PESTLE Analysis

PESTLE Analysis of Starbucks

by The TSW Team

Starbucks Coffee Company is the largest chain of coffeehouses around the world. But the current COVID-19 pandemic and lock-downs all over the world has shook the company from its grounds. The Global recession has also made a huge impact on the sales of their premium coffees. We will be discussing about the factors to determine the aspects of Starbucks today.

PESTLE Analysis of Starbucks

Political Factors that Affect Starbucks

As we all know, Starbucks mainly deals in coffees, so they have to source their raw materials from certain regions or countries. In such regions or countries, the local government impose many rules and regulations on the sourcing of the products. Violating such rules and regulatory decisions, the company might be facing some harmful consequences.

On the other hand, Starbucks are operation in certain areas where the tax and security concerns are at the prime peak. These sensitive locations can prove to be a huge hiccup if something goes wrong. Also in the USA, which is the mother state of the company. US Federal Government has also imposed some strict regulations on multinational ventures like these. (1)

So, companies like Starbucks are under a strict supervision both in the home and international ground. A single mistake can cause a huge damage to the company. So Starbucks should operate wisely and efficiently.

Economic Factors that affect Starbucks

As we have known earlier that Starbucks is a multinational chain of coffeehouses. The basically sells coffees. Perhaps the biggest chunk of the annual revenue comes from the coffees that the company sells. But as we are facing the global recession, people are cutting down the costs of their living.

But there is a ray of hope still alive for the coffee giant. People are not giving up coffee. But they are looking for cheaper alternatives. An average American spends almost 18000 USD every year which does not go under the must have criteria. (2) Starbucks will have to acknowledge this statistics and should enter the market with a highly competitive pricing. If they manage to do so, then they will be able to reach more and more customer and the window of vulnerability will start shrinking down. This is how they can deal with the economic factor and its impact on the business.

Sociocultural Factors that Affects Starbucks

Starbucks has started their journey way back in 1971 in the heart of Seattle, Washington. Since then, it has become a culture of the American people. But recent studies has been stating that 51.9% of customers who are aged above 30 or more years are buying coffees from the coffee giant. (3) But the new generation or the Millennial has not been too engaging. As of the year 2018, people who are in between 18 years to 29 years are the 33.78% customers annually.
So the difference is clearly visible here. We can say that the company has been failing to engage the young people to buy their coffees. A possible reason might be is that the company has a stiff pricing which is not that affordable for the mid-income tiers or the millennial. Starbucks should acknowledge this and find cheaper and better resources to reduce the costs of their coffees.

Technological Factors of Starbucks

In today’s modern world, it is a must to get technologically adapt to increase the efficiency and the sustainability. Starbucks should kick on the gas paddle as well. Though they have partnered with Apple Inc. (4) in the past times, but they need to be more generous to collaborate with more technologies and tech companies. Collaboration is a sensible thing to do if you are a company who heavily rely on a singular product.

Starbucks has not been too quiet about going smart if it is needed to be told. They have adapted the sales system with POS systems and also enabled mobile payments. But they can always improve and bring more and more innovative stuffs in the stores to engage more and more potential customers. Going tech friendly will also attract the young generation AKA the tech friendly generation. This will also meet up the gap between the sales void.

Legal Factors that concerns Starbucks

Starbucks, like every other empire has faced many legal conspiracy in the past years. But one of the most appreciating thing is that they have been very fast to act on the matter. For instance, in the early half of 2018, Starbucks decided to close almost 8,000 cafes all over the US just to reconnect with the employees and conduct a training on racism bias. (5)

But there has been some of the most ridiculous accusations against the company. Like a particular customer has sued the coffeehouse chain business just for putting ice in the iced drinks. (6) But these allegations will not harm the company. But serious allegation regarding the quality can be a serious headache. If they fails to maintain the quality and the customer service, they will face some critical accusations which will downpour the company with heavy criticism. So they need to be super careful about that.

Environmental Factors affecting Starbucks

We all are very concerned about the environment as it is being polluted day by day. If the rate of pollution increases in such manner, then the world will not be suitable for living in the upcoming future. For that, big companies should come up with environment friendly business models and ideas.

Starbucks should not be an exception. They should also come up with sustainable business model which will reduce the use of plastics. What they can do is that can avoid plastic cups and carriers. This will reduce the wastage of plastic. These are some of the areas where the company can work with innovation. For example, they can use bio-degradable materials for their daily purposes. This will increase the productivity and will also promote the greenery.

Another thing where Starbucks should work on is making their customers aware about the environmental losses which is conducted by the humans.

Recommendations

Conducting the Starbucks PESTLE Analysis, we have found that the Starbucks has been the all-time favorite hangout café, meeting spot or just a nice quiet little space to have a coffee and read your favorite book. It has become a part of American culture now. A little polishing on some sectors will be beneficial for the company as well as the consumers.

Related

Reference Link

  • https://www.forbes.com/sites/panosmourdoukoutas/2018/04/01/big-governments-go-after-coffee-bad-news-for-starbucks/#4ec833697c9f
  • https://www.usatoday.com/story/money/2019/05/07/americans-spend-thousands-on-nonessentials/39450207/
  • https://www.statista.com/statistics/230985/people-who-visited-starbucks-usa/
  • https://www.apple.com/newsroom/2007/09/05Apple-and-Starbucks-Announce-Music-Partnership/
  • https://www.theguardian.com/business/2018/may/29/starbucks-coffee-shops-racial-bias-training
  • https://www.newsweek.com/starbucks-lawsuits-list-456294