Starbucks: Three Organizational Pressures Term Paper

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environmental pressures: Starbucks

Starbucks: Three organizational pressures

Since 2008, Starbucks has made an effort to close unprofitable U.S. stores after a period of unwisely swift expansion

It has striven to expand internationally to support its business model, moving into new areas to outflank competitors

Starbucks has always prided itself on its ethical business model and the fact that workers have health insurance and other benefits as well as its Fair Trade Coffee. It must strive to keep these alive while it remains profitable.

Starbucks: Three environmental pressures

Inexpensive competitors like Dunkin' Donuts are threatening the organization

Coffee is not a universally-beloved commodity and Starbucks must adapt to local markets

Starbucks must justify its higher price point by maintaining high levels of quality

Organizational and environmental pressures

Starbucks is one of the world's most profitable food-based companies but it has experienced many challenges in recent years. In 2008, Starbucks announced a radical shift in its market super-saturation policy whereby it used to open up stores literally across the street from one another. It closed 600 stores domestically, in an effort to respond to criticisms about its product and service quality (Linn 2008). Quality rather than quantity became the focus to justify the higher price tag on what was advertised as an affordable luxury but which was becoming outflanked by cheaper, very similar competition from Dunkin' Donuts and McDonalds. The organization shifted its focus to expansion abroad, to take advantage of an untapped market and to be a 'first mover' in the coffee market of Europe and East Asia. "Today Starbucks is in 62 countries around the globe" including India and China (Loeb 2013). "Currently there are more than 3,000 stores in China, and it is one of the fastest growing countries for the [Starbucks] Company. In the first fiscal quarter of 2013 the China/Asia Pacific segment alone achieved sales of $214.3 Million, an increase of 28% over the previous year with comparable store growth in the region" (Loeb 2013).

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This international expansion has required tailoring the Starbucks experience to local tastes. In many of its Asian locations, including China and Japan, Starbucks offers a more extensive array of tea-based beverages and less sweet and more savory foods to honor the local palate. Starbucks has also marketed itself as a brand not just as a beverage. "One of Starbucks' key marketing strategies is to provide customers with an exceptional experience. The chic interior, comfortable lounge chairs, and upbeat music are not only differentiators that set Starbucks apart from the competition, but also have strong appeal to younger generations who fantasize about Western coffee culture as a symbol of modern lifestyle" (Wang 2012).

Starbucks brands itself as an ethical company but has been under increased criticism, despite its workers' relatively generous health benefits and other perks, for the ways in which it operates globally. First of all, there is always the claim that Starbucks is crowding out local, vulnerable competition. Secondly, there are concerns about the ways in which workers are treated at actual stores, beyond the rhetoric of the company. In 2008, when the company was enduring many of its financial difficulties, Starbucks was ordered to "pay its California baristas more than $100 million in back tips and interest that the coffee chain paid to shift supervisors" as shift supervisors had been forcibly 'sharing' in the tips paid to baristas in the general tip pool (Carter 2008).

Environmental and organizational pressures: Financial perspective

Starbucks' shift to international expansion combined with the greater diversification of its products has proven to be very profitable for the company from a financial perspective. "The Seattle-based coffeehouse chain raised its outlook for the year, saying it now expects per-share earnings of $2.62 to $2.68 and revenue growth of 10% or greater. The company had boosted its earnings view in January to $2.59 to $2.67 a share and backed its prior.....

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