Starbucks Coffee Company. Starbucks (NASDAQ: Sbux) Operates Essay

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Starbucks Coffee Company. Starbucks (NASDAQ: SBUX) operates global chain of coffee shops, both store-owned and franchised. After an extended period of rapid growth, the company has entered into a period of relative stagnation. One of the world's largest coffee buyers and the world's largest coffee retailer, Starbucks has a wide range of stakeholders to whom it is responsible. This paper will analyze the degree to which the company is able to meet the needs of these various stakeholders, whose needs are at times mutually exclusive.

The Company

According to the Starbucks.com (2010) website, the company's mission statement is as follows:

"To inspire and nurture the human spirit -- one person, one cup and one neighborhood at a time."

The company emphasizes the role that the core product -- coffee -- plays in this mission and then outlines the ways that some of the different stakeholders contribute to this mission as well. Among the stakeholders mentioned are partners (company jargon for employees), customers, stores, neighborhoods and shareholders. Starbucks feels that if it as a company can deliver positive outcomes to the other stakeholders, this will result in positive outcomes to the shareholders. The objectives listed for the partners are to treat them with respect and hold each other to high standards. The objectives listed with respect to the company's behavior towards customers are to be engaged, and uplift the lives of customers, including but not limited to the production of a perfect beverage. Starbucks' objectives with respect to the neighborhoods in which it operates include being a force for positive action, and to take responsibility for playing a leading role in the community. The company characterizes its responsibilities to shareholders as to deliver financial rewards, to endure and to thrive.

Beyond this, Starbucks views the environment as a key stakeholder as well. There is a separate mission statement with respect to the environment:

"Starbucks is committed to a role of environmental leadership in all facets of our business."

The company has set out a number of objectives relating to this mission: understanding the environmental issues associated with its business; developing innovative solutions to bring about change; striving to buy, use and sell environmentally friendly products; recognizing that fiscal responsibility is essential to our environmental future; measuring and monitoring progress for each project; and encouraging the company's partners to share in its mission (Starbucks.com, 2010).

Stakeholders appear to have a strong influence on the company's missions. That there is a second mission statement specifically for one shareholder, the environment, is unusual in a large corporation such as Starbucks and shows the strong influence of this particular stakeholder on the company. Beyond that, the other stakeholders are given specific and important consideration when the company explains its mission statement in greater detail. It is clear that the different stakeholders drive much of what Starbucks does, and the company believes that in meeting the needs of some of its major stakeholders, that this will contribute to the company meeting the needs of other key stakeholders as well. For example, the company claims that by meeting the needs of other stakeholders, shareholders will benefit, even though the specific needs of shareholders (for increased wealth) can at times be mutually exclusive to the needs of other key stakeholders.

Achieving Objectives

A company whose mission is as governed by stakeholders as appears to be the case with Starbucks should have a strong track record of meeting those needs. To analyze the degree to which Starbucks achieves the objectives of its stakeholders, three major stakeholders in particular will be analyzed -- shareholders, the environment and coffee growers.

With respect to the environment, Starbucks represents a possible significant threat for a few reasons. Not only does it ship its products around the world but it makes extensive use of disposable goods, as is the norm in the quick service food industry. According to the company's website, its strategy with respect to the environment is implemented on many fronts. The company has a recycling program, which to this point includes 70% of stores. At present 25% of beverages are served in reusable cups. The company offers an incentive to consumers to use reusable cups that ranges from ten cents per coffee in North America to the equivalent of nearly thirty cents in Malaysia. Starbucks has made numerous improvements with respect to its paper cups and although progress is slow, the company continues to strive to improve in this area. Front of house recycling has also been introduced (Starbucks.

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com, 2010). The company is also active in other areas of environmental stewardship, including green building, water conservation, energy conservation and climate change. Interesting, the company has a vested interest in climate change as climate change is a significant threat to global coffee supplies (Baker, 2009).

Evidence of Starbucks' success with respect to the environment is mixed. The company has struggled with its program to improve recycling efforts (Gloudeman, 2010). In addition, the company also wastes more water than it claims, leading to charges of greenwashing from environmental groups (Balakrishnan, 2008).

One of the major concerns with respect to coffee growers has traditionally been Starbucks' ability to deliver a fair result for the growers of its primary commodity. For much of the company's history, it bought coffee on the global commodities market and therefore remained largely removed from the growers. In recent years, however, the company has taken a greater interest in this stakeholder group. Since 2005, the company has worked with growers to test different methods of growing, trying systems from around the world in different parts of the world. The objective of this program is to help farmers increase their yields, and to find ways to offset the negative impact on the industry that is occurring because of climate change -- new strains and new techniques can maintain a region's vibrancy even when it otherwise would have faltered (Starbucks.com, 2010).

A long-standing complaint about Starbucks was that the company did not participate in the fair trade coffee market, essentially meaning that it was not delivering as positive an outcome to the growers as it could have. The company has taken steps to improve its outcomes to the growers and is now the world's largest buyer of fair trade coffee (DaisyGreen, 2009). This includes 100% of the company's espresso products. With respect to the coffee growers, Starbucks appears to be making strides towards its objectives. The growers under a fair-trade program will receive more for their coffee than growers who sell into the basic commodity market. In addition, because Starbucks buyers from growers all over the world, its program to test different growing techniques around the world may prove useful in helping coffee growers in all regions deal with the issues presented by climate change.

With respect to shareholders, Starbucks has traditionally delivered results. The company's growth through most of the 1990s and well into the 2000s was very strong, resulting in major improvements in shareholder wealth. In recent years, the company has not delivered results as strong, but has seen faltering sales and profits. The company's strategy for meeting shareholder expectations relies on a combination of factors. Starbucks believes that it can deliver results to shareholders by meeting the needs of other stakeholders. However, the company has also undertaken a number of other strategies in the past few years to build value for the shareholders.

In 2008, the company closed 5% of its U.S. stores as well as a number of stores abroad due to underperformance (Allison, 2008). This move was a response to overcapacity in the system and was intended to reduce costs in the face of rising fuel costs and sluggish sales. The company has tested a variety of different products in order to spur increased sales, including hot breakfast snacks. More recently, the company has begun an experiment in rebranding and offering alcoholic beverages and cheese plates in order to spur nighttime sales (Baertlein, 2010).

The degree to which Starbucks has met the needs of shareholders can be found in its financial statements and stock market performance. The company has restored its earnings per share to $0.85 in the 2009 fiscal year, following a slump in 2008. This is despite a decline in sales in the year, which is evidence that the company's cost-cutting programs have been successful. On the balance sheet, shareholder equity has increased steadily for the past two years after flatlining in 2007. The company's stock price has seen a rapid increase since hitting multi-year lows in December, 2008. At that time, Starbucks' shares were worth less than $10, and today those same shares are worth $29.10, a substantial recovery in share value (MSN Moneycentral, 2010).

Overall, it is reasonable to conclude that Starbucks has met its obligations to its shareholders. The company responded to the declines in shareholder value in 2007 and 2008 with a multitude of different strategies. Not only did the firm address its cost structure, but it.....

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