Free Essay On “Pestel Analysis-Starbucks”
Focus on Economic and Legal Factors
Since the beginning of Starbucks in Seattle, Washington 1971, the firm has grown to distribute its commodities and services to masses of coffee fans through out the world. With a mounting amount of coffee outlets in over 16,000 places through the sphere, Starbucks has been able to achieve the location as the most main competitor in prepared to drink coffee trade for distinctive consumers. “The company spends only 1% of its revenues annually on marketing activities which is about $30 million US dollars in comparison to its competitors higher marketing funds” (Uwakwe). China is the most significant, and possibly the greatest, market for Starbucks rather than North America. ‘Since the primary of the 1st Starbucks store in Taiwan in March 1998, Mainland China at the China World Trade Building in Beijing in January 1999, Hong Kong in May 2000, and Macau in August 2002, the rising significance and inclination of superior excellence coffee and the Starbucks’ (Starbucks). Therefore we will focus on the economic factors and the legal factors faced by Starbucks in the China market.
As to tackle the delinquent strict Chinese environmental rules and tradition, Starbucks began to produce inventive environmentally friendly and organic products to boost links with local people. “Conferring to Starbucks has not only helped popularize coffee in China, it's also aiming to bring Chinese coffee to the world” (Lowe, 2001). The business began a extensive planned environmental friendly assurance to doing business in China, in a way that's locally significant. “Therefore, they going to plant trees and raise coffee in China, in the Yunnan Province. Yunnan coffee is previously known as some of the best in Asia. The chain will help grow and run a farm and managing amenities in Yunnan and will also toil with local growers to increase their crop's yield and quality, keeping the environment as safe as possible” (Aliff). The mission is to produce environmentally friendly and organic products. This becomes a risk for Starbucks, as there is still a likely chance for people in China to reject the coffee culture despite of the heavy investment being done of their side to penetrate into the market. They also need to make extensive efforts to find out ways to recycle as many products as they can within the stores. This will also provide them with the benefit of reducing costs due to consumption of recycled products. However, they are at a risk of losing their product quality by using too much-recycled products. China also forces its businesses to safe energy and reduce the level of pollution else the government poses heavy fines. So the Starbucks shops can benefit from the reduce cost by saving energy and they are at a constant risk to be fined for little errors regarding pollution.
Starbucks in China needs to follow a strict code of legal health related rules and regulations. Starbucks in China deals in a variety of stuffs not restricted to caffeinated brews. Additional to its menu are chai and tea mixtures. “Analyses have signified that these kinds of drinks, teas and coffee that is, possess antioxidant properties that help in digestion and also help the prevention of illnesses”. (Golub 2000, 355) This may well be the essence of the conventional tea consumption refinement and the developing coffee culture in the administrative area. Though, like any other company that works in the food industry, the firm has to function inside the limits of legal decree. In specific the governmental district positioned the Food and Environmental Hygiene Department (FEHD) to supervise food protection, certifying and sanitation amenities among others. Therefore, Starbucks outlets have to fulfill specific rules and benchmarks of the FEHD to resume to function in the market. Its is at a constant risk for being shut down or fined heavily if it does not follow these strict rules. “For example, imported dairy products and frozen confectioneries are supervised by the government, along with the labeling of the commodities is also taken into deliberation with indication to their safety and fitness for human utilization” (FEHD 2008). When the company follows such rules and is approved by the authority, Starbucks benefits from increase in the customer base as people have faith in the quality of product produced by Starbucks. There are other various strict labor laws within the state. The company needs to be extremely careful regarding the child labor law. It is also mandatory to provide with employee insurance and welfare. And makes it difficult for Starbucks to control costs. This increases the cost of labor for the company significantly posing a risk of a significant reduction in the profit, which is the main aim of the company.
The company faces various challenges in the future when it comes to the coffee market in China. “Though the business says that so far the price of its commodities, which is approximately in line with those in the United States, has not discouraged consumers, who see drinking coffee as an fashionable practice” (Presse). Belinda Wong, President of Starbucks in China explains that one of the core difficulties will be adjusting produces to local markets as the product spreads out to other distant towns. Coffee trend is comparatively fresh to China and although the market is increasing quickly it is still minor matched to the United States or Europe. People in China are more inclined towards drinking tea rather than coffee. “Research firm Euromonitor approximates the market in China for focused coffee shops has more than tripled since 2005 to reach 2.9 billion Yuan ($460 million) and said it should be worth 4.47 billion Yuan by 2015. Starbucks has earlier assessed that China has a enormous possible market of about 200-250 million coffee drinkers”(Presse). These are the possible challenges that Starbucks needs to tackle in near future to reap the maximum benefit from the humongous market in China.
Aliff, Mh. "Aliff's Props." : Starbucks in China (Strategic Management). N.p., n.d. Web. 11 Jan. 2015.
Presse, Agence France. "Starbucks Plans China Expansion." Inquirer. N.p., 2012. Web. 10 Jan. 2015.
Food and Environmental Hygiene Department (2008) Performance in 2007. Avialable in: http://www.fehd.gov.hk/department/performance.html [Accessed 06 June, 2008]
Golub, M. (2000) "Adolescent Health and the Environment." Environmental Health Perspectives. 108(4), 355.
"Starbucks In China." Starbucks. N.p., n.d. Web. 10 Jan. 2015.
Uwakwe, John. "Market Strategies, SWOT, PESTLE and Value Chain of Coffee Retails." Assignment Research. N.p., 20 Sept. 2013. Web. 10 Jan. 2015.
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