Introduction of Strategic Management & Sustainability Assignment
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1. Brief background of Starbucks
Starbucks is one of the world's most popular coffeehouses, operating through both company-owned and licenced locations. The establishment was founded in 1971 by three partners: Gordon Bowker, Jerry Baldwin and Zev Siegl and in the United States of America. As director of retail operations, marketing, and sales, Howard Schultz joined Starbucks in 1982. As soon as he joined the Starbucks company, he began working with all of the high-end restaurants and espresso shops to supply them with a variety of coffee flavours. Due to a decrease in consumer demand, the closure of physical stores, and a lack of effective global supply chain management, Starbucks's income was impacted by the recent Covid-19 outbreak. Since majority of Starbucks's profits originate from the United States, the corporation had a difficult time pursuing seamless business operations. For the sake of its patrons' well-being, Starbucks must put in place measures to protect them from harm, such as stricter security measures. Large-scale tourism and catering business shutdowns and job losses have resulted from a global outbreak of covid-19. As a result of these factors, Starbucks' economy and business practises are in decline.
2. impact of Covid-19 pandemic towards the development of sustainable practice
Starbucks' financial and sustainable business ventures have certainly been affected by a pandemic crisis. The worldwide food and beverage business has been rocked by the Covid-19 crisis in order to kick off the new year on the right foot. This suggests that the pandemic has had an effect on Starbucks' efforts to be environmentally friendly. From a 2020 baseline, the corporation has pledged to reduce its yearly greenhouse gas, water, and waste footprints by half by 2030 (Walton, 2020). As a result, the organisation changed the baseline year for all three reduction targets to FY2023, and the target carbon emission reductions have been confirmed as scientifically sound by the Science Based Targets Initiative (SBTi).
Starbucks has established five primary initiatives based on science, centred around its Mission and Values, and led by rigorous market research and experiments in order to meet its 2030 targets. Expanding plant-based menu options, moving away from single-use packaging and towards reusable containers, investing actively in regenerative agriculture, reforestation, forest conservation and water replenishment in the coffee supply chain, improved waste management and innovation to develop more sustainable stores are all parts of this. In light of the epidemic, Starbucks has established a Global Environmental Council, which is made up of senior executives from around the firm who are compensated depending on how successfully they meet the company's sustainability targets (AFP, 2020).
With regards to water conservation, carbon emissions reduction, and waste management, the organisation was able to achieve a 4 percent in water usage, 11% reduction in carbon emission and 12% reduction waste from FY19 to FY20 (Starbucks, 2020) As a result of COVID-19's impact on business activity in FY20, this degree of annual reduction was not expected at this point in the journey toward the 2030 targets and is unlikely to be typical going forward. Data availability and quality have also improved as a result of the company's decision to strengthen its environmental impact monitoring process. By growing its plant-based menu around the world, Starbucks is working toward its carbon reduction goal. Clients have a wide range of alternatives to choose from a range of new plant-based menu items that were added to every Starbucks location globally during fiscal year 2020 (WARC, 2020). Because of pandemic safety procedures, firm management had to put a halt on its plans to enable customers and partners to bring their own reusable cup into the stores during the market study. There were 1.3 percent of beverages served in reusable cups in Canada, Japan, and the U.S. in FY20, either in a customer's personal cup or in a store operated by the company (Portal, 2021). Single-use cup fees have also been tested in the UK and Germany. It also launched the Circular Cup, created from six single-use paper cups in the UK.
