PESTLE ANALYSIS

OF STARBUCKS

By:-
1) HARSH CHADHA
2) GURSHA HANS
3) HIMISHA KOTHARI
4) TANVVI KHOLI
5) GULSHAN JAIN
6) HEMANT AGGARWAL
 POLITICAL ANALYSIS
The main political factor is about sourcing the raw materials. This has gathered a lot of the
attention from politicians in the West and from the source countries.
For this reason, the company wants to adhere to social and environmental norms. It is willing
to follow the sourcing strategies.
It gives importance to fair trade practices that have been agreed upon by global corporations
and the governments of the developing and the developed countries.
Another impact is the need to follow the laws and regulations in the countries from where
Starbucks buys the raw materials. Activism and increased political awareness in developing
countries have made his essential.
The regulatory pressures within the home market in the US are also a factor. Multinationals
based in the US are now subject to greater scrutiny of the business processes. The company
must monitor political stability within the country as well.
Some other factors to consider are:
 Tax policy
 Employment laws

What if these rules are not followed?

Starbucks was involved in some legal cases, some of which are:
Carr v. Starbucks Corporation and Shields v. Starbucks Corp
The political condition of Starbucks is not good as it should be. They are being blamed for the
violation of wage and hour laws. Starbucks has two pending class-action lawsuits filed by
Starbucks, California, employees for being improperly denied overtime pay. Starbucks’s is
denying all liabilities in these cases, however;
The company has agreed to the settlement in order to take care of all of the plaintiffs’ claims
without having to get involved in any protracted litigation. Now Starbucks is paying $18
million for the settling of the lawsuit case.
Kraft and Starbucks in billion-dollar legal fight
Again Starbucks is in news for it’s within termination of the 12-year contract with Kraft. In
1998 Kraft and Starbucks entered into a retail grocery coffee business, which at the time was
generating less than $50 million in annual revenues. Since then, the business has grown to
approximately $500 million. This joint venture has marked a major shift for Starbucks'
consumer-packed business, a key building block in Chief Executive Howard Schultz's strategy
to drive future growth for the nation's largest coffee-shop chain. For the violation of the contract
again Starbucks would have to pay out large amount as compensation.
 ECONOMIC ANALYSIS
What if GST gets Scrapped and Service tax is introduced again?
Earlier before GST was introduced, the service tax was charged at 6.1% as well as the VAT at
14.5% was charged on the beverages. After introduction of GST, tax on beverages is paid at
5%. So usually a hot chocolate beverage whose base price is Rs 180. So now, the bill amount
of the same hot chocolate is Rs 189. Whereas earlier when we used to pay service tax and VAT
separately the same bill of a hot chocolate would sum up to 217.08. Hence, if the service tax
and other earlier indirect taxes were applied there would be almost 28.08 of more spending
from the Indian consumer’s pocket.
BEFORE GST
Particulars Amount (in Rs.)
Hot Chocolate Short 180
Service Tax @6.1% 10.98
VAT @14.5% 26.1
Total Bill 217.08

After GST
Particulars Amount (in Rs.)
Hot Chocolate Short 180
GST @5% 9
Total Bill 189

What if the Inflation rate gets high from the current 4.87%?
Inflation badly affects everyone, everywhere and the food industry is no exception. The current
quarter inflation has risen such as milk and products (3.2 percent) sugar and confectionery
(8.12 percent) Labour rate and wages (5.8 percent). Therefore, if the Inflation rises there will
be a rise in prices of several items means that the input prices for production of various goods
and services are rising. In this case, market analysts and fund managers will always consider
the net impact on the margin of the entity that they are tracking.
While there might be an increase in the input prices, it has to be considered in the backdrop of
the company’s ability to pass on the price hike to the end-user who are the consumers. If
Starbucks is able to sustain its profit margin despite high inflation.
What if the Global Recession of 2008 strikes back?
The foremost external economic driver for Starbucks is the ongoing global economic recession.
With its ongoing expansion plan in India as it being the pivotal market the following
remarkable incidents can happen following the recession like, thousands of baristas will lose
their jobs as it shuts stores to cope with dwindling sales of lattes and cappuccinos as cash-
strapped consumers lose their thirst for coffee if the recession comes in action. There will be
slump in profits as the market share of Starbucks is excessively high like the sales will fall, as
the spending appetite will be minimised as India being a price sensitive country. Executives
would have to consider discontinuing products or restructuring the price of the products, which
are relatively high comparing to the spending capacity of the Indian consumers.

SOCIAL-CULTURAL ANALYSIS
Like western countries, we don’t start our day going to a coffee house to have a cup of coffee,
nor to have snacks over there.
What if the Social-Culture pattern changes
1. We will open Stores Early in the morning.
2. We will open small and quick outlets in Knowledge Parks, where people can start the
day with our coffee in hand.
3. We can even start Indian Traditional drink, TEA in our menu.
4. We can give Happy hour discounts, So that more people will tend to consume our
products.
5. We can start a monthly coupon, so that they get used to consume our product and start
their day with our coffee.

TECHNOLOGICAL ANALYSIS
IF TECHNOLOGICAL CHANGES HAPPENS:

 We will launch a rich digital music experience, both in-store and out of store, integrated
in our mobile app
 Wireless charging tables at every store
 Innovative use of data analytics that will helps support Starbucks pricing strategy, real
estate development planning(where to place their stores), product development, trade
promotion optimization and marketing strategy
 New digital menu boards will allow Starbucks to change which products it features to
drive and increase sales strategically. The boards can feature different items based on
time of day, weather, and more (i.e. lunch items in the afternoon, cold drinks when the
weather is hotter). In theory, the boards can also be used to dynamically change prices
throughout the day and season to reflect shifts in demand
 Placing kiosk machines on every outlet for faster service and making starbucks
completely automated.

LEGAL ANALYSIS
Impacts of Legal Factors on Starbucks
Starbucks must ensure that it does not violate any laws and regulations in the home market and
countries from where they buy raw materials.
It should also stay alert about introduction of caffeine production and consumption related
policies and regulations by health authorities.
Some factors that might affect the company are:
 Introduction of stricter customs and trade regulations
 Licensing regulations related to the industry.

The legal factors in the PESTEL/PESTLE analysis model are the laws and regulations on
business. Starbucks must address the following legal external factors in its remote/macro-
environment:
 Product safety regulations (opportunity)
 GMO regulations outside the United States (opportunity)
 Increasing employment regulation (threat)

“What if” Starbucks has opportunities to improve its performance by satisfying product
safety regulations and regulations on ingredients from genetically modified organisms
(GMOs).
Starbucks is already performing well in these aspects. However, increasing employment
regulation, especially in developing countries, threatens Starbucks Coffee’s access to the labor
market. This external factor also impacts Starbucks through increased spending for human
resources. Thus, in this aspect of the PESTEL/PESTLE analysis model, the identified external
factors present mostly opportunities for Starbucks Coffee.

ENVIRONMENTAL ANALYSIS
Plastic Ban
As recently this law has been initiated in Maharashtra to avoid or stop using plastic. So in such
case the Starbucks can use paper cups to serve coffee to abide by the law and it is eco-friendly
also.
Renewable Sources of Energy
As we know that there has been continuously been a signal of sources of energy being are
finishing very fast so "what if" in future we are left with none so to cure that from side of
Starbucks they are practicing to use renewable source of energy and thus minimizing energy
consumption.
Water Conservation
"What If" in future the water usage is restricted by government? So keeping that aspect in mind
Starbucks is evaluating their store design, equipment and operations identify ways to reduce
the amount of water they use.