TERM PAPER

BUSINESS VALUES AND ETHICS

(MGT-954)

SUBMITTED TO: SUBMITTED BY:

Ms. Karampreet Kaur Akhilesh Matura

Reg. 7050070105

RSE108A11
 ACKNOWLEDGEMENT

First of all, i would like to thank my friends for assisting and helping me
in my term paper. I would like to thank Ms. Karampreet Kaur and Mr.
Rohan Sharma for helping me how to do my work. I would like to thank
university for providing such a nice internet facility. I would like to
thank our librarian for letting me borrow some books, for the computer
lab incharge for letting me use computers. I would like to thank my
parents for their financial and never ending support, for the help in my
study and for its completion. And it would not be successful without
God who guides me in my everyday life and activities. I thank him for
the good health he has given to me, and for the completion of my term
paper. For all the people who helped me a lot, thank you very much and
may god bless you all.

Lastly, I offer my regards and blessings to all those who supported me in

any respect during the completion of the term paper.
 Table of contents

1. Abstract……………………………………………….1
2. Introduction ………………………………………….2
3. Current situation………………………………………3
4. Starbucks corporation…………………………………4
5. Various ethical issues involved……………………….5
6. Various unethical issues involved…………………….7
7. Final judgments…………………………………….....9
8. Recommendation……………………………………...9
 Abstract

Starbucks opened in Seattle’s Pike Place Market in 1971 with hopes of creating a

“third place” between home and work. Starbucks was created to produce premium

coffee, while adhering to various core principles during economic growth. “The

company has realized that people don’t only come for coffee; they come for the

atmosphere”. Customers are able to socialize, read, study or enjoy music while

drinking coffee. Starbucks strategically positions each store with hopes of

matching the specific location, helping to create a unique atmosphere. Throughout

this paper, I will analyze Starbucks’ current domestic and international marketing

strategy through SWOT (strengths, weaknesses, opportunities and threats) analysis,

to provide new ideas, leading to market segmentation.

 Introduction
Starbucks Corporation is an international coffee and coffeehouse chain based in
Seattle, Washington, United States. Starbucks is the largest coffeehouse company
in the world, with 17,133 stores in 49 countries, including 11,068 in the United
States, nearly 1000 in Canada and more than 800 in Japan.

In 1971, Starbucks opened operations in Seattle’s pike place markets with the
future aim of providing coffee to a number of restaurants and surrounding bars.
With the recruitment of Howard Schultz who led the marketing and retail efforts of
Starbucks.

In 1982, the company took a change in direction through the views of Schultz, who
after visiting Italy tried to adapt the same principles in order to a strong bar culture.
Schultz then utilized Starbucks ability to provide quality coffee beans and opened
up a new store called Il Giornale, which brewed coffee from these particular beans.

In 1987, Giornale had decided to take over the assets of Starbucks and also, further
changed its name to Starbucks Corporation. By the end of the year, Starbucks had
increased the number of stores to 17 and furthered its location span by entering
Chicago and Vancouver.

In 1990, the company took further steps forward with expansion of the Seattle
headquarters and an increase in resources with the opening of a new roasting plant.
Relationships and other ventures also took off during the early nineties as the
company looked to development organizations to further its progress.

In 1995, the company really established its name with the opening of the 676th
store as well as increasing the products in store with the addition of compact discs
a result of a previously popular experiment with ‘in-house’ music.

In 1996, the company kept on stretching its reach by entering into the market of
Japan, Singapore and Hawaii. This was achieved through joint ventures including
the one formed with Sazaby Inc., which pushed through the development of coffee
house in Japan.
By the year 2000, things had progressed so far that 3,300 stores were already
opened, the company had ventured into countries ranging from England to
Australia and china.

By the quarter or 2008, total international stores became 5113 store and 11567
store in united states.

Current situation:
The current international situation for Starbucks seems to be an emerging part of
their business and the reorganization of this is proved by their aim to become a
leading global company through making a difference in people’s lives all around
the world. This goal is quite close to being achieved as proved the successfulness
of these ventures. The current countries in which Starbucks is located in are:
Australia, Bahrain, Canada, Hong Kong, Israel, Japan, Kuwait, Lebanon, Malaysia,
new Zealand, Oman, peoples republic of china, Philippines, Qatar, Saudi Arabia,
South Korea, Switzerland, Taiwan, Thailand, United Arab emirates, Egypt, united
kingdom, and the united states.
 Starbucks Corporation

Type Public (NASDAQ: SBUX)

Restaurants
Retail coffee and tea
Industry
Retail beverages
Entertainment
Founded Pike Place Market in Seattle, Washington (1971)
Founder(s) Zev Siegl, Jerry Baldwin and Gordon Bowker
Headquarters Seattle, Washington, U.S.
Howard Schultz, Chairman, President and CEO
Key people Troy Alstead, Chief Financial Officer
Stephen Gillett, Chief Information Officer
Whole bean coffee
Boxed tea
Made-to-order beverages
Products Bottled beverages
Baked goods
Merchandise
Frappuccino beveragesSmoothies
Services Coffee
Revenue ▲ US$9.77 Billion (FY 2009)[1]
Operating
▲ US$476 Million (FY 2009)[1]
income
Net income ▲ US$391 Million (FY 2009)[1]
Total assets ▼ US$5.58 Billion (FY 2009)[2]
Total equity ▲ US$3.05 Billion (FY 2009)[2]
Employees 128,898 (2009)[3]
Starbucks Coffee Company
Tazo Tea Company
Seattle's Best Coffee
Subsidiaries
Torrefazione Italia
Hear Music
Ethos Water
Website Starbucks.com

