ANSWER THE FOLLOWING AFTER READING THE CASE:

1. Background 2. The Analysis Report a. Issues and Concerns b. Point of View c. Objectives d. Areas of Consideration e. Alternative Courses of Action f. Recommendation g. Plan of Action 3. References/Exhibits

Starbucks' Mission: Social Responsibility and Brand Strength INTRODUCTION ice creams, and VIA coffees can be purchased in groHoward Schultz joined Starbucks in 1982 as director Target. Starbucks partnered with Courtesy Products to of retail operations and marketing. Returning from a create single-cup Starbucks packets marketed toward trip to Milan, Italy, with its 1,500 coffec bars, Schultz hotel rooms. Starbucks also partnered with Green recognized an opportunity to develop a similar retail Mountain Coffec Roasters to introduce Starbuckscoffec bar culture in Seattle. branded coffec and tea pods to the market. These pods In 1985 , the company tested the first downtown target consumers who own Keurig single-cup brewing Scattle coffechouse, served the first Starbucks caf machines. Although the two businesses would normally latt, and introduced its Christmas Blend. Since then, be rivals, this partnership is beneficial for both Green Starbucks expanded across the United States and Mountain and Starbucks. Since Green Mountain owns around the world, now operating over 20,000 stores Keurig's single-serve machines, the partnership enables in 64 countries. Historically, Starbucks grew at a rate Starbucks to access this technology to market a new of about three stores a day, although the company cut product. Green Mountain benefits because the partnerback on expansion in recent years. The company serves ship generates new users of Keurig single-cup brewing approximately 70 million customers per week and has machines attracted to the Starbucks name. revenues of approximately $14 billion a year. It is the This partnership between Green Mountain and largest coffechouse company in the world. Starbucks did not stop Starbucks from launching its Starbucks locates its retail stores in high-traffic, high- own line of single-serve machines. In 2012, Starbucks visibility locations. The stores are designed to provide an introduced its Verismo 580 Brewer that allows coninviting coffee bar environment that is an important part of sumers to brew a cup of Starbucks coffee in their own the Starbucks product and experience. It was the intention homes. The coffec has the strong, bold flavor of a cup of Howard Schulz to make Starbucks into "the third place" purchased in any Starbucks retail location. Starbucks for consumers to frequent, after home and work. Because offers a limited assortment of coffees to emphasize the company is flexible regarding sizc and format, it locates quality rather than quantity. Not to be outdone, Green stores in or near a varicty of settings, including office build- Mountain released another type of single-serve coffee ings, bookstores, and university campuses. It can situate brewer called the Rivo. Unlike the Verismo, that uses retail stores in sclect rural and off-highway locations to powdered milk pods, the Rivo uses fresh milk. The race serve a broader array of customers outside major metro- to conquer the single-serve coffee market is intensifying politan markets and further expand brand awareness. To between the two companies. provide a greater degrec of access and convenience for non- A common criticism of Starbucks is the company's pedestrian customers, the company increased the develop- strategy for location and expansion. Its "clustering" ment of stores with drive-through lanes. Starbucks plans to strategy, placing a Starbucks literally on every corner increase its use of drive-through stores and has announced in some cases, forced many smaller coffee shops out that 60 percent of all new stores will be drive-throughs. of business. This strategy dominated for most of the In addition to selling products through retail 1990s and 2000 s and Starbucks became the butt of outlets, Starbucks sells coffee and tea products and jokes. Many people began to wonder whether two licenses its trademark through other channels and its Starbucks directly across the street from each other partners. For instance, its Frappuccino coffec drinks, were really needed. The last recession brought a change Starbucks Doubleshot espresso drinks, super-premium in policy, however. Starbucks pulled back on expansion, "This case was prepared by Michelle Urban and Jennifer Sawayda for and under the direction of O.C. Ferrell and unda Ferrell 2015. closed hundreds of stores around the United States, and STARBUCKS CULTURE focused more on international markets. Now Starbucks is beginning to focus on U.S. expansion once more, with In 1990, Starbucks' senior executive team created plans to open 600 more stores. mission statement that specified the guiding principle: for the company. They hoped the principles included in the mission statement would assist partners in determinNEW PRODUCT OFFERINGS ing the appropriateness of later decisions and actions Starbucks introduced a number of new products After drafting the mission statement, the executive team the years to remain competitive. In 2008, Starbucks asked all Starbucks partners to revicw and commen decided to return to its essentials with the introduction on the document. Based on their feedback, the fina of its Pike Place Blend. The company hoped that the statement put "people first and profits