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Starbucks Corp Ethical Practices

Paper Type: Free Essay Subject: Marketing
Wordcount: 3654 words Published: 28th Apr 2017

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It is a fact that Starbucks Corporation is the largest specialty coffee bar in the world. It has pioneered the evolution of the coffee world, which is currently recognized by the Cappuccinos, Frappuccinos, Espresso Macchiatos and Caffé Lattes, instead of just coffee. Starbucks has grown from humble beginnings when its CEO, Howard Schultz, purchased the first Seattle based Starbucks coffee bar back in 1986, and then oversaw its phenomenal expansion to the Northwest, the Midwest and thereafter to the rest of the world at a tremendous rate. The phenomenal growth of Starbucks has been largely attributed to the emphasis that its management has always placed in the recruitment of talented individuals who are capable of sustaining the momentum of growth that the company has been associated with. The management of the company devotes a vast amount of resources to the construction of a useful organizational structure that allows for the anticipated future ventures and expansion of the company. This emphasis is largely attributed to its CEO, who believes that many companies fail because their leaders do not inculcate proper systems and processes to insure the expansionary visions of their companies. Therefore, since the first Starbucks outlet opened, Schultz and his team have made sure that they maintain the creation of stable and reliable financial, legal, accounting, planning and logistics frameworks that ensures that the company can not only go international, but also maintain its international presence. (Hartman& DesJardins, 2008).

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However, the business practices that this company has to maintain in order to sustain its expansion has led to a number of ethical problems, both in regard to how the company deals with its employees and customers, and also the business practices that it engages in. Therefore, the focus of this paper is to highlight some of these ethical concerns, with as much detail as possible, and then propose some probable strategies that can be employed in dealing with them so as to sustain the phenomenal growth of this company, while at the same time adequately addressing important ethical concerns that may arise in this regard.

The imperatives of organizational performance on a day-to-day basis are so compelling that organizations have little or no time to attend to the moral content of decision-making in an organization. Morality is considered so qualitative and esoteric in nature to an extent that it lacks any substantive correlation to quantitative and qualitative performance. For an organizational culture to be considered effective, it has to encourage ethical behavior, and discourage any behavior that can be described as unethical. (Elliot-Howard, DuFrene & Daniel, 1997).Unethical behavior may cost an organization Therefore organizations are required to operate with increased positive and ethical cultures.

Individual differences impact ethical behavior through the psychological empowerment that plays an important role in the relationship between the attitudinal outcomes of the employees to the ethical behavior elicited by the organizational leadership and management. Psychological empowerment of employees by the management occurs through how the management perceives the authenticity of the ethical behavior of the management. (Elliot-Howard, DuFrene & Daniel, 1997). If the employees are not led by practical exemplary leadership then it is difficult to inculcate ethical behavior in the organization. Individuals only regard an act as morally right or wrong on the basis of the likelihood that it will be a means of achieving specific objectives. An act can only be considered to be ethical by a person if the results of the action are perceived as more rewarding to that person at individual level than all other available alternatives.

Organizations can influence the ethical behavior of employees through the obligation of leaders in the organization to set a moral example for the other members of the organization. It is also important for the leadership of the organization to also identify the values that may be detrimental to the expected ethical behavior within the organization and in the society at large. The leaders can therefore only show ethical behavior when they are doing what is good, just and morally right and when they help to increase the moral-self actualization and moral awareness of other members of the organization. Leaders who exhibit ethical behavior have to inculcate the necessary conditions for the growth of organizational culture. (Elliot-Howard , DuFrene & Daniel ,1997).

The ethical tone in an organization also influences the behavior of the members of the organization. This is because what is done by the top management, as well as the culture that they create and reinforce, determines to a large extent how all the members of the organization act and react to the ethical dilemmas that they face in their working environment.

In light of this definition of the importance and impact of ethical behavior in an organization, a critical analysis of ethical standards in Starbucks reveals that through its aggressive expansion program, Starbucks has been accused of being a major contributor to the homogenization of culture that has been witnessed in the United States and in recent years in other parts of the world. The continuation of this trend threatens to establish a “monoculture”, which will lead to the creation of international chain stores and outlets at the expense of indigenous and individual restaurants and stores world wide. This monoculture has led to the placement Starbucks outlets on every busy street corner worldwide, replacing all local livelihoods, and creating one global coffee-drinking experience for all coffee drinkers. Thus through the export and displacement of local culture, Starbucks, and other companies of its nature, such as McDonalds, are the products of a virulent monoculture that is quickly spreading worldwide, and forms the engine of American Imperialism.