VARIOUS ETHICAL ISSUES INVOLVED:

ENVIRONMENTAL IMPACT:
In 1999, Starbucks started "Grounds for your Garden" to make their business more
environmentally-friendly. This gives leftover coffee grounds to anyone requesting
it for composting. Although not all stores and regions participate, customers can
request and lobby their local store to begin the practice.
In 2004, Starbucks began reducing the size of their paper napkins and store
garbage bags, and lightening their solid waste production by 816.5 metric tons (1.8
million pounds). In 2008, Starbucks was ranked #15 on the U.S. Environmental
Protection Agency's list of Top 25 Green Power Partners for purchases of
renewable energy.

RECYCLING:

The U.S. Food and Drug Administration granted the first-ever approval to use
recycled content in food packaging for Starbucks coffee cups. In 2005 Starbucks
received the National Recycling Coalition Recycling Works Award.Starbucks
gives customers a 10-cent discount when they bring their own reusable cup, and it
now uses corrugated cup sleeves made from 60 percent post-consumer recycled
fiber.

FAIR TRADE:

In 2000, the company introduced a line of fair trade products. Of the approximately
136,000 metric tons (300 million pounds) of coffee Starbucks purchased in 2006,
about 6 percent was certified as fair trade. According to Starbucks, they purchased
2,180 metric tons (4.8 million pounds) of Certified Fair Trade coffee in fiscal year
2004 and 5,220 metric tons (11.5 million pounds) in 2005. They have become the
largest buyer of Certified Fair Trade coffee in North America (10% of the global
market). Transfair USA, the only third-party certifier of Fair Trade Certified coffee
in the United States, has noted the impact Starbucks has made in the area of Fair
Trade and coffee farmer's lives.

STAFF TRAINING:
Black aprons displaying the title "Coffee Master" are worn by employees who have
completed the Coffee Master course, which educates employees in coffee tasting,
growing regions, roasting, and purchasing (including fair trade). Almost 70% of
the coffee used by Starbucks around the world comes from the sixth major
producer in the world, Guatemala, a pro-organic producer.

ETHOS WATER:

Ethos, a brand of bottled water acquired by Starbucks in 2005, is sold at locations

throughout North America. Ethos bottles feature prominent labeling stating
"helping children get clean water", referring to the fact that $.05 from each $1.80
bottle sold ($.10 per bottle in Canada) is used to fund clean water projects in under-
developed areas.

PRODUCT RED:

Starbucks began selling Product Red goods in November 2008, enabling the supply
of AIDS medicine for 3,800 people for a year.

NEW ORLEANS:

In 2008, Starbucks announced a volunteer program in New Orleans, three years

after Hurricane Katrina. According to Rebuilding Together New Orleans,
employees will work on various projects, including houses, planting trees and an
urban garden. A volunteer coordinator said that "I've never seen this magnitude
from one corporation before, I'll say that, in terms of the sheer numbers.

SPARKHOPE:

In 2004, UNICEF Philippines and Starbucks launched Spark Hope, a programme

in which Starbucks stores in the Philippines provide early childhood care and
development for children in a particular community. An area in each store contains
a donation box and shows photos of the adopted community and information about
UNICEF’s programme.

VARIOUS UNETHICAL ISSUES INVOLVED:

MARKET STRATEGY:

Some of the methods Starbucks have used to expand and maintain their dominant
market position, including buying out competitors' leases, intentionally operating at
a loss, and clustering several locations in a small geographical area (i.e., saturating
the market), have been labeled anti-competitive by critics. For example, Starbucks
fueled its initial expansion into the UK market with a buyout of Seattle Coffee
Company, but then used its capital and influence to obtain prime locations, some of
which operated at a financial loss. Critics claimed this was an unfair attempt to
drive out small, independent competitors, who could not afford to pay inflated
prices for premium real estate. Starbucks in the 2000s greatly increased its
"licensed store" franchise system, which permits Starbucks franchises only if they
contribute to less than 20% of the franchisees gross income, are inside other stores
or in limited or restricted access spaces, as to not dilute the brand image. Franchise
agreements are rare in volume and usually only made with Fortune 1000 or similar
sized chain stores. The licensed store system can create the illusion of 2 or more
Starbucks cafes in the same shopping plaza, when one is a standalone company
owned, and the others are licensed. The menus of licensed stores can be the same
or trimmed or modified versions of the cafes, or be positioned as independent cafes
that happen to sell Starbucks products (ex. Barnes & Noble).

LABOUR DISPUTES:

Starbucks workers in seven stores have joined the Industrial Workers of the World
(IWW) as the Starbucks Workers Union since 2004.