last." In fact blend would return Starbucks to its roots of distinctive, expertly blended coffec. In order to get the flavor per- ronment for its employees. fect, Starbucks enlisted the inputs of 1,000 customers Starbucks has done three things to keep the mission over 1,500 hours. To kick off the new choice, Starbucks and guiding principles alive over the decades. First, it held the largest nationwide coffee tasting in history. To distributes the mission statement and comment cards for make the brew even more appealing, Starbucks joined feedback during orientation to all new partners. Second, forces with Conservation International to ensure the Starbucks continually relates decisions back to the guiding beans were sustainably harvested. Also, after feedback principle or principles it supports. These principles focus revealed many of its customers desired a lighter blend, on coffec, partners, customers, stores, neighborhoods, Starbucks introduced Blonde Roast blend in 2011. and sharcholders. And finally, the company formed a Starbucks executives believe the experience "Mission Review" system so partners can comment on customers have in the stores should be consistent. a decision or action relative to its consistency with one Therefore, Starbucks began to refocus on the customer of the six principles. These guiding principles and values experience as one of the key competitive advantages of have become the cornerstone of a strong cthical culture of the Starbucks brand. To enhance the European coffec predominately young and educated workers. shop experience for which Starbucks is known, shops Starbucks founder and CEO Howard Schulz has are replacing their old espresso machines with new, long been a public advocate for increased awareness of high-tech ones. Some are changing over to Clover Brand ethics in business. In a 2007 speech at Notre Dame, he single-cup brewing machines so cach customer receives spoke to students about the importance of balancing a freshly brewed cup of coffee made to his or her speci- "profitability and social consciousness." Schultz is a fications. To keep the drink-making operation running true believer that ethical companies do better in the long efficiently and accurately, Starbucks mandated baristas run, something that has been confirmed by research. to make no more than two drinks at the same time. Schultz maintains that, while it can be difficult to do Additionally, Starbucks fosters brand loyalty by the right thing at all times, in the long term it is better increasing repeat business. One of the ways it accom- for a company to take short-term losses than lose sight plishes this is through the Starbucks Card, a reloadable of its core values. card introduced in 2001. For the tech-savvy visitor, Because of its strong corporate culture, for nearly a Starbucks partnered with Square and introduced the decade Starbucks has been ranked one of Fortune's " 100 Square Wallet application for mobile devices. The Best Companies to Work For." In 2013, the company app cnables customers to store their debit, credit, or ranked 94 th out of 100 companies. Despite the challenges Starbucks card information. When they order their of the recession, Starbucks has been praised for not cutting coffee, they merely scan their phone for payment. back employec healthcare costs. The care the company This mobile app can be used at approximately 7,000 shows its employecs is a large part of what sets it apart. company-owned Starbucks stores, along with Starbucks Starbucks offers all employees who work more than 20 Card eGifts sent to friends through the Internet. It is esti- hours per weck a comprehensive benefits package that mated that 14 percent of all Starbucks in-store transac- includes stock options as well as medical, dental, and tions in the United States are done using mobile devices. vision benefits. In another effort to benefit employecs, Starbucks partnered with Arizona State University (ASU) CORPORATE SOCIAL MISSION to offer tuition assistance to those who want to carn a degree from the university's online program. In 2014, Although Starbucks supported responsible business it was voted as one of the most ethical companies on practices virtually since its inception, as the company has Ethisphere's annual list for the cighth consecutive year. grown, so has the importance of defending its image. At Another key part of the Starbucks image involves the end of 1999, Starbucks created a Corporate Social its commitment to ethics and sustainability. To address Responsibility department, now known as the Global concerns related to these issues, Starbucks launched Responsibility Department. Global Responsibility the Shared Planet website. Shared Planet has three releases an annual report in order for sharcholders main goals: to achieve ethical sourcing, environmental to keep track of its performance and can be accessed stewardship, and greater community involvement. The through the Shared Planct website. Starbucks is conwebsite is a means of keeping customers current on cerned about the environment, its employees, suppliers, initiatives within the company. It describes how well customers, and its communities. Starbucks fares on achieving its social responsibility goals, and it provides a means for customers to learn things like the nutrition data of Starbucks' offerings and Environment other concerns related to Starbucks products. Starbucks actively partners with nonprofits