Starbucks

Starbucks

            Starbucks has experienced some problems in the past. Due to the global economic crisis that was experienced in 2008, it was forced to lay off workers, closed stores and made losses. In 2009, Starbucks reported losses in their net revenues and earnings, operating income, operating margins, and comparable store sales. In addition to these problems, it had to suffer the negative publicity especially where firearms were concerned. Moreover, it would not be supporting the soldiers in war since it did not support the war.

Some people were opposed to the idea of people carrying firearms. They did not like the fact that Starbucks was not opposed to this idea. Starbucks did not object to people carrying firearms insisting that it had its own security and there was no threat posed to the customers. Those who opposed the carrying of guns in public were concerned because in their opinion, a coffee place is a place for peace and it is supposed to be family friendly. They thought that if people saw the guns then it would lead to much tension (Bluestein, 2010).

The issue of their coffee prices has also been an issue. Many people are of the opinion that Starbucks charges a lot of money for a cup of coffee, which has not cost much to prepare. During the economic downturn, many people avoided going out and this was a blow to Starbucks. The cost of dairy products went up and this consequently increased the cost of milk-based products. In addition to this, competition was stiff. They faced competition from Burger King, McDonalds and Dunkin Donuts. The company also suffered economically since the stock prices were down and their shares dropped.

Starbucks gets some of its coffee from Guatemala where workers receive very low wages. The people who work in the plantations work in very poor conditions. Though it is not the sole responsibility of Starbucks to ensure that the workers are fairly compensated, the company has a moral obligation. More than fifty percent of the coffee beans in Guatemala are exported to the United States. This makes up about forty percent of Guatemala’s foreign exchange. Starbucks, being the major coffee retailer, has a role to play. It charges a little bit higher for its coffee and it should make sure that some of the benefits trickle down to the farmer.

Of course, there are many things involved. The government or any other officials could be at fault in this situation. The fact is that the whole Guatemala issue has provided negative publicity not only for Guatemala but also for Starbucks (Zielinski, 1995). Since then the company agreed to meet with those who were fighting for the farmers and they resolved the issues. A company, which is faced with publicity, should be quick o respond, before the company’s image is tainted.

The company was accused of being greedy and wanting to make coffees faster and hence make quick profit. They replaced the machines that made good coffee with cheaper models. They also introduced so many business ventures within the company. They no longer dealt with coffee alone but they instead sold other things such as CDs. This made them loose their target and the level of service went down. Unfortunately, the decision to do these things came at a time when the world was experiencing a financial crisis, which further aggravated the outcome.

Starbuck’s rivals saw the damage that the company was doing to itself and they capitalized on it. They attracted customers with the assurance of good quality coffee and since most of the people were tired about spending so much money and not getting quality, they changed shop and they went to stores such as McDonalds’ which were cheaper. This presented the company in a negative way and they had to come up with measures to repair their image.

The company first brought back the owner, Mr. Howard Schultz, to help run it. Schultz brought in another person who also worked in Starbucks before and together, people started to see a change. Another thing that they did was to look at the level of human traffic near the stores. Because of the rapid extension it experienced, Starbucks had some outlets, which had no traffic. In deciding which stores to close, the management looked at the level of traffic and saw which shops were not doing so well. They then decided to close these shops. This reduced the costs associated with running such shops and ensuring that the other shops experienced financial growth.

Howard also enhanced Customer service. Staff received training on how to provide the best services for the customer and how to prepare good coffee. Starbucks outlets across the states were closed for this purpose. Howard had noticed that the staff no longer made good coffee. They hurriedly prepared it and this lessened the flavor. The level of cleanliness went a notch higher and this greatly attracted the people back to Starbucks. Customers who had previously avoided Starbucks came back because of the changes that were made.

After these changes were enacted, the company’s financial position also changed. The shares rose and the earnings increased. Profits increased and the company was able to pay dividends to its shareholders. It also opened stores in foreign countries and this increased its income. Starbuck has come up with the idea of introducing free internet to its customers through Wi-Fi. This will enable those who have come to take a cup of coffee to use the internet without charge for two hours.

It has provided entertainment like movies, music and other things such as job applications. It not only sells coffee, but it is looking into the possibility of teaming up with Apple to provide music services through iTunes. They can then sell this music to the customers who are in their shop and realize a profit. The details of this have not been worked out yet (Gillespie, 2007). This will go a long way in promoting and maintaining customer loyalty. Customers will also be able to purchase music through the internet and this is an added advantage for Starbucks.

The idea of corporate social responsibility is a noble one. When Schultz suggested it, he was well aware that many people who did not support Starbucks. In their defense, Starbucks had led to loss of jobs. The company was big and had ensured that the small coffee shops, which were owned, by individuals or families did not survive. This did not deter Howard’s effort in urging companies to devote their time to social responsibility. There were those who opposed him and said that it would not be possible but others supported him. Right now, Starbuck prides itself in being a major contributor to programs, which support AIDS education in Africa (Wiggins, 2008).

Corporate responsibility is a good thing and it increases the credibility of the company. It makes the company more acceptable to the people. It is especially useful to companies, which have heard negative publicity in the past. If they engage in activities, which help the local people such as charities, then the people are usually ready to forget the past mistakes. This is something that Starbucks has realized. Being a company, which is based in many countries, they have chosen to support a program, which is outside the United States. This will show the other people that they care.

It will especially be beneficial since the company is expanding its business globally. Since there are low profits being experienced in the United States, the profitable thing for them to do right now is to ensure that their global markets flourish. Knowing the problems that ail a company is the first step towards the solution. The next step is to make sure that the right person is employed; one who will take the company forward. Starbucks had to call Howard who had already retired but it did help them to get the company back on its success track

References

Bluestein, G. (2010). Starbucks Gun Policy: Refusal to Ban Firearms Pleases Open Carry Advocates, Troubles Gun Control Advocate. Retrieved 24 July 2010, from http://www.huffingtonpost.com/2010/02/28/starbucks-gun-policy-refu_n_480062.html

NYT (2010). Starbucks Turns on Free Wi-Fi for Customers July 1^st. New York Times. Retrieved 24 July 2010, from http://markets.on.nytimes.com/research/stocks/news/press_release.asp?docTag=201006300001BIZWIRE_USPRX____BW7046&feedID=600&press_symbol=248911

Wiggins, J. (2008). FT: The Trouble with Starbucks. Retrieved 24 July 2010, from http://xinkaishi.typepad.com/a_new_start/2008/12/ft-the-trouble-with-starbucks.html

Zielinski, M. (1995). Trouble Brewing at Starbucks Coffee – Working Conditions of Guatemalan Coffee Pickers – Column. Retrieved 24 July from, http://findarticles.com/p/articles/mi_m1295/is_n3_v59/ai_16839642/