In 2008, a 10-Q filing of Starbucks with the Securities and Exchange Commission for quarterly releases stated that:

“With a presence today in more than 30 countries, management believes that the Company’s long term goal of operating at least 25,000 Starbucks retail locations throughout the United States and in International markets is achievable”.(starbucks. com, 2008).

While the mission statement of Starbucks reads that:

“…establish Starbucks as the premier purveyor of the finest coffee in the world…” .(Roach, 2003).

According to ‘National geographic’, coffee is the world’s most valuable commodity, only second to oil.( Roach, 2003).

Therefore, it is clear why Starbucks is a juggernaut in the coffee business worldwide. One might argue that the company is simply good at adhering to the market economy to sustain its growth, which is continue to supply what the customers want, and they will continue to buy. Indeed, the mission statement of the company outlines that:

“develop enthusiastically satisfied customers all of the time” (Starbucks.com).

However, the fact of the matter is, none of the above stated points gives the reason for the phenomenal success of Starbucks. The company employs overly aggressive practices in the business world, as well as using that capital at its disposal; alongside the corporate power it wields in order to phase out local coffee outlets so as to establish a monopoly in their place. The strategy of Starbucks is therefore not to offer a superior alternative to the customer as compared to the competition, but to purposefully pursue the elimination of all other available alternatives, so that the customer lacks any choice. Starbucks has perfected the pursuit of this end to an extent that it has positioned itself on a clear path to the coffee market monopolization. The company employs the strategies of market cannibalization, ‘cluster bombing” and buy-outs in order to eliminate its competition.

The market-entry strategy of Starbucks involves the initial identification of the main independent coffee shop in a new locality, and then buying the lease of the coffee shop from the landlord of the building at the best deal necessary. It then proceeds to replace the coffee shop with their own outlet. (Hartman& DesJardins, 2008).Therefore the previous coffee shop is unavoidably compelled to wind up. However, if they are unable to obtain the lease, then they will proceed to open several franchises around the coffee shop so as to ‘choke” it out of business by offering better deals to customers so that in the end, the original coffee shop is still forced to go out of business. This wicked strategy effectively initiates the process of “cluster-bombing”, whereby Starbucks establishes so many franchises around one specific area, such that after the independent coffee shop has been driven out of business, the franchises belonging to Starbucks have to start competing with themselves, and this leads to the cannibalization of their own sales. Thus this company promotes an unbeatable business model that has been branded as ‘Darwinism”. This is because in spite of this cannibalization, the net growth of the company is sustained. (Hartman& DesJardins, 2008).

These unfair business practices have led to adverse reactions to Starbucks expansion plans in various parts of the world, with residents of Ocean Beach, California working on a ban entitled ‘Proposition A’ that is intended to ban “Formula Retail” outlets such as Starbucks and McDonalds from encroaching in the area, and the Japanese ‘Cafe de Crie chain’ a key Starbucks rival in the in Japan, has added its voice to the growing chorus of those who have voiced out complaints against these unethical business practices by Starbucks. (Hartman& DesJardins, 2008).

The Starbucks Corporation was the cause of doom for the efforts by the Ethiopian coffee sector to come up with a trademark that would protect its most valuable export, coffee, in the international market. The Ethiopian coffee sector was engaged in the ambitious pursuit of trademarks of its major international coffee brands; Harrar, Yirgecheffe and Sidamo, in order to be in the position to apply sound techniques for marketing so as to boost the commercial viability of these brands. The ultimate goal was to increase the returns due to the more than 15 million Ethiopian coffee farmers who depend on the coffee trade for their livelihood. Ethiopia is one of the poorest countries in the world, with at least 80% of its population living below the poverty line, on less than $2 a day. It does not warrant economic analysis to realize how much such a move could help alleviate poverty in this country. This is one of the most self-reliant and innovative ways that the commerce of such a country can rejuvenate its economy, and therefore this brilliant thinking should be applauded and aided world wide. (Hartman& DesJardins, 2008).