around In 1992 , long before it became trendy to be "grech,", the globe. In 2013, Starbucks became one of the larg- to clearly articulate the company's cnvironmental prioriest buyers of Fair Trade Certified coffee at 33.4 million ties and goals. This initiative created the Environmental pounds. It also purchased 4.4 million pounds of certi- Starbucks Coffec Company Affairs team, the purpose fied organic coffee. Another organization Starbucks of which was to develop environmentally responsible partnered with is the Foodservice Packaging Institutel policies and minimize the company's "footprint." As Paper Recovery Alliance. The partnership addresses the part of this effort, Starbucks began using environmental issue of responsible foodservice packaging in terms of purchasing guidelines to reduce waste through recycling, its use, recovery, and processing. Additionally, Starbucks has invested over $70 million in programs for farmers conserving energy, and educating partners through the company's "Green Team" initiatives. Concerned stakearound the world. Conservation International joined with Starbucks holders can now track the company's progress through in 1998 to promote sustainable agricultural practices, its Shared Planet website that clearly outlines Starbucks' namely shade-grown coffee, and help prevent deforesta- environmental goals and how the company fares in livtion in endangered regions around the globe. The results ing up to those goals. Recently, Starbucks hosted a series of the partnership proved to be positive for both the of Cup Summits, inviting various thinkers to develop environment and the farmers. For example, in Chiapas, a new way of producing the traditional Starbucks disMexico, shade-grown coffec acreage (that reduces the posable cup so it is entirely compostable. As a result, need to cut down trees for coffec plantations) increased Starbucks began offering a $1 plastic cup for purchase well over 220 percent, while farmers reccive a price that is good for a recommended 30 uses. This is part of premium above the market price. Starbucks and Oprah, an attempt by Starbucks to address the 4 billion cups two of the biggest global brands, joined forces to create globally deposited into the environment by making all Oprah's Chai Tea in 2014. A specially created blend cups reusable or recyclable by 2015. from the stores of Teavana, one of Starbucks' most recent acquisitions, these branded products contribute to youth education programs. All profits made from this tea go toward this cause. Starbucks works with many other organizations Growing up poor with a father whose life was nearly as well, including the African Wildlife Foundation health benefits, Howard Schultz always considered the and Business for Social Responsibility. The company's creation of a good work environment a top priority. He efforts at transparency, the treatment of its workers, and believes companies should value their workers. When its dozens of philanthropic commitments demonstrate forming Starbucks, he decided to build a company how genuine Starbucks is in its mission to be an ethical that provided opportunitics his father did not have. and socially responsible company. The result is one of the best healthcare programs in the coffee shop industry. Schultz's key to maintaining coffee-growing communities. Starbucks collaborates a strong business is developing a shared vision among directly with some of its growers through Farmer employees as well as an environment that they can Support Centers, located in Costa Rica, Rwanda, actively contribute. Understanding how vital employees Tanzania, South America, and China. Farmer Support are, Schult is the first to admit his company centers on Centers provide technical support and training to personal interactions: "We are not in the coffee busi- ensure high-quality coffec into the future. In 2013, ness serving people, but in the people business serving Starbucks donated approximately $11 million for loans coffec." and farmer support programs, with the goal of reaching However, being a great employer does take its toll $20 million for the 2015 yeas It is a major purchaser of on the company. In 2008, Starbucks closed 10 percent Fair Trade Certified, shade-grown, and certified organic of stores in order to continue to provide employees with beans that further support environmental and economic health insurance. This decision, based on its guiding efforts. In 2013, the firm bought its first coffee farm, principle of "people first, profits last," shows how much located in Costa Rica and employing about 70 people. the company values its employees. As a way to improve The purchase was one step toward Starbucks' goal of employee health, Starbucks established a program for increasing its ethically sourced coffee to 100 percent employees called "Thrive Wellness" that offers various by 2015. resources aimed at assisting employees in incorporating In 1991, Starbucks began contributing to CARE, a wellness into their lives. The program offers resources worldwide relief and development foundation, as a way such as smoking cessation, weight loss, and exercise. to give back to coffee-origin countries. Starbucks' donaStarbucks also estimates that 70 percent of employees tions help with projects like clean water systems, health are either currently in college or desire to eam a degree. and sanitation training, and literacy efforts. Starbucks The aforementioned partnership