PESTEL analysis of Starbucks
This detailed ‘PESTEL analysis of Starbucks’ examines some of the macro-environmental factors that may impact on the operations of Starbucks globally. Starbucks is the largest coffee house chain in the world, headquartered in Seattle, Washington, the USA. It is renowned globally for its premium hot and cold drinks.
Political factors that may affect Starbucks
Starbucks is the premier roaster and retailer of specialty coffee in the world. It has over 32,000 stores in 80 countries (Starbucks, 2020). This is certainly a massive operation; however, this may also expose the company to some challenging political events and decisions.
Starbucks has benefitted from the political stabilities in the USA, UK, the EU, and many other countries. However, trading in different countries (in addition to the ones mentioned above) e.g. Bahrain, Belgium, Brazil, China, Colombia, Costa Rica, Egypt, India, Luxembourg, Malaysia, Mexico, Monaco, Morocco, Qatar, Romania, Russia, Saudi Arabia, Singapore, Slovakia, Trinidad and Tobago, Turkey, and many others means that the company must adjust to different political and legal systems. Likewise, political upheavals in some countries affect its day to day operations and sourcing of the raw materials.
Economic factors that may affect Starbucks
Starbucks is positioned as a premier and specialty coffee house. This positioning impacts on the pricing strategies of the company. As the prices of its products are generally high, many people both in the developed and developing countries may find it hard to consume a cup of premium coffee everyday due to their financial limitations.
In 2020, the economies of many countries where Starbucks operates faced dramatic challenges. It is estimated that Starbucks lost around $3.1 billion in revenue. However, it is positive about its second-largest market, China (Lucas, 2020).
Rising labour and operational costs is a challenge for Starbucks. However, it should be mentioned that though the wage levels in the USA, the UK, and the EU are relatively high, the same does not hold true in many countries. Another important point to consider is that there are many cheaper alternatives out there making a highly competitive market for Starbucks.
Social factors that may affect Starbucks
An important issue to discuss in the PESTEL analysis of Starbucks is the social environment. Surely, coffee culture is very well-established in most developed countries. Many people have more than one cup of coffee a day. Developing nations have also seen rise in coffee consumption over the years. This is in fact what is driving the massive growth of Starbucks in many countries. However, due to social distancing rules, the business has taken a big hit. These rules may force the company to reduce the seating capacities in its restaurants in years to come.
Starbucks has invested millions of dollars in programs that are designed to improve the socio-economic conditions of local communities. It created employment opportunities for many 6 to 24 year-olds who are out of work and not in school. These initiatives along with many others strengthen its brand image in the society.
Technological factors that may affect Starbucks
Starbucks has been making use of new technologies very well. For instance, its customers receive personalised order suggestions generated via a learning platform that is built and hosted in Microsoft Azure (Sokolowski, 2019). Likewise, the company gathers massive amounts of data through AI from over millions of transactions a week.
Starbucks released its Mobile Order & Pay in 2014, to enable customers to submit their orders in advance via the app and pay using the app when collecting the orders at the store (SBUX, 2016). It is always in search of new tech innovations. Indeed, Starbucks is a technology pioneer in the coffee chain industry.
Environmental factors that may affect Starbucks
Many people accuse Starbucks of polluting the environment. Starbucks uses thousands of cups a minute, many of which are not considered recyclable. The impact of plastic waste on water, oceans, and health is huge. However, the company has taken a number of initiatives to reduce the impact of its operations on the environment. For instance, it announced in August 2020 of launching Circular Cup (reusable cup) in the UK stores. The reusable cups are also being introduced across Europe, the Middle East, and Africa. It has also set a target to reduce carbon, water and waste by 2030.
Legal factors that may affect Starbucks
Starbucks has been fined in the past few years over a number of issues in some countries. For instance, it was fined in 2016 by the Westminster Magistrates Court, London for leaving rubbish bags on the street outside of the collection times. Similarly, it was also fined Rs 1.04 crore in 2020 by the National Anti-Profiteering Authority in India. Therefore, it is extremely important for Starbucks to ensure that it does not violate any rules and regulations in the countries where it operates.
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Last update: 01 December 2020
Lucas, A. (2020) Starbucks CEO: ‘We are playing the long game in China’ available at: https://www.cnbc.com/2019/01/24/starbucks-ceo-we-are-playing-the-long-game-in-china.html (accessed 01 December 2020)
SBUX (2016) Starbucks: A Technology Pioneer, available at: https://digital.hbs.edu/platform-rctom/submission/starbucks-a-technology-pioneer/ (accessed 25 November 2020)
Sokolowski, J. (2019) Starbucks turns to technology to brew up a more personal connection with its customers, available at: https://news.microsoft.com/transform/starbucks-turns-to-technology-to-brew-up-a-more-personal-connection-with-its-customers/ (accessed 30 November 2020)
Starbucks (2020) About us, available at: https://www.starbucks.co.uk/about-us (accessed 01 December 2020)
Author: M Rahman
M Rahman writes extensively online with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He holds an MSc in Tourism & Hospitality from the University of Sunderland. Also, graduated from Leeds Metropolitan University with a BA in Business & Management Studies and completed a DTLLS (Diploma in Teaching in the Life-Long Learning Sector) from London South Bank University.