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However, Starbucks does not realize this. It has instead collaborated with industry lobbysts to thwart this move by whichever means necessary, and has therefore pressured the US office of Patent and Trademarks to deny this application by the Ethiopian government. Subsequently, the office has denied Ethiopia two out of the three trademarks it had applied for. Starbucks has not stopped there, but has gone ahead and snubbed all efforts by the Ethiopian government to broker a fair agreement. Starbucks has proved that its unethical business practices has no bounds by going ahead and launching a media-counter-offensive on the genuine complaints raised by the Ethiopians through Oxfam against its position in regard to this matter ,and has engaged in public watering down of the efforts of this third world country to get a fair hearing in so far as the trademark issue is concerned. Starbucks has successfully hood-winked even the most a vowed commerce champions such as ‘The Economist’ with this misadvised campaign, that even they have taken sides, helping to thwart the incipient efforts by Ethiopians to achieve economic independence. This has left many questions unanswered in regard to the ethical business practice at Starbucks. (Hartman& DesJardins, 2008).

It is unimaginable that a corporation as large as Starbucks can take such an incident lightly, when it does not require deep analysis to discover that such a move reveals that the corporation is not only deeply hypocritical, but it is also exposing itself to a serious threat of the undermining of the its brand equity . To expound on this fact, it is necessary to analyze the main role that these Ethiopian coffee brands have played inn the achievement of the extraordinary success that Starbucks has enjoyed in the past. (Hartman& DesJardins, 2008).

Dependence of Starbucks on Ethiopian Coffee.

The main distinction between the Starbucks products and the many other coffee products in the market is that Starbucks has an unrivalled brand symbolism. Starbucks achieves this through its packaging, baristas, store design, Italian-icized lexicon, music and coffees. The corporation employs the use of an easily accessible high-brow worldview which greatly appeals to its target customers, which are the “creative-class”;the college-educated people with an ambitious approach to life. Therefore, Starbucks entices customers to partake of its culture of “cosmopolitan connoisseurism” which they can fellowship with by simply taking a latte at the nearest Starbucks outlet. The most successful technique that Starbucks has used to cultivate this culture is the portrayal of its coffees as products of art. All the coffees that Starbucks sells are branded, packaged an promoted in such a manner that they imbue the aura of local craft in the traditional set up, specially brewed by people who are far removed from the modern life, thus making their products exotic. Therefore, the main coffee brands which originate from Ethiopia, such as Harrar, Sidmao and Yirgacheffe, have been the mainstay of the exotic and artisanal quality claims of Starbucks’ coffee.

Additionally, the mode in which Starbucks adopts in the marketing of its coffee is very similar to the mode in which wines are marketed. This is clearly seen in the Starbucks website, where one such marketing article states that:

“From the birthplace of coffee, Sidamo is highly prized by coffee buyers from around the

world. It features a fleeting, floral aroma with a bright yet soft finish and, like the best

Sidamo coffees, a wonderful hint of lemon.” (Hartman& DesJardins, 2008).

Thus Starbucks strive to portray its coffee as a product of tradition and artistry which is ladden with the culture of a native folk far removed from the lifestyle of the customers Starbucks targets. Thus the corporation exploits the fact that Ethiopian coffee producers are not commercially mined, but mere peasant who are far removed from the dynamics of the global market place. The fact that Ethiopian coffee is cultivated on peasant -like, backyard gardens has provided Starbucks with a perfect and effective symbolic material for its marketing strategies. Ethiopian coffee offers the best experience in market place flooded by mass-market coffee brands. The “college-educated” consumers targeted by Starbucks are provided with exotic access to the landscapes, folk design and African-imagery photos through the Starbucks coffee. These are highly priced experiences and artefacts. Furthermore, the idea that these consumers who are targeted by Starbucks that they are buying the coffee products from a continent that is in dire need of economic aid because of the act that it is plagued by endless humanitarian crises has helped to boost the sales for Starbucks. Thus the corporation has successfully tapped into the ethical symbolism that their customers portray in regard to their concern to the economic state of Africa, while at the same time denying the Africans the chance to truly develop, thereby keeping all the economic gains of this concern to itself. Thus the assuage of the Starbucks customers’ concerns in regard to global inequalities is not helping anyone, but Starbucks itself. (Hartman& DesJardins, 2008).

