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Starbucks An Analysis With Focus On The Financial Function

974 words - 4 pages

The year was 1971 when three partners opened the first Starbucks. The business started out as a local roaster and retailer of whole bean and ground coffee and as the business grew they took inspiration from the Italian coffeehouse tradition. The Italian coffeehouses are a place for conversation and a sense of community, a stop between home and work. This experience was something Starbucks wanted to bring to the United States. They had found their niche. Following this, Starbucks grew quickly and began opening several stores all over the country, and shortly thereafter the world.

Since the beginning of Starbucks in Seattle, the company has expanded exponentially. Starbucks is today the ...view middle of the document...

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 countries 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 price, 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...

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