‘Pestle’ Analysis for Starbucks Coffee Company

* Interest rates – An increase in interest rates in the USA would result in plans for investment and expansion being deterred by the Starbucks resulting in decreased productivity of the company. Furthermore, increased expenses for the consumers such as rising mortgage repayments would result in decreased availability of income to spend on luxurious products such as coffee. Low interest rates should have the

One of the areas in which Starbucks is currently facing a challenge, however, is in its attempt to expand internationally. While Starbucks has seen success in the United States and the Asian-Pacific regions, its sales are lacking in the regions of Europe, Africa and the Middle East. While much of this difficulty can be attributed to the struggling economies of these regions, the fact still remains that Starbucks has an uphill battle when it comes to expanding its chains. (Sun, 2015).

In years past, coffee was relatively inexpensive to buy because coffee was typically consumed in certain countries, but now that many more countries are consuming coffee, the supply is having a difficult time keeping up with the demand. For instance, if economists predicted in 1980 that the demand for coffee would increase between 50% and 80% by 1990, then it would stand to reason that farmers would have probably enlarged the size of their crops in order to accommodate the demand. However, in 1990 the demand for coffee only rose by 10% thereby creating a surplus of coffee on the market for consumers. Because coffee is so easily obtainable, and farmers are trying to sell their goods so the crops will not go to waste, prices begin to drop to help tempt purchasers, which helps the producers so they avoid losing their investment entirely.

Starbucks is a well respected brand of coffee that is known globally. As they dominate the market in United States, they have realized the potential growth in overseas markets and open its doors to going global. However, competing internationally is not easy for every company that’s why Starbucks has encountered certain challenges and issues as it enters foreign markets and grows globally.

When a company experiences a new equilibrium price causing a higher demand with this higher demand the coffee population will have the opportunity to pay higher wages and invest in more coffee R&D and processing technology and create a better infrastructure for the Starbucks corporation. If this demand does exist it would allow other companies to enter the market giving star bucks more competition. Once all the smoke settles with this new product the demand will begin to slow down because of increased supply, competition and more growers will produce more of the needed coffee beans needed to product this new coffee type. Starbucks is constantly doing this with its new products. Originally they were the new kids on the block with the newest premium coffee, but due to this trending copy cats have entered the market, and once the consumer realized that prices went up. They to begin to find alternatives to drinking premium coffee. Several of these substitutes

Economic conditions in the US and certain international markets could adversely affect Starbucks’ business and

Changes in demand determines how much Starbucks should supply in the market. Competitors pricing strategies, customers income, economic conditions and advertising will cause the demand curve either to shift outwards or inwards. So Starbucks should always be ready to face these challenges and set its prices and supply according to market conditions. If Starbucks intends to focus only high income group then the demand for its coffee in middle and lower income group will be very less. But if Starbucks set prices which attract all the income groups then its demand will become elastic and slight change in price will cause a greater change in quantity

The price of coffee is impacted by several factors. Meteorological events can affect the quality of a harvest or even wipe out entire plantations. The political and economic stability of the coffee-growing regions can have a profound effect on availability, and subsequently price per pound. Coffee is traded on the commodities exchanges

In “Undercover Economist”, Harford shows the biggest issue affect to the Starbucks to have a huge success is a location. Based on the investigation of the

Coffee is a commodity enjoyed all over the world. Bistros in Paris to large franchise chains in the United States; the fact is people love coffee. Take a look at the causes for shifts in supply and demand for one

Assuming that the demand and supply for premium coffees are in equilibrium, the price will be at a constant, without significant pressure from the market. If Starbucks introduced the world to premium blends, this would cause a positive shift in the demand curve. There a higher equilibrium price and higher quantity when demand increases and supply remain unchanged. As prices increase, and the market moves to a new equilibrium, we will see higher wages, more advances and investments in technology and infrastructure, and greater competition. As production become more efficient and competition becomes greater, supply will increase and cause prices to settle back down. There are several factors that will impact the long-term equilibrium, such as changes in supply. For example, if a hard freeze eliminated Brazil’s premium coffee crop, this would cause a negative shift in the supply curve. Assuming demand remains constant a negative shift in the supply curve will cause quantity to decrease and equilibrium price to increase. Research shows that in 2011 a frost occurred in Brazil's southeastern coffee growing belt. Traders worried that next year's yields could be hurt. At the same time, heavy rains during harvest forced Columbia to reduce its crop estimate for 2011. Understanding the impact of problems along the supply chain and how the changes in supply

Starbucks is known for their Frappuccino’s; unfortunately they are on a downward spiral in sales due to competitors such as McDonalds. In 2008 Starbucks admits to its losses due to their competitors. “Company executives now freely admit that such thinking is largely to blame for the woes that led to Tuesday’s announcement that Starbucks will close 600 U.S. stores and eliminate thousands of jobs. The coffee giant’s missteps have come at a spectacularly bad time, hitting as the economic slump deepens and consumers are seeing their discretionary spending eaten up by rising gas prices and grocery bills (Linn).”

The next issue that Starbucks needs to consider is the selection of the locations. Market location depends on the nature of the business and is a critical aspect for business success. The operations manager’s decision on location must take into consideration operations management costs, transportation cost, and rent. Operations management at Starbucks needs to consider convenient and marketable locations for their coffeehouses. The location factor is one of the important reasons why consumers choose a specific coffee shop. Since location is everything in the retail industry, most Starbucks coffeehouses are located in shopping malls. The location of Starbucks stores is important because most consumers perceive coffeehouses to be essential places to relax from their busy lifestyles.

This could be considered the lowest of Porter’s Forces that affect Starbucks. Starbucks main input is coffee beans, followed by slightly less common Arabica coffee beans, and being coffee a commodity product, there are many coffee suppliers that can offer the product cheaper than others. The lack of complexity that surrounds the production of coffee beans enables Starbucks to find viable alternatives should any of their suppliers attempt to improve its standing. As an

Factors in the global environment provide both opportunities and strengths for Starbucks. Opportunities such as increased revenues, further expansions, and achieving their goal of becoming the most respected brand worldwide. Starbucks also faced threats. These threats include dealing with growing antiglobalization overseas and their huge risk of less return on each overseas store, this deriving from overseas operations being run by local partners instead of Starbucks