Howard Schultz bought a Seattle coffee company in 1987 then transformed the six coffee stores into a national,publicly owned company with more than 25,000 employees and over 1,300 stores.By 2002 these figures had risen to 5,689 stores in 28 countries.He is the man behind,and CEO of,Starbucks.
PESTLE analysis is tools that can aid organizations making strategies by helping them understand the external environment in which they operate now and will operate in the future.It is a method of examining the many different external factors affecting an organization-the outside influences on success or failure.
Taxation policy is a high taxation imposed on farmers in those countries producing the coffee bean will usually mean Starbucks pay a higher price for the coffee they purchase.Any fluctuations in taxation levels in the industry are almost certainly ultimately passed on to the consumer.Recently(June 13,2003)Tanzania's Minister of Finance harmonized and rationalized local government taxation to boost rural productivity of the coffee bean.Tax was lowered for these‘small holder farmers'and this saving will have been passed on to purchasers of coffee like Starbucks.
Deregulation-A decade ago,the USA pulled out of the ICA(international Coffee Agreement)that set export quotas for producing nations and kept the price of coffee fairly stable.Coffee quotas and price controls ended.Since the deregulation farmers have suffered and their earnings have dropped.Many have struggled to make a living so have given up.
International trade regulations/tariffs-Trade issues will affect Starbucks predominantly when exporting and importing goods.When another country's government imposes a tariff it not only results in an efficiency loss for Starbucks but large income transfers can become inconsistent with equity.This extra charge can turn a bargain into a rip-off.Also,since 9/11,trade relations have been adversely affected between the USA and some other countries.
Government stability is another important factor for the company.Starbucks should thoroughly investigate the political stability of any country they plan to expand to.Changes in government can lead to changes in taxation and legislation.The forthcoming American elections may have an effect on Starbucks as new legislation or new or existing government may bring in taxes.Also,those countries in political turmoil or civil war(e.g.Zimbabwe at present)should be approached with great caution when considering new ventures.
International stability-The international economy must be brought into consideration as it can affect Starbucks'sales and markets.The aftermath of 9/11 was an example of an economic downturn that affected the world market.If the world market is in a slump it is not usually the ideal time for a business to look at grand expansion.
Employment law-A reduction in licensing and permit costs in those countries producing the coffee bean for Starbucks would lower production costs for farmers.This saving would in turn be passed on to the purchaser.
Michael Porter defines five forces impacting a firm's competitiveness-threat of substitutes,threat of new entrants in the industry,bargaining power of suppliers,bargaining power of customers,and the intensity of competition within the industry.A firm's strategic decisions to respond to these five forces are a source of risk also.
The company is facing a real threat of substitution from many other companies that producing the same product that is satisfying the same need.This is in its domestic market and even in the international market specially Europe and Middle East.Also Starbucks is facing a real problem of rival competition due to its uncompetitive price all over the world and even in its domestic market.