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Starbucks Social Responsibility and Brand Strategy
Introduction
Starbucks is the largest international chain of coffee shops which has been consistently growing and expanding since the 1980s. In 2008, it faced a major crisis caused by the economic recession and the failure of the companys aggressive expansion strategy. To address the crisis, it introduced significant changes to its corporate policy, focusing on five main aspects of its operations: the environment, employees, customers, suppliers, and communities. The alignment of the companys general strategy with the core principles of business ethics allowed Starbucks to successfully overcome the crisis and achieve stable growth.
Background
Starbucks is an American multinational chain of coffeehouses headquartered in Seattle, Washington. Currently, it is the largest coffeehouse chain in the world, operating more than 30,000 retail stores in 80 countries ( Starbucks company profile, n.d.). Starbucks focuses on selling coffee grown under the highest standards of quality using ethical sourcing practices, positioning its stores as a neighborhood gathering place, and providing exceptional benefit programs to its employees ( Starbucks company profile, n.d., para. 6). In the past few decades, Starbucks has achieved high levels of growth while maintaining a good reputation for social responsibility and business ethics.
In 2008, Starbucks faced a crisis that was a result of both the economic recession and the expansion of the store network in the previous years. A global recession caused the market to bottom out for expensive coffee drinks, leading to a drop in Starbucks profits (De Silva, 2020). At the same time, the company encountered problems with its aggressive expansion strategy that dominated for most of the 1990s and 2000s (Ng, 2018). With Starbucks stores located almost at every corner, the company started to be criticized for forcing many smaller coffee shops out of business. Its international expansion was also connected with numerous difficulties caused by a lack of sensitivity to the specific local needs and nuances.
To address the crisis, Starbucks decided to slow down its global growth plans and instead refocus on strengthening its brand, satisfying customers, and building consumer loyalty. Explaining the crisis, the companys CEO, Howard Shultz, noted that Starbuckss heavy spending to accommodate its expansion has created a bureaucracy that masked the main problem (De Silva, 2020, para. 8). In 20082009, the company closed 10% of its stores, which allowed it to continue to provide employees with health insurance (Ng, 2018). Further on, Starbucks invested in responsible programs for ethical sourcing, reducing environmental impact, and improving communities to translate serious management crises into better performance.
It can be concluded that Starbucks addressed the 2008 crisis by making radical changes in its business strategy. It pulled back on expansion that characterized the companys development over the last several decades and focused on sustainability and customer experience (De Silva, 2020). Its guiding principles were updated to focus on increasing awareness in all aspects of business, from supplier relations to human resource management. Social change was proclaimed to be an important part of the companys core identity, with Starbucks starting to invest more funds into social development programs to benefit local communities ( Starbucks company profile, n.d.). Each business decision began to be evaluated based on its compliance with the companys ethics. As a result, the company succeeded in both addressing the crisis and modifying its brand to reflect social developments and appeal to changing consumer tastes.
Alternative
Starbucks could have chosen another strategy to respond to the 2008 crisis. It could have continued the same course of action that it has been pursuing over the previous several decades and adopted radical measures to reduce costs and retain profits. The closure of stores could have been avoided by reducing employee benefits and compromising on the quality of products and services. Instead of sustainable development and social change, Starbucks could have focused on cheaper labor and cheaper ingredients, continuing to expand as a multinational fast-food chain with a focus on quantity rather than quantity.
This strategy was not adopted by Starbucks because it violates the ethical principles on which the company is based and provides a non-sustainable solution which focuses on short-term rather than long-term benefits. Starbuckss corporate mission states that the company is concerned with the environment, its employees, suppliers, customers, and communities and is committed to achieving social change ( Starbucks company profile, n.d.). The proposed aggressive strategy would have violated all of these principles.
With the aggressive strategy, the companys environmental concerns would have been abandoned, and it would have ceased investments into environmentally friendly solutions aimed at waste reduction, recycling, energy conservation, and partner education. Employees wages and health benefits would have been reduced, and the managements attention would have been placed on employee productivity rather than satisfaction. Starbucks would have changed its supplier policy, purchasing cheaper lower-quality ingredients instead of paying premium prices to local farmers to support coffee-growing communities. In terms of customer experience, Starbucks would have focused on uniformity rather than customization, designing all its stores in the same way regardless of their location. It could have probably involved changes in the stores image from a welcoming environment where people can relax into a fast-food venue with grab-and-go food items and coffee. Investments in community support programs would also have been abandoned, and the focus on social change would have been replaced with a focus on profits and expansion.
