Starbucks Coffee Company

Starbucks Coffee Company was founded in the year 1971 by three people. They opened their first store in Seattle’s Pike Place Market. The name ‘Starbucks’ actually originated from Herman Melvin’s classical novel called Moby Dick. The seafaring name seems appropriate for a store that imports the world’s finest coffees to the cold, thirsty people of Seattle.

Then came Howard Schultz. He joined Starbucks in 1982. While on a business trip in Italy, he visits Milan’s famous espresso bars. Impressed with their popularity and culture, he sees their potential in Seattle. It was proven that after the people start trying lattes and mochas, Seattle quickly becomes coffee-crazy. Now Howard Schultz is the chairman and the main philosopher of the probably the best retail coffee company in the world.

In Starbucks their employees are called ‘partners’. This was to avoid any form of discrimination among employees. Another reason is because Starbucks also provides share options to even the part-time ‘partners’.

Starbucks Coffee ‘harvests’ their coffee beans mainly from three regions; Latin America, Africa/Arabia and Asia Pacific. In Malaysia, they also have the same allocation of coffee beans (it is standardized nationwide).

In Malaysia, Starbucks Coffee is a joint venture between Malaysia’s BERJAYA GROUP and Starbucks Coffee International. All operations are carried out by the BERJAYA which includes culture adaptability, local customs, store developments and strategically management plans. Starbucks Coffee International is responsible to maintain standards among the term ‘Starbucks’. They do quality assurance and do business visits from time to time.

The first Starbucks Coffee store in Malaysia was opened at KL Plaza in the year 1998. Now in the year 2006 there are already 68 stores nationwide. One of their strategy or ‘culture’ is to open up a store in every corner of the city. Their mission is to provide a second home or ‘the third place’ for the people out there. In that way there will a Starbucks Coffee store available everywhere for the needs of the customers, hence the term “Starbucks follows wherever you go”

SECTION B

(i)Explain the key factors you would consider in conducting a PEST analysis of the environment. Illustrate your answer by providing supporting examples.

“The PEST analysis examines the broad environment in which the organization is operating” (Johnson, 1999). “A company‘s marketing environment consists of all the factors that are external to its own marketing system and that impinge on a successful exchange process with its customers” (Hannagan, 2005). There are the four key areas in which to consider how current and future change can affect the business of Starbucks Coffee.

Firstly political, “Company need to keep up to date with political changes that are occurring not only in the country in which they are operating but also across the world, because these will affect the work of the company in one way or another” (Hannagan, 2005). The war over the middle-east resulted in the decrease in oil price and increase in petrol price. Besides that there are tax imposed on every cup sold by Starbucks Coffee. Starbucks Coffee imports most of their stock (ingredients, materials) which is later taxed by the Malaysian government.

Secondly economical, “Level of disposable income greatly influence demand on consumers, if disposable income falls, consumer will continue to buy but will reduce in spending on luxuries necessity” (Hannagan, 2005). The increase in raw materials actually brings a drastic change to their sales, with the decrease in the rate of income results in lesser buying power. Although petrol price increased but income remains the same which lessen customer’s spending rate in Starbucks Coffee. People will think twice before overspending in Starbucks Coffee due to the hike in other goods.

“Social factors include the demographic and cultural aspects of the external environment. Companies need to have a clear understanding of the society and the population to which their products and services are directed” (Hannagan, 2005). Although there is no categorization of which type of customers that often visits Starbucks Coffee, the range can be from young, the educated and coffee connoisseurs. “Among the things that Starbucks adapt to customers is probably the use of lower calorie ingredients in their products such as the choice of low fat milk in their beverages and the Frappucino Light. This is their lighter version of their ice blended beverages which contain low calories” (The