Available at:
https://www.scribd.com/document/74813537/PESTEL-starbucks [Accessed 1 Nov. 2019].
Hanafin, J. (2018). The Impact Of VAT On Your UAE Business. [online] Entrepreneur. Available at:
https://www.entrepreneur.com/article/307462 [Accessed 4 Nov. 2019].
Export.gov. (2018). United Arab Emirates - Customs Regulations | export.gov. [online] Available at:
https://www.export.gov/article?id=United-Arab-Emirates-customs-regulations [Accessed 3 Nov. 2019].