Effects Of Business Environment Changes On Starbucks Coffee Company

Economic Environment of a business

Identify one specific organisation that you believe has been significantly affected by changes in the business environment since 2006.

Explain clearly what the effects have been. Make sure you support your comments with referenced evidence drawn from appropriate sources – these would include (but should not be restricted to) the ONS, the BBC (including the UK economy site), the Economist, Sky, one of the quality newspaper sites. You may of course also use company specific websites if that is appropriate.

The UK recovery since 2009 has been relatively slows; and hence faster than most of the G7 economies (Starbucks Coffee Company 2016). Over the last couple of years most of the Britain citizens are affected by less extent of UK economy. In every articles and newspaper, people are use to see the practical impact of declination of economic conditions on many aspect of multi-national companies in UK like Starbucks Coffee. According to the report of Economic Freedom (UK), the regional ranking of UK in terms of economic environment is forth with an overall change of 0.6% (Cowling et al. 2015).  But in the decade of 2003 to 2013, the economic rate of UK results a gradual decline of 3.2% of GDP and government borrowing of 3% (Heo and Ye 2016).  The researcher has identified some of the prevailing economic environment business conditions in UK with the help of an instance of Starbucks Coffee.

The economic environment of a business implies several economic factors like inflation, rate of increase in interest rates, employment, productivity and etc. The economic environment of UK resulting from 2003 to 2013 financial crisis that created a phenomenal deal and fear among various multi –national companies in UK. In the year 2010, the economical rate of UK results declination of GDP and increase a rate of inflation values (Bateman et al. 2014).    According to the report of UK Economic Outlook, the current GDP growth of UK is 2.2% with second fastest growth rate in G7 and only 0.5% rate of inflation (Tredgett and Coad 2013). The four primary economic activity resources in the business market lies with the concept of Land, Labor, Capital and Enterprise. The main purpose of economic activity is to satisfy human wants and to produce goods and services.

Starbucks Coffee is the chain of Coffeehouse that serves a variety of Coffee and Non-Coffee beverages across worldwide with a featured food of Cakes and pastries. The company operated a licensed store of more than 17000 stores worldwide (Starbucks Coffee Company 2016). The company operated its products in more than 50 countries. The company main competitors are McDonald’s, Dunkin Donuts and Caribou. Besides this, the company also took part in various social and environmental responsibilities with a manufacturing concept of recyclable and reusable cups (Mahobia and Jain 2015).

Overview of Starbucks Coffee

Figure 1: Starbucks Coffee

(Source: Starbucks.co.uk, 2016)

 In the mid year 2003-2013, the country suffers a declination of projected growth of 7.23% which results many global companies to lease its company shares for the GDP growth (Liu 2015). Various companies in UK including Starbucks Coffee suffer a great impact of economic conditions of business. The company growth rate results a decline of 2.3%, company sale declines to 9% simultaneously (Bowen and Sisson 2013).  Not only, the companies but also several individuals and banks are affected by economic conditions because this results cuts in interest rate and rise of inflation of various services.

According to the report, Starbucks economic earnings have dropped 21% too far, $151 million to $110 million with a revenue rose to 12% (Tredgett and Coad 2013).  In the economic environment, Starbucks is at its weakest in its company history. In the year 2010, the economic rate of UK was very poor which results Starbucks to cut down many jobs and stores; incurs a heavy loss in a economy growth. The economic impact of Starbucks is directly proportional to revenues, gross value added and employment. During the mid period of 2003 to 2012, the economic environment business conditions of UK was very worst which results Starbucks like companies to rely upon international suppliers (Lee 2013).

Figure 2: Starbucks Coffee Economic Environment

(Source: Jang and Jung 2013, pp-35)

The expenditure of Starbucks gradually increases to 63% in 2011/12. Construction costs rises to 13% which results declinations of infrastructural area (Cowling et al. 2015).