A Starbucks strike occurred in Auckland, New Zealand, on November 23, 2005.

Organized by Unite Union, workers sought secure hours, a minimum wage of
NZ$12 an hour, and the abolition of youth rates. The company settled with the
Union in 2006, resulting in pay increases, increased security of hours, and an
improvement in youth rates.

In March 2008, Starbucks was ordered to pay baristas over US$100 million in back
tips in a Californian class action lawsuit launched by baristas alleging that granting
shift-supervisors a portion of tips violates state labor laws. The company plans to
appeal. Similarly, an 18 year-old barista in Chestnut Hill, MA has filed another suit
with regards to the tipping policy. Massachusetts law also states that managers may
not get a cut of tips. A similar lawsuit was also filed in Minnesota on March 27,
2008. In April 2010, New York City resident Zeynep Inanli, filed suit against
Starbucks for serving unreasonably hot tea.

OPENING WITHOUT PLANNING PERMISSION:

Starbucks has been accused by local authorities of opening several stores in the
United Kingdom in retail premises, without the planning permission for a change
of use to a restaurant. Starbucks has argued that "Under current planning law, there
is no official classification of coffee shops. Starbucks therefore encounters the
difficult scenario whereby local authorities interpret the guidance in different ways.
In some instances, coffee shops operate under A1 permission, some as mixed use
A1/A3 and some as A3".

In May 2008, a branch of Starbucks was completed on St. James's Street in

Kemptown, Brighton, England, despite having been refused permission by the
local planning authority, Brighton and Hove City Council, who claimed there were
too many coffee shops already present on the street. Starbucks appealed the
decision by claiming it was a retail store selling bags of coffee, mugs and
sandwiches, gaining a six month extension, but the council ordered Starbucks to
remove all tables and chairs from the premises by 20 February 2009, to comply
with planning regulations for a retail shop. 2500 residents have signed a petition
against the store, and public inquiry is due to be held on 10 June 2009.

A Starbucks in Hertford won its appeal in April 2009 after being open for over a
year without planning permission. Two stores in Edinburgh, one in Manchester,
one in Cardiff, one in Pinner, Harrow, and one in Blackheath, Lewisham were also
opened without planning permission.

VIOLENCE AGAINST STARBUCKS IN THE UNITED KINGDOM:

On January 12, 2009, a Starbucks in White chapel Road in London was the target
of vandalism by pro-Palestinian demonstrators who broke windows and reportedly
ripped out fittings and equipment after clashes with riot police. In the early hours
of the following morning a suspected makeshift firebomb was hurled into the
premises, causing further damage.
On January 17, 2009, a pro-Gaza protest was held by the Stop the War Coalition in
Trafalgar Square in central London. After the rally, two groups of people, some
hiding their faces, smashed and looted two Starbucks on Piccadilly and
Shaftesbury Avenue. Although the stores had requested greater police protection
following the violence against a Starbucks the previous week, Scotland Yard stated
it could "not stop thugs hell-bent on causing damage.
FINAL JUDGMENTS:
A Starbucks strike occurred in Auckland, New Zealand, on November 23, 2005.
Organized by Unite Union, workers sought secure hours, a minimum wage of
NZ$12 an hour, and the abolition of youth rates. The company settled with the
Union in 2006, resulting in pay increases, increased security of hours, and an
improvement in youth rates.

In March 2008, Starbucks was ordered to pay baristas over US$100 million in back
tips in a Californian class action lawsuit launched by baristas alleging that granting
shift-supervisors a portion of tips violates state labor laws. The company plans to
appeal. Similarly, an 18 year-old barista in Chestnut Hill, MA has filed another suit
with regards to the tipping policy. Massachusetts law also states that managers may
not get a cut of tips. A similar lawsuit was also filed in Minnesota on March 27,
2008. In April 2010, New York City resident Zeynep Inanli, filed suit against
Starbucks for serving unreasonably hot tea.

Conclusion:
In conclusion, Starbucks has appealed to such a wide target market, it seems every
product introduced will be an instant success (sodas, teas, ice creams, pastries).
Ranked in Fortune magazine as the most innovative company, it’s no surprise that
the new technological addition, the Starbucks Card, boosted sales and helped
growth during a time when the economy was struggling. “Starbucks went back to
basics, and they’ve approached the basics with a science and intensity that no one
has ever done before”.
Recommendation:
Starbucks has become a great successful company in the coffee bean and beverage
business and its strategy has been very effective. From the beginning, Schultz, the
company's owner, has professed a strict, slow growing policy. He feels it is also
important to keep all the stores company owned to improve and grow the business
further. To further grow, Starbucks will need to expand further in other areas of the
United States as well as internationally. Future joint ventures will expand the
products into grocery and convenience store shelves through bottled beverages and
ice cream flavors. Other joint ventures will allow further expansion into the
brewery business, which will produce beer with Starbucks' coffee beans. Other
partnerships will bring new products for Starbucks, such as jazz CDs, and tandem
units with bagel bakeries. As the company expands, the culture and corporate
strategy must be maintained for success. This will ensure the health of the
organization throughout any future expansion.