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, 2022). This is certainly a massive operation; however, this may also expose it 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.
Starbucks is a global company, and therefore, its operations are subject to political risks in various countries and regions. Political risk can be defined as the risk of adverse effects on a company’s business caused by political instability, government policy, or social change.
Economic factors that may affect Starbucks
Economic environment is a key area of examination in this PESTEL analysis of Starbucks. Starbucks is positioned as a premier and specialty coffee house. This positioning impacts on its pricing strategies. 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.
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.
While the performance of Starbucks is very good, some markets will remain somewhat volatile in the near term. In the longer term, it may face many of the same economic challenges as other large US multinationals. In fact, its home market (U.S.) is already saturated, and according to some analysts, it is hurting the sales.
Social factors that may affect Starbucks
Starbucks is popular in many parts of the world; however, its popularity varies greatly depending on the region. Its products, marketing campaigns, and public image vary from country to country. This shows that the coffee house understands the social factors very well.
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 in the last several years, the business took 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 16- 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
Another important element in this PESTEL analysis of Starbucks is technology. Technological factors can affect Starbucks in a number of ways. For example, the rise of online shopping has reduced the number of customers visiting Starbucks’ brick-and-mortar stores. However, Starbucks has been using technology to its own advantage, using mobile ordering and payment to boost sales.
The customers of Starbucks receive personalised order suggestions generated via a learning platform that is built and hosted in Microsoft Azure. Likewise, the company gathers massive amounts of data through AI from over millions of transactions a week.
Barsky (2021) reports that Starbucks increasingly depends on automation for employee scheduling, inventory management, and equipment diagnostics. Likewise, its Mobile Order & Pay was introduced to enable customers to submit their orders in advance via the app and pay using the app when collecting the orders at the store. The company is always in search of new tech innovations. Indeed, it is a technology pioneer in the coffee chain industry.
Environmental factors that may affect Starbucks
Environmental factors can affect Starbucks in many ways, such as rising temperatures and extreme weather, water shortages, and droughts. It should be mentioned that many people accuse it 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, Starbucks 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.
Starbucks has set a target to reduce carbon, water, and waste by 2030. Additionally, it has been working to make its supply chain more sustainable. It is worth noting that it decided to phase out the use of disposable cups in its Korean-based cafes by 2025 (Rouzic and Yum, 2021).
Legal factors that may affect Starbucks
Legal environment is the final part of this PESTEL analysis of Starbucks. There is no doubt that egal factors can affect Starbuck in a number of ways, such as changes in the tax code, new labour regulations, and lawsuits. For instance, it was fined by the Westminster Magistrates Court, London in the past for leaving rubbish bags on the street outside of the collection times.
Similarly, Starbucks 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.
Summary of the PESTEL analysis of Starbucks
This analysis reveals several threats and opportunities that may affect Starbucks’ performance in the future. Government intervention, changes in political conditions, political instability, changes in interest rates, inflation, cultural values, demographic trends, rise of online shopping, the impact of climate change on coffee beans, water shortages, droughts, and many other factors may affect its global operations.
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Last update: 10 June 2022
Barsky, N. (2021) Starbucks just set two digital transformation marks that cannot be ignored, available at: https://www.forbes.com/sites/noahbarsky/2021/11/16/starbucks-digital-transformation-boosts-customer-loyalty/?sh=759af75d4202 (accessed 10 June 2022)
Rouzic, A. and Yum, J. (2021) Plastic pollution is a global problem – Starbucks needs to take global action, https://www.greenpeace.org/international/story/47470/korea-plastic-pollution-starbucks-reusables-global-action/ (accessed 09 June 2022)
Starbucks (2022) About us, available at: https://www.starbucks.co.uk/about-us (accessed 10 June 2022)
Author: M Rahman
M Rahman writes extensively online and offline 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.