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Originally Posted by MHR 319 Team Assignment STARBUCKS – THE EVIL EMPIRE
I. Summary of the Facts:
Starbucks Corporation, founded in 1971, is one of the fastest growing coffee retailers in the world. Starbucks had over 500 company owned stores throughout the country at the time this case was written, they now have over 8,000 stores in 28 countries. Starbucks has been in a constant state of growth since it was purchased by CEO Howard Shultz along with a group of investors in 1987. Starbucks plans to remain company owned to maintain quality, freshness and training. It is a progressive business offering great employee benefits. The company offers each employee full medical and dental benefits as well as stock options to both full and part time employees. This makes Starbucks the first large retailer to have employees come first with their theory that happy employees make happy customers. The company also makes large donations to various non-profit organizations. Starbucks gives each store the authority to work with a variety of local community groups. Although it seems as though Starbucks is on the right track the case proved otherwise.
Starbucks has been known to purchase coffee beans at below market costs. According to the United States and Guatemala Labor Education Project workers are paid two cents a pound for picking coffee beans in unsafe conditions that Starbucks turns around and sells for $8 a pound in their retail stores. The company is in the process of adopting a code of conduct but in the mean time Starbucks is getting a bad reputation.
Along with unsafe working conditions and horrible pay, Starbucks is also accused of bumping off the competition. They have been said to pay large sums of money to property owners to take over already existing coffee stores. With this negative image come protesters as well as anti-Starbucks websites and leaflets. The company has been venturing into cities it is not wanted. Howard Schultz denies all wrong doing but customers are seeing things differently. Starbucks is still getting the negative attention it does not want.
II. Statement of the Problem:
Starbuck is viewed by many as a big business corporation that will stop at nothing to continue their goal of worldwide domination in the specialized coffee industry. Starbucks is one of America’s fastest growing specialty businesses that have enjoyed hefty profits in excess of 20% increases per year since its inception almost 15 years ago. Starbucks has enjoyed enormous success and productivity in a relatively short period of time.
The Seattle based coffee brewer continues its relentless growth and profitability that has enabled the company to secure a position as the industry leader in the coffee retail industry. In many cases, Starbuck’s incredible success has come at a premium price. As experienced by other powerful companies in the past, Starbucks is experiencing severe challenges in dealing with the development of strong oppositions which include disgruntled customers, community activist, labor unions to free trade protesters. Starbucks worldwide perception has suddenly changed. There has become more opposition and protesters continue to bloom in what people refer to “the evil empire” as a reference to Starbucks.
Starbucks elusive brand image has been tainted by numerous accusations stemming from Starbucks involvement in alleged unfair labor practice, to global expansion, to free trade infringement violations, and exploiting third world countries by purchasing raw materials below market value.
Starbucks is in dire need of an image overhaul. The perception of the company has faltered and is in decline after getting hit by negative publicity. Many customers see Starbucks as nothing more than a greedy capitalistic opportunistic money-mongering corporation that will stop at nothing to accomplish its goal of global domination.
III. Causes of the Problem:
Starbucks is the fastest-growing takeout store ever. In the past 17 years, they have grown from one store to well over 8,000 with plenty of room for further growth. They have been popping up everywhere and are opening stores at a rate of 3.5 per day. At that rate, it is obvious that they draw business away from existing local coffeehouses, and realistically they may even draw business away from other Starbucks’ nearby. The potential for growth is astounding, as Starbucks is still not very common in Europe, a continent full of heavy coffee drinkers. With a growth rate like this, it’s easy to see how Starbucks can be perceived as an evil empire. Starbucks has begun to monopolize their industry and they are looking towards other opportunities in other markets.
Aside from its retail stores, Starbucks has begun to expand into other businesses. They have partnered with Pepsi to produce bottled coffee drinks for sale in markets and have also started selling CDs in their stores and have partnered with XM Satellite Radio to bring their own music channel to XM’s 2 million subscribers.
In addition to its amazingly fast growth rate, Starbucks has also had its share of unethical business practices. Starbucks has been accused of buying coffee beans at below Fair Trade prices. Also, they have bought coffee beans from suppliers who used child labor and paid workers extremely low wages. In addition, to open more stores, Starbucks has been accused of trying to squeeze out local coffeehouse competition by offering landlords double the current rent that current coffeehouses pay. They look to crush the local competition by flexing their corporate muscle allowing them to pay less for the coffee beans and offer landlords more rent. Because of all this, Starbucks is sometimes met with a lot of resistance when coming into communities. There have been lots of protests both here in the U.S. and abroad to try to prevent Starbucks from expanding into communities in which they are unwelcome. However, these protests are usually ineffective and Starbucks ends up opening the store as planned. Some of the reasons that communities do not want a Starbucks are because having a Starbucks will raise the rent of the area as well as encouraging and adding heavy traffic to the area.
Taking all these factors into consideration, it’s easy to see how Starbucks can be perceived as an “evil empire.” The constant skyrocketing growth, combined with sometimes questionable business practices makes many people uneasy about letting Starbucks into their communities. One such community in Portland has even created their own web site to keep their residents informed and active against an unwanted Starbucks that opened in their community. In spite of the community’s very vocal resistance, Starbucks continued and opened the store as planned. CEO Howard Schultz has said that he only wants to expand into areas where people want a Starbucks, but clearly in this instance this was not the case. Starbucks used coercive power to expand anyways.
