Starbucks Ethics

Starbucks Ethical Issues Starbucks has a number of challenges that it must address. There are a number of issues that stakeholders raise with the company. Since Starbucks has made elements of social responsibility part of its brand identity, these stakeholders have taken it upon themselves to insist that Starbucks have strict adherence to their own particular vision of what social responsibility means. For some it is fair trade coffee, for others organic coffee. For some, it is hormones in milk. For others, it is irresponsibly regurgitating anti-Semitic myths.

Seriously, the textbook loses credibility by publishing that crap. So the challenge for Starbucks is to prioritize and address each issue. The company has made social responsibility a part of its marketing as a means of differentiating itself. Some of the issues are practical in nature. The company treats its employees better than most other quick service restaurants because doing so helps it to attract better employees, including many who otherwise would not work quick service. This allows Starbucks to deliver a higher quality of customer service.

On other issues, social responsibility is more of a brand image issue. Brand image is important in an industry where Starbucks can differentiate itself from larger competitors with social responsibility. Further, the company is also competing with a large number of independent coffee shops, many of which have made a specific point to offer organic, fair trade, or locally-roasted coffee. Starbucks must be competitive in terms of its image in order to compete with those. Social responsibility is not entirely about brand with Starbucks.

Part of the company's push for social responsibility is that this is a genuine philosophy. The company does not just want to be perceived as responsible -- it is responsible. This comes down from senior management, and is a philosophy to which the company's workers buy in. The customers, to an extent, also see this as a reflection of who they are. There are clear brand associations that arise from ethical business practices. Starbucks has positioned itself as a socially responsible coffee shop, made by ethical people for ethical people.

So there is a little bit of branding, but there is also a lot of truth to the socially responsible positions that the company takes. With respect to its staff, Starbucks has made treating the staff well to be part of its strategy. It is not unique in being able to do this. Indeed, companies with low cost models, like Costco, also operate with much the same philosophy.

It is easier for Starbucks to have this philosophy because it has higher margins than most quick service restaurants, and it has higher volumes than its independent competitors. It also has a strategic interest in skimming the best workers in the industry. The best workers allow Starbucks to deliver better customer service, and a more consistent brand presentation. They are more stable in their jobs, which is important in the coffee business because some customers are daily, coming in at the same time every day.

Having lower turnover allows for staff to get to know customers, and vice versa, something that helps Starbucks deliver better service. Also, the company is engaging in a trade-off between the costs associated with the pay and benefits packages, and the costs associated with turnover, training and lower service standards. The company clearly feels that, financially, their approach to staffing has a positive payoff. I believe that the social responsibility is part of the overall strategy for Starbucks.

It is complementary to the core strategy of offering a differentiated product/service offering. When Starbucks first started, there were very few cafes of its nature, and in many parts of the U.S. there were none. So Starbucks offered a unique service, in providing a comfortable "third place" other than work or home. This is why in England they had to shift their strategy to make their coffeeshops more comfortable, in order to better compete against pubs, which can be very comfortable.

The company also offered a differentiated coffee offering. It had a superior roast to what most coffee as like before Starbucks -- everything was like gas station coffee back then. So there was a differentiated product and a differentiated service. These were definitely the most important aspects of Starbucks' success, along with the attention the company paid to getting the best real estate with the highest traffic.

However, the company quickly realized that it was positioning itself as something of an aspirational brand, associated with a wide range of complementary characteristics. Relaxation, accessible decadence, and social responsibility all tie into the values that middle class America has. They could exist individually, but the company's brand image is much stronger if they all come together. Plus, as noted, the higher service levels that better- compensated staff deliver were always important to the Starbucks experience. So these things came together. I still see the social responsibility as complementary, however.

Without the other factor -- the product and service -- Starbucks would not attract customers on social responsibility alone. There is no company that can win over consumers with good vibes alone -- all companies need to have a superior service or product because the number of consumers who make consumption decisions purely on ethical considerations.