Overall, adopting such an aggressive strategy to respond to the crisis would have meant compromising on ethics and violating the underlying principles of the companys corporate mission. It would not have been consistent with the companys policy and would have probably resulted in Starbucks being transformed into a fast-food coffee chain with cheap, low-quality products. The solution chosen by the companys management at that time was more consistent and ethical.
Proposed Solution and Recommendations
Over the last decade, Starbucks continues to operate in line with its business strategy adopted in 2008. To maintain the current level of growth and improve the companys business ethics, it can be recommended to further develop this strategy without introducing any radical changes. To maintain competitive advantage, improve consumer experience, and expand market presence, the companys activities need to be focused on the environment, consumers, employees, suppliers, community, and promoting social change.
In line with its environmental mission statement, Starbucks should stay committed to reducing waste, conserving energy, educating its partners, and increasing consumer awareness. One of the major companys initiatives is to increase the use of reusable cups and personal tumblers among its consumer base to reduce the amount of waste. It can be recommended to provide more substantial discounts to people bringing in their reusable cups.
Customer satisfaction should continue to be of utmost importance to Starbucks. The focus needs to be placed on the quality of the coffee, the atmosphere of the coffee shops, and the overall Starbucks experience rather than rapid expansion. Starbucks stores should be designed as places where people would want to spend time and relax, and when expanding to foreign countries, particular attention should be given to addressing the local specifics to avoid previous marketing mistakes.
The existing employee programs are designed in line with the companys guiding principles of putting people before profits, and they should be further developed in this direction. The key elements are diversity, investments in employee education, commitment to employee well-being, and provision of a comfortable working environment (Tikson & Hamid, 2017). All employees have a voice at Starbucks, which is emotionally rewarding and results in high motivation and personal satisfaction (Tikson & Hamid, 2017). Further developments may include providing increased employee medical and psychological support to address the challenges of the COVID-19 pandemic.
As suppliers are concerned, Starbucks is committed to building positive relationships with small coffee growers while also working with governments and non-profits in the regions of its operation. It has developed a set of socially responsible coffee-buying guidelines that ensure preferential buying status for participants who receive high scores in best practices ( Starbucks company profile, n.d.). Further developments need to be in line with the companys goal of increasing its ethically sourced coffee to 100%.
Community involvement should continue to be one of the cornerstones of Starbuckss business strategy. It should include identifying and addressing issues specific to local communities, participation in social development programs, and involvement in discussing serious issues. Despite some controversies surrounding Starbuckss previous activities in this area, this approach requires further development, especially in the times of the pandemic. Specific initiatives need to be proposed to support local communities in their handling of the crisis.
Overall, the strategy of the companys further development should be a continuation of its current business strategy, with utmost attention given to sustainability and increasing awareness in all aspects of its operation. The specific actions to maintain Starbuckss competitive advantage and increase consumer loyalty need to be in line with the companys corporate mission. Each business decision needs to be evaluated to ensure its compliance with the ethical values, and the interests of communities and employees need to be placed above profits. Adherence to ethical values helped Starbucks to overcome the crisis and achieve its current market position, and there is no indication that it should be abandoned.
Conclusion
Starbuckss current business strategy was developed as a response to the 2008 crisis, which was partly a result of the companys aggressive expansion policy. The strategy is based on ethical and social values, and the company is committed to ensuring that all its operations are consistent with the established moral guidelines. The alternative to this strategy could have been a more aggressive approach focused on further expansion and cost reduction. Its inconsistency with ethical values prevented it from being adopted, and the companys management chose a more sustainable strategy that proved to be successful. It is recommended to further develop this strategy without implementing any serious changes. The companys focus on the environment, employees, customers, suppliers, and communities ensures its commitment to long-term rather than short-term outcomes, which serves as the basis of Starbuckss consistent growth.
References
De Silva, D. (2020). Starbucks: Lessons from the financial crisis. Seeking Alpha.
Ng, D. (2018). How Starbucks growth nearly destroyed the business, until one man saved its skin. Channel News Asia.
Starbucks company profile. (n.d.). Starbucks.
Tikson, S. D. S., & Hamid, N. (2017). Human resources policies and work culture: A case of Starbucks. Journal of Business, Management, and Informatics, 14(1), 111.
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