In recent years the revenues accrued by Starbucks has been largely attributed to the selling of drinks which have been sweet-blended and contain little or no coffee, and less associated with the cosmopolitan worldview that Starbucks has previously used as a marketing platform. Thus the coffee brands from Ethiopia have significantly contributed to the cultivation of this brand imagery that is so valuable to Starbucks in terms of boosting its sales. Starbucks tries to portray the sugary cakes and syrupy drinks that it sells as having roots in the decommercialized, artisanal African coffee world, so that the products are not viewed as fast foods, but are successfully masked by this image of something more acceptable.These exotic coffees have been successfully turned by Starbucks into a very profitable niche, which include the ‘Black Apron Exclusives T line’, an expensive packaging and tagline which sells coffee that touted as “Rare. Exotic. Cherished.” Harrar and Sidamo are the major coffee brands that are sold in this line, which instead of retailing at $10-13/lb, go for at least $24-26/lb; more than double the price of the normal whole coffee beans. This has been solely made possible by the portrayal of this coffee line as exotic, scarce and special. (Hartman& DesJardins, 2008).

Thus one would be misled into thinking that as the dynamics of free market stipulate, the increase in the perceived value of Ethiopian coffee brand would produce a corresponding increase in the returns accrued by Ethiopian coffee farmers. However, this is hardly the case; Starbucks is a major contributor to the antithetic manner in which this market operates. Despite the fact that then value of the coffee that the Ethiopian farmers are producing has tremendously increased, and rightfully so, because the coffee is of among the highest grades produced in the world, none of this price increments has been passed back to the coffee producers. The farmers are instead operating like ‘promoted beggars’ who only make enough money to get them through the day. Their below-subsistence living standards are ironical to the photos of contended and happy peasant farmers which are a common in Starbuck’s marketing images. The fact of the matter is that the market price of coffee is so low to an extent that many Ethiopian coffee famers have been recently opting to grow khat, the light narcotic drug that is commonly grown in East Africa, instead of coffee. (Hartman& DesJardins, 2008).

Thus Starbucks has unethically used its massive market power to control the coffee value chain to its favor. Since the Ethiopian coffee brand are traded at the world stage under the Starbucks trademark, the corporation control all the economic gains of the market and tilts the profits to its favor, while paying off the peasant farmers as little pay as it is necessary to get them by. There clearly no ethical standards observed in this regard.

In light of these unethical business practices, it is clear that Starbucks should adopt a culture of ethical practice sin the organization, and engage in concerted efforts at eradication of these unethical business practices. Therefore, the company needs to inculcate an organizational culture of ethical behavior on its overall business strategy. A detailed strategy through which this can be done is outlined below.

Organizational culture is a concept in the field of organizational studies that gives a description of the attitudes, psychology, experiences values and beliefs; both personal and cultural, that exist within an organization. It is defined the specific recollection of values and norms shared by people and groups within an organization that determine their interaction with each other, and with stake holders outside the organization.(Charles & Gareth, 2001).Therefore organizational culture is sustained by organizational values, which are defined as the ideas and beliefs that the members of an organization should engage in constant pursuit of , and also the ideas regarding the necessary behavioral standards that they should adopt. It is from organizational values that prescribed norms, expectations and guidelines that determine employee behavior and control in particular situations and towards one another develop. (Charles & Gareth, 2001).

Thus the senior management of Starbucks needs to engage in concerted efforts at imposition of behavioral standards and corporate values which bear a specific reflection to the objective of the organization. In light of this definition, Schein expounds (Schein, 2005).that culture is the toughest attribute of an organization in view of change, and surpasses all other attributes of the organization such as the physical attributes, services and products, leadership, and founders. Schein states that the deepest cognitive level of the culture of an organization is where tacit assumptions exist. He expounds that these are the unseen cultural elements that are not easily identifiable in interactions between members of an organization on a daily basis. These elements of an organization’s culture are often regarded as a taboo to question or discuss. (Schein, 2005).


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