Starbucks primarily operates in the retail coffee shop market. The UK coffee shop market alone is estimated at over 16,000 outlets and showed a strong growth of 6.4% in sales during 2013 (FDIN, 2014). The branded coffee chain segment recorded a turnover of £2.6 billion, delivering a higher than market sales growth of 9.3% (FDIN, 2014). The coffee shop sector has seen a considerable growth in the past 15 years and Allegra Strategies (as cited in FDIN, 2014) forecasts that UK’s branded coffee shop market will grow at 10% compound over the next five years.
A “PESTLE” analysis is a strategic analysis model used to identify the current and future external environment in which a company operates in and the environment’s macro economic functions (Worthington & Britton, 2006). The analysis includes the political, economic, socio-cultural, technological, legal and environmental factors that influence and affect a company.
I will use the “PESTLE” analysis to identify and understand the macro economical factors that Starbucks must consider when conducting its business.
• Taxation policies – High taxation imposed by a country’s government on the coffee bean farmers may ultimately lead to Starbucks having to pay a higher price for the coffee they wish to purchase, which may be passed on to the customer.
• Government stability – Starbucks must consider and investigate the political situation of any country they plan to open stores in. Changes in government can lead to drastic changes in legislations and taxation policies. The same consideration must be done when looking at suppliers of coffee beans.
• Tariffs and trade regulations – Regulations on trade will affect Starbucks primarily when exporting and importing goods. A tariff can result in not only a loss of efficiency when it comes to Starbucks it also affect the farmers. The extra charge that the tariffs impose doesn’t only lower the profit margin of Starbucks, but also the farmers.
• Interest rates – A rise in interest rates would mean that future investments and plans of expansion might be put on hold as a result of the increased cost of borrowing. A rise in interest rates would also raise the Mortgage repayments, leaving consumers with less disposable income to spend on coffee. A reduction in interest rates should have the opposite effect.
• Competitors pricing – Competitive pricing can lead to Starbucks having to lower its prices, hence driving down profits and profit margins, as an attempt to maintain their market share.
• Exchange rates – When dealing with international trade Starbucks will be affected by exchange rages. The value of a supplier’s currency will determine the amount Starbucks gets for their money, a change in this value will result in increased or decreased spending on the same amount. A spending that can be passed along to the customer.
• Demographics – Demographics play an important role for Starbucks when determining...