The change of business environment in UK has been occurred since 2003 (Latif et al. 2014). It affects Land, Labor, Capital and Enterprise of an economy. After a huge economic recession occurred in the year 2003-2013, UK is recovering from a significant breakdown. The recession results UK to decline its GDP growth to 0.5% but in the year 2009; UK makes a fluent changes to 5.2% respectively (Cowling et al. 2015).  Many researcher and analysts believe that the International Events such as Olympic helps in getting income influx. The table below has been created by the researcher itself; which highlights UK GDP growth, inflation rate and import and export percentage worldwide.

Categories	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
Gross Domestic Product (GDP)	2315	2246	2350	2430	2480	2550	2660	2784	2892	3012
Inflation (in %)	-0.8	-5.2	1.7	1.1	0.1	1.3	1.9	1.7	2	2.2
Export (in %)	466.9	356.4	410	478	476	478	520	–	–	–
Import (in %)	640	480	560	638	650	645	720	–	–	–

Figure 3: Starbucks Coffee Business Environment Strategy

(Source: Bateman et al. 2014, pp-280)

The political and economical changes affecting Starbucks includes inflation, high rise of interest rates, price discrimination and unemployment. In the year 2010, Starbucks had to close its two outlets globally which led many employees to flush down many jobs (Wetherly and Otter 2014). Rise of inflation led Starbucks consumers to switch off the company products by incurring other foreign brands products. High rate of interests affects many individuals and company customers.

Starbucks Coffee in relation with Economic Environment

Emerging Marketing Gaining Power: Over the last few years UK has been suffering from constant economic issue. As UK invests and trade among themselves; the economic rate declines to 3.5% in the year 2008 (Cowling et al. 2015). The bargaining power of many UK companies tends to decline 2% simultaneously. Starbucks faces a loss of $1 million in the year 2006 (Yu 2013).

As technology is emerging day-by-day, many companies adopt the advance and innovative technology to manipulate with market segmentation. In the period of recession (2011), Starbucks adopts a system of digital networks to make its online offerings expand. Additionally, as the company faces a substitute loss of 2.3% globally; the need of digital networks estimates a flop strategy; which led company to incur a premium loss (Smith and Waters 2015). The practice of employees working outside is hurting the job market.

Additionally, a concept of active packaging in the year 2011 led company to hit the market share and results many stakeholders to withdraw the monetary values invested in technological sector (Starbucks Coffee Company 2016).

Global Warming: Starbucks has noticed that the climate has been frequently changed in the year 2010 in UK because of extremes rise in sea and water levels. This constant change makes the Starbucks to work even harder for creating its traditional farming resources. In the year 2008, Starbucks sees scarcity of water as a sustainability threat. This unusable threat caused Starbucks to initiate and restore UK watershed by eliminating water to National Forest System. This led Starbucks to drive more water and energy to 50% (Cowling et al. 2015). 

The issue that Starbucks has faced is very rational. It depends on the country economy market segmentation. The effects include political, economical, market, technological and global issue of Starbucks. The detailed of those prevailing effects with the help of ONS is explained by the researcher.

Figure 4: ONS System of Starbucks Coffee

(Source: Bowen and Sisson 2013, pp-110)

In the year 2003, the growth of GDP in second, third and fourth remain same; whereas in 2004, it gradually declines with a very low percentage. In 2004, the mid of quarter one  has seen an immense performance of 3,70,000 (in $million) which was overall good. Suddenly, in the year of 2008 and 2009 the growth rate of GDP is declining simulaneously with reference to quarter one. In the consequetive year of 2010, 2011, 2012 and 2013, Starbucks economic growth rate remains constant with normal sales value. In the overall ONS graph sheet the highest rate of Starbucks reaches to 3,70,000 (in $million) and lowest rate of Starbucks eliminates to 3,00,000 (in $million). This enhances Starbucks performance of  growth rate in economic environment of UK business.