with ASU provides this continues its long-term relationship with CARE, making opportunity as students can choose from 40 programs Pike Place Blend its first CARE-certified brew. with no obligation to remain as a Starbuck's employ while receiving or achieving their degree. The rising cost of education is an important issue that CEO Howard Customers Schult wants to help alleviate. Strengthening its brand and customer satisfaction is more important than ever as Starbucks secks to regroup Suppliers after the latest recession forced the company to rethink Even though it is one of the largest coffee brands in its coffee-brewing machines, introducing new food and the world, Starbucks maintains a good reputation for drink items for health and budget-conscious consumers, social responsibility and business ethics throughout and refocusing on its core product. Recognizing the the international community of coffee growers. It concem over the obesity epidemic, Starbucks ensures builds positive relationships with small coffee suppliers that its grab-and-go lunch items are under 500 calories while also working with governments and nonprofits and is involved in two sodium reduction programs: the wherever it operates. Starbucks practices conserva- National Salt Reduction Initiative in New York and tion as well as Starbucks Coffec and Farmer Equity the UK Food Standards Agency Salt Campaign. The Practices (C.A.F.E.), a set of socially responsible cof- company focuses more on the quality of the coffee, fee buying guidelines that ensure preferential buying the atmosphere of the coffee shops, and the overall status for participants that receive high scores in best Starbucks experience, rather than continuing its rapid practices. Starbucks pays coffee farmers premium prices expansion of stores and products. Enhancing the custo help them make profits and support their families. tomer experience in its stores became a high priority. More than 95 percent of total coffee purchases are As a way to encourage people to relax and spend time C.A.F.E. verified, and the company is on track to have there, Starbucks offers free wireless Internet access in all 100 percent of its coffee purchases verified by 2015 . its U.S. stores. They have also partnered with Duracell The company is also involved in social develop- Powermat to install over 100,000 wircless phone charment programs, investing in programs to build schools gers in Starbucks and Teavana locations across the and health clinics, as well as other projects that benefit United States. Communities an opportunity for expansion into consumer packaged Starbucks coffee shops have long sought to become the relying solely on coffee. In order to remain competitive, "instant gathering spot" wherever they locate, a "place Starbucks made a series of acquisitions to increase the that draws people together" The company established value of its brand, including Bay Bread (a small artisan community stores, which not only serve as a meeting bakery), La Boulange (a bakery brand), Evolution Fresh place for community programs and trainings but also (a juice brand), and Teavana (a tea brand). This allowed as a source of funding to solve issues specific to the Starbucks to offer high quality breakfast sandwiches as local community. As of 2013, the program has raised well as Paninis and wraps for lunch. approximately $800,000 to alleviate community issues To symbolize this shift into the consumer packaged including education, employment, health, and housing. goods business, Starbucks gave its logo a new look. There are currently five such locations (including one Previously, the company's circular logo featured a merin Thailand), and Starbucks aims to establish a total of maid with the words "Starbucks Coffec" encircling it. In 50 by 2018. Schulz even used the advance and ongoing 2011 , Starbucks announced it was removing the words royalties from his book, Pour Your Heart into It, to cre- and enlarging the mermaid to signal to consumers ate the Starbucks Foundation that provides opportunity Starbucks is more than just the average coffee retailer. grants to nonprofit literacy groups, sponsors young writers' programs, and partners with Jumpstart, an organization helping children prepare developmentally SUCCESS AND CHALLENGES for school. Additionally, Starbucks takes a proactive approach For decades, Starbucks revolutionized our leisure time. to addressing unemployment in America. In light of Starbucks is the most prominent brand of high-end cofthe high unemployment rate, the company partnered fee in the world but also one of the defining brands of with the Opportunity Finance Network to establish a our time. In most large cities, it is impossible to walk program called Create Jobs for the USA. This initiative more than a few blocks without seeing the familiar provides funds to Community Development Financial mermaid logo. Institutions that finances small businesses, community In nearly two decades, Starbucks achieved amazcenters, and housing projects. Starbucks donated $5 ing levels of growth, creating financial success for million to this initiative. sharcholders. Starbucks' reputation is built on product quality, stakeholder concern, and a balanced approach to all of its business activities. Of course, Starbucks does BRAND EVOLUTION receive criticism for putting other coffee shops out of business and creating a uniform retail culture in many Although Starbucks