IV. Possible Solutions:
1.) Donate and contribute funds to the local communities, non-profit organizations, social events, small businesses, and natural disasters victim (Florida Storm victims). The company needs to go above and beyond what they already contribute.
(Pros) Keep the local communities and non-profit organizations satisfied by receiving donations and funds from Starbucks. Contributions improve the brand identity of Starbucks and attract new customers to the stores.
(Cons) Decreases profit. Possible patriotism
2.) Create more “awareness” (PR) about Starbucks contribution and donation to keep the consumers and local businesses satisfied.
(Pros) Consumers, local businesses, and the media will be aware of Starbucks goodwill. Media coverage of Starbucks contribution and donation will improve Starbucks brand identity as a benevolent company that cares about its communities. Increasing the PR will help Starbucks stray away from the evil empire perception.
(Cons) Creating public awareness of Starbucks goodwill will cost time and money for the company. The company will need to hire new teams consisting of part-time employees to come up with plans for donations, contributions and finding the time and man power to help.
3.) Slow down the growth rate of new stores domestically and internationally. Starbucks should not sacrifice the long-term goal by the further expansion of new stores but rather be concerned by the current market and goals of the company. Slow growth rate will help minimize negative PR.
(Pros) Starbucks can concentrate on expanding the merchandising and services, customer satisfaction, employee satisfaction, and the long-term profit of Starbucks.
(Cons) Slowing down the expansion or “colonization” as Starbucks like to call it might distract prospective investors from buying Starbucks stock because of slow market growth. Slow growth for the company could make room for new business startups and contribute to competitor's growth.
4.) Before planning to open a new Starbucks store the company should seek feedback from the particular neighborhood and the community through surveys and questionnaires rather than Starbucks going in and open a store where it is not wanted. Starbucks should hire a self-managing team that is an independent counsel group to be responsible of seeking feedback from small businesses, local communities, non-profit organizations and other areas there company may effect. The team will find out the reactions and concerns of opening up a new Starbucks in that particular neighborhood. If the feedback is positive then the company should proceed with the development but if negative they should rethink this venture.
(Pros) Seeking feedback from the city will determine if they will be welcome in certain communities. This will prevent future problems of rejection with in small communities where they are not welcome.
(Cons) There could be many cases where Starbucks isn’t welcome and make expansion very difficult.
V. Recommended Solution and its Implementation:
Starbucks Corporation will need to create a team of self-managing experts, which would be a non-biased, independent counsel. The solutions group authorizes Starbucks as to whether they can open up a new store at a certain location or if they should look elsewhere. The Board of Directors will need to seek the authorization from the solutions group to determine if it is to Starbucks advantage to open a new store in a particular area. The sequence is as follows: Starbucks development team will research on the location that they plan to open. Once all the information has been gathered, Starbucks will inform the solutions group and await their approval and hear their recommendations. The solutions group will visit the city and receive feedback from the local businesses and Community Development Department in that particular city. If the feedback is positive, the solutions group will authorize Starbucks to proceed with the development of the new store. If the feedback is negative, the solutions group will advise the company to find a more welcome place to start up a new store.
Abiding this solution will help Starbucks Corporation from having future problems with small businesses, protestors, and local organizations. The company will use the feedback supplied by the solutions group and will use it to find prime new locations for new stores. The entire sequence should take a period of five year for the implementation to be complete.
When Starbucks Corporation implements this solution, Starbucks could benefit from the limited number of Starbucks stores available. Supply and demand comes into play. When Starbucks stores are limited in location, the demand for the product could increase the company's revenue. Also, by limiting the number of stores Starbucks may lose the reputation of an “evil empire”.
VI. Justification:
Since expansion strategy for Starbucks is an ongoing trend, we PR Consultants shall improve efficiency in exploring foreign markets with the objective to become an enduring success for the company with strong global brand identity. By means of recommending that, Justification of Starbuck Corporation wants to improve its public image it needs to take the following steps toward the future. They need to incorporate a Self-management team to oversee future development of the corporation. With the restructuring of the corporations’ outlook on future endeavors, it will be able to make themselves a more positive image, instead of the negative image of an Evil empire.
The first step would be to slow down the growth rate of the corporation and not to sacrifice the long-term goal for the short-term payouts at the present time. The reason for this is to make sure that you are not putting the horse before the carriage so to speak. This way the corporation is able to deal with the social responsibility they have and correct the obligations to the organization to behave in ethical and moral ways. This will improve the quality of work life for the overall employee experience in the workplace. In addition, they need to make a work-life balance for the demands of the employees work and personal affairs.
The Second step would be to make the Starbuck name more known in a positive aspect. It would be best to take a small step back from the mass development. Thus, use some of those funds to make up a Research and Development department that come up with ways to benefit the community. That way when people think of Starbucks they would think about community. In addition, even when they see a Starbucks they would know that it means community. This can be achieved with the development of Attitudinal, Behavioral, and Information Foundations within the Starbucks Corporation.
The Final step would be to have a non-bias team to oversee all parts of the Public Relations of the corporation. There many objectives would be to see the cooperation through a five-year span, making the key part in the development and growth within the community and with proper recognition. |