The external environment can be defined as forces and factors outside the organization affecting the overall company’s performance directly or indirectly. It can be divided into two components including specific environment and general environment. Specific environment refers to the unique factors of each company that directly relevant to the achievement of goals and affect managers’ actions and decisions directly including suppliers, customers, pressure groups and competitors.
General environment refers to the broad conditions that may affect the company, in which includes political or legal environment, economic environment, sociocultural environment, technological environment and demographic environment.
Background Information Starbucks is a famous recognized company selling coffee and food. In 1980s, Starbucks maximized market in coffee and has become the leading seller in North America. In 1971, it started running business in Seattle and grown from 55 stores in 1989 to now 2200 today.
According to Schultz (1997), Starbucks founders learned to darkly roast Arabica beans from Alfred Peet introducing this technique to the U. S. It also provided a relaxing, attractive social atmosphere and offered high-quality Products and created a great working environment for its employees.
Knowing the basic history, it is important to analyze the performance of the company. Legal-political environment It means that the business operates in the relationships between government and coffee producing nations and it offers the frameworks.
The review should include public policies and political about private enterprises, states and local government control and regulation. Government subsidies or taxes have influence on the cost of running the coffee shop. In July 2002, The U. S. declared that a war outbreak on Iraq. The tensions between the Middle East and the United States had been increasingly volatile. Arab people boycotted the American services and goods because of the worsen relationship between Israel and the United and States. The U. S. companies were boycotted including Starbucks, Coca-Cola and Burger King.
This policy issues created serious financial problems for Starbucks. The sale performance of company has been decreased 30% in 2003. There are rumors that Starbucks donated money to Jewish community against Pelestinian crises. Six Starbucks stores were shut down because of the security threats. The worsen business environment make Starbucks failure in Israel. In addition to these threats, changing rapidly in import laws has great influence on Starbucks operations. Due to the Fair Trade policy, the price of imports coffee beans was required not to lower than the minimized price.
Starbucks find difficulty in running business because the cost of imports coffee beans has increased. Ultimately, Starbucks have no choice but to increase its selling price 15% for Starbucks coffees. Since 2001, Starbucks are facing two class action suits. The first lawsuit is about Carr verse Starbucks. The second case is Starbucks verse Sheilds. Starbucks was accrued of violating hour and wage laws in California. In order to not involve in any protracted action, Starbucks agreed to settle the claims. However, these lawsuits destroy the company reputation.
Many people lost confidence in Starbucks. Economic environment It set the fundamental rules to operate business. The economic condition in Hong Kong is guided by the free private enterprise systems. When planning to enter in other countries, the company should take into account of the long-term viability of the planning. It can also be reviewing by the following aspects. Economic growth and stability including situation about employment, fiscal policy and government monetary will affect the demand for food and beverages. The competition condition affects the coffee market.
Inflation or deflation and changes in disposable income could influence the cost and purchase levels of the coffee shop operation. Starbucks had successfully implemented an expansion planning to boost sales. The company’s net income has been increased from $1. 3 billion in 1998 to $1. 7 billion in 1999. Starbucks also stated that it would expand company scale greatly in the next three years and hope it can launch beverages in the 2010 summer. On the ended March 30, the company profits have been decreasing 28% compared its their store-opening projections in the United States which included 400 licensed units.
In 2008, the profit have been decreasing 43% by 425 units and 100 underperforming stores had closed. It can be expected that there is slow economic growth in the next three years. Starbucks decided to open 400 new stories each year with a total of 21500 in the end of 2011. Starbucks also plan to expand foreign country to have 40 percent market share. This can facilities the company performance to increase profit. Inflation is another critical aspects to affect the performance of company. According to Lisa (2008), inflation rate had increased only 5% in 2009.
To capture the market, Starbucks respond to the increasing demand for healthful products. It provided drink with two flavors available. In Southern California, the company expanded its new breakfast line with a chilled food and proprietary baked features. Chief executive Howard Schultz stated that the sandwiches could be delicious than the original coffee. The revenues had increased 12 percent to $2. 5 billion in 2009 and $2. 3 billion in 2008. The inflation can influence the purchasing power in coffees. Sociological environment It means the ways of living styles.
It usually shapes the behavior of workers and consumers. The foreign company should review as follows. Worker values and social protection such as, mandatory provident fund will affect the ways to manage employee, the internal operating and the types of staff to employ. Social value about Chinese values and demographic data will also affect the preferable coffee to sell. Consumer preferences could shift from coffee to other beverages. There are some principles to affect the business environment. First, Starbucks strive to buy, sell and use recycling products.
In many Starbucks stores, cardboard or milk jugs are recycled. But the commercial recycling services are difficult found in some countries. If the stories are located in some communities without recycling services, Starbucks may not provide comprehensive or no recycling. The waste collection and recycling in malls often account by the landlords because of lacking of shared spaces. Even so, Starbucks strive to make recycling easier for customers. In the U. S. the company are working with major authorities to gain more front-of-house recycling opportunities.
To reduce the environment impact of cups, Starbucks developed recyclable cup and encouraged customers to use their own reusable cups. The customers can get a 10-cent discount if they use their own reusable tumblers and mugs for their coffees. Customers are requested to serve in a reusable mug if they stayed in a store to enjoy coffee. It can reduce the impact on environment to keep the forests intact. Some customers think that the action of Starbucks doing is environmental friendly. Based on the interest of enjoying coffee in coffee shop, there was the difference between corporately-owned and independently-owned coffee shop.
Different types of ownership have different coffee shop culture. According to Nicole (2006), the experience of a group of patron coffee shop had called Campers. This means Campers patron always to enjoy a longer periods of time. Some Campers regarded coffee shop as living room. Starbucks also identify coffee shop Campers as two characteristics. One is the individual engaging in the activities. Other is the individual isolated from the other. Some coffee lover got involved in a wide range of activities including using a personal notebook computer, discuss a project with partner and reading a newspaper or book.
If the number of coffee lovers increases to enjoy Starbucks environment, the performance of company can generate more revenues. Technological environment It refers to all systems about the knowledge to operate. Using technology can improve operational efficiencies. A favorable policy about developing high technology can influence the various kinds of coffee machines in the coffee shop. The technology of worker’s level and technology infrastructure can increase the efficiency of operations. Starbucks is always finding a ways to let customers having a better experience to enjoy coffee.
With the technology improving, Starbucks had launch Starbucks Card. This card has greatly improved the efficiency of customer service. It also created the opportunity to make line shorten and make customer more convenient. Some information technology liked Wi-Fi. The most important part is the employee ability to use the right tools to operate coffee machines efficiently and correctly. The information technology has allowed Starbucks to plan and organize employees. The company has used the Internet to promote their advertisement and products. Advanced technology can enhance Starbucks competitive environment.
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