achieved massive success in the last cities. Yet the company excels in its relationship with its 43 years, the company realizes it must modify its brand employees and is a role model for the fast-food industry to appeal to changing consumer tastes. All established in employee benefits. In addition, in an age of shifts in companies, no matter how successful, must learn to supply chain power, Starbucks is as concemed about adapt their products and image to appeal to the shift- its suppliers and meeting their needs as it is about any ing demands of their target markets. Starbucks is no other primary stakeholder. exception. The company is associated with premium In spite of Starbucks' efforts to support sustainabilcoffee beverages, an association that served it well over ity and maintain high ethical standards, the company the years. However, as competition in specialty cof- garnered harsh criticism in the past on issues such as fee drinks increases, Starbucks recognized the need to a lack of fair trade coffee, hormone-added milk, and expand its brand in the cyes of consumers. Howard Schultz's alleged financial links to the Israeli One way it is doing this is adopting more prod- government. In an attempt to counter these criticisms, ucts. In addition to coffee, Starbucks stores sell coffec in 2002 Starbucks began offering Fair Trade Certified accessories, teas, muffins, CDs, water, grab-and-go coffee, a menu item that was quickly made permanent. products, Starbuck Petites, upscale food items, hand- Approximately 95 percent of coffee in the United States crafted sodas called Fizios, as well as wine and beer is ethically sourced currently. in select locations. Food sales make up 20 percent of Starting in late 2008, Starbucks had something new Starbucks' revenue. The rise in coffee prices has created to worry about. A global recession caused the market to bottom out for expensive coffee drinks. The company it sells) for a 10-eent rebate, yet these account for less responded by slowing its global growth plans after than 2 percent of drinks served. The company hopes to years of expanding at a nonstop pace and instead refo- achieve less cup waste with its new $1 reusable cup. In cused on strengthening its brand, satisfying customers, 2010, Starbucks held a two-day "Cup Summit," invitand building consumer loyalty. After Starbucks stock ing outside participants to brainstorm how to creatc started to plummet, Howard Schultz retumed as CEO a more sustainable cup. It remains to be seen whether Starbucks will achieve its goal of total recyclability in to retum the company to its former glory. Schulz was successful, and Starbucks rebounded the short term. from the effects of the recession. The company is once again looking toward possibilities in international markets. This represents both new opportunities and challenges. When attempting to break into the U.K. CONCLUSION challenges. When attempting to break into the U.K. market, for instance, Starbucks met with serious resis- Despite the setbacks it experienced during the recestance. Realizing the homogenization of its stores did not sion, the future looks bright for Starbucks. The comwork as well in the United Kingdom, Starbucks began to pany continues to expand globally into markets such as remodel its stores so they took on a more local feel. At Bangalore, India; San Jose, Costa Rica; Oslo, Norway; the end of 2012, Starbucks came under public scrutiny and Ho Chi Minh City, Vietnam. The challenges the for allegedly not paying taxes for the last 14 of the 15 company experienced and will continue to expericnec years they were established in the United Kingdom. A strengths and embrace the opportunity to emphasize protest group called UK Uncut began "sitting in" at the community involvement, outreach work, and its overall stores, encouraging coffee drinkers to buy their coffee image and offerings. The company must continue to elsewhere. Starbucks claims it did not pay taxes because apply the balanced stakeholder orientation that is so it did not make a profit. Howeves, the company said it apply the balsoced would stop using certain accounting techniques that showed their profits overseas. Starbucks also agreed to or not it makes a profit. Starbucks is rapidly expanding in China, currently operating 1,000 stores with plans to open hundreds more. China is set to become the company's second largest market behind the United States. Starbucks effectively overcame obstacles in tapping into the Create the following: Chinese market and adapted its strategy to attract 1. Background Chinese consumers. After the 2007 closure of the retail 2. The Analysis Report operation in the Forbidden City, resulting from cultural a. Issues and Concerns concems of the presence of a Western staple in a sacred b. Point of T1ew area, Starbucks became more sensitive to the specific c. Objectives needs and nuances of the country. Through educating d. Areas n) Consideration not largely consumed there), they are now drinking as e. Alternative Courses of much coffee as the Americans. Action the company's emphasis on sustainability, an estimated 4 billion disposable Starbucks cups are thrown into landfills each yeac Only 39 percent of its stores recycle the cups. Although Starbucks has caken initiatives to make the cups more ecofriendly, such as chang- ing from polyethylene No. 1 to the more ecofriendly f. Recommendation polypropylene No. 5, the cup represents a serious waste