Topic 6: Starbucks Flashcards
Does social responsibility contradict the notion of being profitable?
NO! Starbucks has been able to leverage its brand to price gauge loyal customers who drive a high volume of visits. This way, even by having the highest cost, Starbucks also harnesses the highest profit margin in the industry.
How does Starbucks’ employee turnover ratio affect profit?
High employee loyalty (a turnover of only 60% compared to the industry 220%) mitigates high training costs.
Green initiatives attract what kind of really, really, really financially helpful people?
Green initiatives, while costly, attract SRIs
Wait, what’s an SRI again?
A socially responsible investor… duh.
Within the case, Global Exchange chose the issue of fair trade coffee. What is fair trade coffee?
- Fair price
- Democratic organization
- Direct trade and long term relationships
- Access to credit
- Environmental protection
What made Starbucks a strategic target for Global Exchange?
They chose Starbucks because it was already SO close to meeting all of GE’s requirements, they knew all it would take was a nudge up $0.06. Plus, with the MANY MANY MANY storefront locations, Starbucks’ brand and physical presence offered a wide-reaching platform.
Go listen to “Taylor the Latte Boy.”
https://www.youtube.com/watch?v=zXS0nEOx_20
What other targets could they have chosen and would any others be as strategic as Starbucks?
Meh… they could have pursued Dunkin’ Donuts or McDonald’s or stuff, but Starbucks was really the only practical option because they were already talking about their farmers, and paying $1.20 instead of the industry standard $0.80.
What were the costs (risks) surrounding the issue of Starbucks moving to fair trade coffee?
Customer Risks: low quality, high price. Weak/nonexistent demand.
Supplier Risks: small suppliers. Immature fair trade supply. Lose current suppliers. Look weak to NGOs (lose control of agenda).
What were the benefits (rewards) surrounding the issue of Starbucks moving to fair trade coffee?
Enforce/enhance corporate reputation to: SRIs, partners, franchises, employees. Stop the boycott. 1st mover in new market.
Given the risks and rewards of fair trade coffee, weigh the merits of DOING NOTHING AND IGNORING THE CAMPAIGN.
Well that’s stupid, and you shouldn’t do that. Run the risk of looking insensitive and [insert rude words here] to investors and loyal customers. Merit: let GE exhaust its point until people are tired of hearing about it.
Given the risks and rewards of fair trade coffee, weigh the merits of FIGHTING BACK and actively DEFENDING YOUR POSITION.
Also stupid. You look like an even bigger [bad word] for arguing against the justice of fair trade coffee. Must believe they have a defensible position.
Given the risks and rewards of fair trade coffee, weigh the merits of NEGOTIATING for a COMPROMISED AGREEMENT.
Now that’s more like it. Starbucks took this option because they couldn’t justify fighting over $0.06.
Case Update: Starbucks agreed to the following:
- For one year, they would brew fair trade coffee once per month, and when asked by customers.
- Increased investments in fair trade coffee by working with Oxfam America, CEPCO, and the Ford Foundation.
Case Update: How did Starbucks’ actions address the risks and rewards?
Mitigated risk and moved forward. Compromise avoided looking weak to NGOs, maintained customer base, enforced and enhanced corporate reputation, and stopped the boycott. Now activists cover most of the costs of R&D in tastier fair trade coffee!