4. Competitive stance of Starbucks
Starbucks, unlike many of its retail competitors, has always been conducting extensive tests in order to gain a competitive advantage. Mobile apps, in-app purchase, electronic payments, third-party delivery network and pick-up-only stores are some of the strategic innovations that became part of its omnichannel functionality long before the counterpart companies implemented them successfully. With COVID-19, these experiments are beginning to bear fruit and will finally free Starbucks from the debts of architecture, store-renovation, supply chain management, legacy operations and consumer expectations that can be a major challenge for less skilled businesses (Kelso,2020). The leadership of Starbucks stressed the importance of caring for partners (workers) as a cornerstone of the company's strategy, along with a continuous focus on elevating customer experiences and playing a constructive role in communities and neighbourhoods throughout the world. Starbucks management discussed the firm's swift response to the COVID-19 epidemic, bolstering the brand's resilience while simultaneously positioning the company for long-term growth, via the perspective of this commitment. There have been some significant modifications in consumer behaviour in response to the current pandemic disruption, which have been swiftly implemented by Starbucks. It was Johnson's insight into changing consumer behaviour and how the company will continue to meet its customers wherever and however the brand wants to engage with them that was most valuable. For example, he explained how Starbucks is enhancing customer experiences, creating new beverage platforms, and enhancing digital customer interactions in order to take advantage of five shifts in consumer behaviour: It has long been one of the greatest ventures for coffee-producing enterprises to create an omnichannel retail experience like Starbucks. It has opened up a whole new universe of possibilities for Starbucks customers to preload digital cash into their mobile app. Starbucks made it clear that only "to-go orders" would be available in the event of a viral epidemic. This declaration was critical for two reasons: first, for the sake of Starbucks' employees and customers, and second, to allow the corporation to test out a new business model. As revealed by Kevin Johnson, CEO of Starbucks, during the third quarter of 2021, During the third quarter, Starbucks saw a 17 percent increase in customers downloading the Starbucks App and signing up for Starbucks Rewards. The Starbucks Rewards loyalty programme and smartphone ordering have seen an uptick in customer interest and demand in the most recent quarter, he noted. They form the core of the company's efforts to stand out from the competition. This resulted in a four-percent growth in tenders, compared to its Q3 scenario (46 percent), which is higher than the trend before COVID (World Coffee Portal, 2021). This demonstrates the company's competitiveness in attracting new customers and re-engaging the current consumer base.
5. Determination of the company market (SWOT analysis)
The present scenarios of the market can be accessed through this SWOT analysis of Starbucks
Starbucks re-invests their profits in expanding the business to next level. Their business strategy and good tactics have benefited the company.
Standardization of Quality and Taste
Starbucks has flourished internationally as a result of its exquisite coffees and premium blends. It provides uniformly standardized, and high-quality items across all of its sites.
Integrated global supply network
Starbucks is noted for having a large worldwide supply chain (Lemus et al., 2015). They get their coffee beans from the three major coffee-producing areas- Asia-Pacific, Latin-America, and Africa.
Global Brand Image
By 2021, it will have grown from 1,886 locations to 33,833. Starbucks currently has two types of stores: company-owned and franchised. In total, it has 17,133 company-owned stores and 16,700 licensed outlets around the world. Approximately 85% of the company's revenue comes from its own outlets.
Starbucks isn’t renowned for providing the most innovative items. It makes product imitability very simple for its competitors.
Starbucks’ products are expensive than other companies for several working-class and middle-class customers. Its exorbitant pricing makes it unaffordable for customers.
Social and environmental groups were outraged by the company's unethical buying practises. They claimed that the beans were sourced from poor farmers in the developing globe. Due of this, it has been accused of violating "Fair Coffee Trade" rules.
Implementing Cost Distinctions
Several companies are swiftly expanding their customers through serving both premium and standard coffee to appeal to distinct social groups. With promoting its pricey ones as premium, Starbucks may target the middle-class by offering standard coffee at low cost (Haskova, 2015).
Collaborations with big companies
Co-branding is generally advantageous. Starbucks could form collaborations with big companies. Its influence and profitability would be boosted as a result.
There's still room for Starbucks to improve, even if they're at the forefront of coffee innovation. Using the latest coffee inventions and technologies, you can create everything from the greatest froth to snap chilling, coffee grinding, and RSI-reducing gadgets.
The presence of multiple third-party stakeholders and suppliers complicates Starbucks’ supply network, making it hard to properly handle the whole network.
Many companies provide low-cost items, which might jeopardise the long-term viability of Starbucks, that serves pricey products.
6. Recommendations to improve sustainable practices
When it comes to serving customers without compromising its sustainability practices, Starbucks has the opportunity to be more creative. Increasing the number of drive-thru and Starbucks Pickup locations can help the company maintain a sustainable position. A drive-thru is now included in 60 percent of Starbucks stores, but that number can rise to 80 percent in the company's future expansion plans. Starbucks cafés can use walk-up windows, which are technically drive-throughs, to keep customers from lingering inside. Expanding its "grab and go" businesses, which are little more than a line and a vending machine, is another option for the corporation (AFP, 2020). Those who reinstate café seats will do it in a more cautious fashion. To test whether customers can be trusted to maintain a social distance on their own, the corporation can temporarily remove much of the furnishings from cafes.