Starbucks is affected by the change of Business Environment

Conclusion

This study investigates the political, economical, technological and global impact of Starbucks in UK. The company also impacted its economy through its procurement. The company apprenticeship, GDP growth and innovation help to enhance the supply chain management side of labor market outcomes. The economical condition of UK is increasing at a substantial rate after 2012. The current GDP growth of UK is 2.2% with second fastest growth rate in G7 and only 0.5% rate of inflation. This emerges a gradual success to UK economy with its rise in GDP growth level and control of inflation rates. Many companies are utilizing and manipulating its resources by adopting and maintaining advanced system in technological sector. The companies like Starbuck raise its labor power, revenue and sales from last five years globally and worldwide after recession period in UK.

References

Bateman, I.J., Harwood, A.R., Abson, D.J., Andrews, B., Crowe, A., Dugdale, S., Fezzi, C., Foden, J., Hadley, D., Haines-Young, R. and Hulme, M., 2014. Economic analysis for the UK national ecosystem assessment: synthesis and scenario valuation of changes in ecosystem services.Environmental and Resource Economics, 57(2), pp.273-297.

Bowen, S.A. and Sisson, D.C., 2013, March. Starbucks, Reputation Management, and Authenticity: A Case Study of Starbucks’ United Kingdom Tax Crisis & “# SpreadTheCheer” Campaign. In 16TH INTERNATIONAL PUBLIC RELATIONS RESEARCH CONFERENCE (p. 110).

Cowling, M., Liu, W., Ledger, A. and Zhang, N., 2015. What really happens to small and medium-sized enterprises in a global economic recession? UK evidence on sales and job dynamics. International Small Business Journal,33(5), pp.488-513.

Heo, U. and Ye, M., 2016. Defense Spending and Economic Growth around the Globe: The Direct and Indirect Link. International Interactions, (just-accepted).

Jang, Y.J. and Jung, E.C., 2013. Studies on the Design Marketing Strategies in the Experiential Economy through the Case Study of ‘the Starbucks Company’. In Design, User Experience, and Usability. Web, Mobile, and Product Design (pp. 30-36). Springer Berlin Heidelberg.

Kim, E., 2013. The role of social media in crisis communication-A case study of Starbucks (Doctoral dissertation, Texas State University-San Marcos).

Latif, M., Gulzar, H., Bukhari, S.R. and Sameen, S.N., 2014. Starbucks sustained during economic crisis. International Journal of Accounting and Financial Reporting, 4(1), p.307.

Lawton Smith, H. and Waters, R., 2015. Regional synergies in Triple Helix regions: The case of local economic development policies in Oxfordshire, UK. Industry and Higher Education, 29(1), pp.25-35.

Lee, Y.C., 2013, July. The strategy of mission statement to build staff working value-A case study of Starbucks. In Service Systems and Service Management (ICSSSM), 2013 10th International Conference on (pp. 487-489). IEEE.

Liu, C.L., 2015. Internet Marketing Strategies and Customer Loyalty: A Case Study of Starbucks Coffee.

Mahobia, H. and Jain, T.K., 2015. Starbucks: Adapting in the Indian Market.Indian Journal of Marketing, 45(8), pp.37-47.

Starbucks Coffee Company. (2016). Starbucks coffee shops –Starbucks.co.uk [online] Available at: https://www.starbucks.co.uk/ [Accessed 29 Mar. 2016].

Tredgett, E. and Coad, A., 2013. The Shaky Start of the UK Small Business Research Initiative (SBRI) in Comparison to the US Small Business Innovation Research Programme (SBIR). Available at SSRN 2205156.

Wetherly, P. and Otter, D., 2014. The business environment: themes and issues in a globalizing world. Oxford University Press.

Yu, J., 2013. Promotion mix and consumer engagement on social networking sites: A cross-cultural case study of Starbucks Posts on Facebook (USA) and Kaixin (China). Quarterly Journal of Chinese Studies, 2(1), p.1.