The organisation will be able to find additional savings opportunities in the future thanks to energy management systems that optimise heating and cooling. Optimizing retail equipment and lighting specs can also help the organisation save money on energy costs. Some of our energy savings have been cancelled out by the expansion of our firm into new markets, which have had an unexpected impact on our environmental footprint. When heated food was added to the menu, for example, fridge and oven capacity had to be increased, reducing the benefits of other efficiency initiatives. As part of Starbucks' efforts to reduce its energy use, the company needs to focus on increasing the use of renewable energy. It was one of the top ten buyers of renewable energy in the United States in 2014, according to the Environmental Protection Agency. Because they are Green-E accredited, the company's RECs will provide wind farm owners with additional cash, which will help spur the development of new renewable energy sources. As a result, wind farms will be able to offer their electricity at a price that is competitive with that of fossil fuel-fired plants.
The company's sustainability strategies may also benefit from adopting more technologically advanced methods. Automated order imports from Uber Eats, the drive-thru, and Starbucks' app can be used to streamline the company's order processing system. The company may, among other things, invest in subsidising the coffee producers as a way to encourage more environmentally friendly business practises. Coffee producers can benefit from this programme by gaining access to financing that can be used to improve their fields and production practises. A diversified Renewable Energy portfolio should also be established, aiming to offset 50% of the company's roasting and beverage manufacturing locations and energy use. Adopting a better virtual supply chain management via the Virtual Power Purchase Agreement with local solar enterprises can also provide some advantages in sustainable practises.
The above discussion gives out a detailed overview of the sustainably practices of Starbucks and how it has been active in adopting and evolving the traditional ways of marketing and serving customers amidst the pandemic crisis. It is thoroughly noticed in the initiatives like reusable cups, waster, energy and waste management, subsidizing the farmers and turning the supply chain into improved virtual mode. With its capabilities and innovative strategies, Starbucks can readily achieve its crown in the highly competitive beverage and hospitality industry.
Lemus, E., von Feigenblatt, O.F., Orta, M. and Rivero, O., 2015. Starbucks Corporation: Leading Innovation in the 21st Century. Journal of Alternative Perspectives in the Social Sciences, 7(1), pp.23-38.
Haskova, K., 2015. Starbucks marketing analysis. CRIS-Bulletin of the Centre for Research and Interdisciplinary Study, 1, pp.11-29.
AFP, 2020. Coronavirus hits environmental initiatives: Starbucks pauses use of reusable, personal cups. [online] The Economic Times. Available at: <https://economictimes.indiatimes.com/magazines/panache/coronavirus-hits-environmental-initiatives-starbucks-pauses-use-of-reusable-personal-cups/articleshow/74509651.cms> [Accessed 15 March 2022].
Kelso, A., 2020. Starbucks Redefines Its ‘Third Place’ Strategy To Adapt To The Coronavirus Crisis. [online] Forbes. Available at: <https://www.forbes.com/sites/aliciakelso/2020/06/10/the-coronavirus-crisis-has-caused-starbucks-to-shift-its-real-estate-strategy/?sh=2d4b9473197c> [Accessed 15 March 2022].
Starbucks, 2020. Starbucks Outlines Vision for the Future and Reaffirms Strategy for Continued Growth at Scale. [online] Stories.starbucks.com. Available at: <https://stories.starbucks.com/press/2020/starbucks-outlines-vision-for-the-future-and-reaffirms-strategy-for-continued-growth-at-scale/> [Accessed 15 March 2022].
Walton, C., 2020. 3 Ways Starbucks Will Emerge From COVID-19 Stronger Than Before. [online] Forbes. Available at: <https://www.forbes.com/sites/christopherwalton/2020/04/03/3-ways-starbucks-will-emerge-from-covid-19-stronger-than-before/?sh=4e506cf01844> [Accessed 15 March 2022].
WARC, 2020. How Starbucks is using COVID-19 crisis to differentiate the brand | WARC. [online] Warc.com. Available at: <https://www.warc.com/newsandopinion/news/how-starbucks-is-using-covid-19-crisis-to-differentiate-the-brand/43929> [Accessed 15 March 2022].
World Coffee Portal, 2021. Starbucks at 50 Pt.3: New ways of working. [online] World Coffee Portal. Available at: <https://www.worldcoffeeportal.com/Latest/InsightAnalysis/2021/July/Starbucks-at-50-Pt-3> [Accessed 15 March 2022].