Starbucks Coffee PESTEL/PESTLE Analysis & Recommendations

Starbucks Coffee PESTEL or PESTLE analysis, political economic social sociocultural technological ecological environmental legal external factors
A Starbucks café in Toronto. Starbucks Coffee’s PESTEL/PESTLE analysis indicates that most of the external factors in the company’s remote or macro-environment present opportunities. (Photo: Public Domain)

Starbucks Coffee Company, founded in 1971, has grown to an international brand. As the world’s biggest coffeehouse company, Starbucks continues to lead the industry in sustainable business and innovation. Such success is attributed to the firm’s ability to address the external PESTEL/PESTLE factors. The PESTEL/PESTLE analysis framework indicates the most significant influences on Starbucks based on characteristics of the remote or macro-environment. Despite its current industry leadership, Starbucks must continue monitoring its remote or macro-environment. The PESTEL/PESTLE analysis model can be used to satisfy this need. Through continued effectiveness in addressing the external factors identified in the PESTEL/PESTLE analysis of its remote/macro-environment, Starbucks Coffee can continue to succeed despite the negative forces impacting its business.

Starbucks Coffee’s industry leadership is linked to the company’s effectiveness in addressing external factors identified in this PESTEL/PESTLE analysis. The PESTEL/PESTLE analysis model is used to determine the most important issues that Starbucks must address in its business strategies.

Political Factors Affecting Starbucks Coffee’s Business

This part of the PESTEL/PESTLE analysis framework identifies the impact of governments on business. Starbucks experiences the following political external factors in its remote/macro-environment:

  1. Regional integration of markets (opportunity)
  2. Improving governmental support for infrastructure (opportunity)
  3. Bureaucratic red tape in developing countries (threat)

Regional integration is a current trend and external factor that presents an opportunity for Starbucks to globally expand. Also, most governments around the world are improving infrastructure, which creates the opportunity for Starbucks to access more markets or suppliers. However, bureaucratic red tape persists in most countries. This external factor is a threat because it makes business expansion more difficult for Starbucks, especially in developing countries. Thus, this aspect of the PESTEL/PESTLE analysis model presents mostly opportunities for Starbucks Coffee.

Economic Factors Important to Starbucks Coffee

This component of the PESTEL/PESTLE analysis model refers to the economic conditions and changes significant to business. Starbucks faces the following economic external factors in its remote or macro-environment:

  1. High growth of developing countries (opportunity)
  2. Declining unemployment rates (opportunity)
  3. Rising labor cost in suppliers’ countries (threat)

The high economic growth of developing countries and the declining unemployment rates create opportunities for Starbucks to gain more revenues from various markets around the world. However, the rising labor cost in developing countries is an external factor that threatens Starbucks because it increases the company’s spending for ingredients. The firm sources much of its coffee beans from developing countries. Thus, this part of the PESTEL/PESTLE analysis model presents mostly opportunities for Starbucks Coffee.

Social/Sociocultural Factors Influencing Starbucks Coffee’s External Environment

This aspect of the PESTEL/PESTLE analysis framework shows the social conditions and trends influencing consumers and business. Starbucks must address the following social/sociocultural external factors in its remote/macro-environment:

  1. Growing coffee culture (opportunity)
  2. Increasing health consciousness (opportunity)
  3. Growing middle class (opportunity)

Starbucks has opportunity to increase its revenues based on increasing demand for specialty coffee, which is due to a growing coffee culture and a growing middle class around the world. Also, the company has the opportunity to widen its array of more healthful products to attract health-conscious consumers to Starbucks cafés. Thus, all the identified external factors in this component of the PESTEL/PESTLE analysis model present opportunities for Starbucks Coffee.

Technological Factors in Starbucks Coffee’s Business

In this part of the PESTEL/PESTLE analysis model, technologies and related trends are identified. Starbucks experiences the following technological external factors in its remote/macro-environment:

  1. Rising mobile purchases (opportunity)
  2. Technology transfers to coffee farmers (opportunity)
  3. Rising availability of specialty coffee machines for home use (threat)

Starbucks has the opportunity to improve its mobile apps and linked services to gain more revenues through mobile purchases. The company also has the opportunity to improve its supply chain efficiency based on new technologies coffee farmers use. However, the rising availability of home-use specialty coffee machines is a threat to Starbucks because it increases the availability of substitutes to Starbucks products. Thus, this aspect of the PESTEL/PESTLE analysis framework presents mostly opportunities for Starbucks Coffee.

Ecological/Environmental Factors

This component of the PESTEL/PESTLE analysis model identifies the effects of ecological or environmental conditions and changes on business. Starbucks faces the following ecological/environmental external factors in its remote or macro-environment:

  1. Business sustainability trend (opportunity)
  2. Growing popular support for responsible sourcing (opportunity)
  3. Growing popular support for environmentally friendly products (opportunity)

The business sustainability trend focuses on business processes that ensure minimal environmental impact. In relation, responsible sourcing emphasizes corporate social responsibility in the supply chain. Starbucks has opportunities to enhance its performance in these areas. Note that the company already has responsible sourcing policies. Starbucks also has the opportunity to offer more of its products in recyclable packaging. Thus, in this part of the PESTEL/PESTLE analysis model, Starbucks Coffee has major opportunities.

Legal Factors

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:

  1. Product safety regulations (opportunity)
  2. GMO regulations outside the United States (opportunity)
  3. Increasing employment regulation (threat)

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.

Recommendations based on Starbucks Coffee’s PESTEL/PESTLE Analysis

This PESTEL/PESTLE analysis shows that most of the external factors in Starbucks Coffee’s remote/macro-environment present opportunities. However, the company must work to address the identified threats, especially the threat of substitution linked to the increased availability of home-use specialty coffee machines. On the other hand, Starbucks cannot do much but to avoid the threat of bureaucratic red tape. Overall, the PESTEL/PESTLE analysis framework indicates that Starbucks Coffee has plenty of room for further global growth.

References
  • Gillespie, A. (2007). PESTEL analysis of the macro-environment. Foundations of Economics, Oxford University Press, USA.
  • Housing Industry Association (2011). An Introduction to PESTLE Analysis. HIA Ltd.
  • Koehn, N. F. (2002). Howard Schultz and Starbucks Coffee Company. Harvard Business School.
  • Murphey, M., & Gause, R. (1974). UCF Research Guides. Industry Analysis. PESTLE Analysis. Business Horizons17(5), 27-38.
  • Roper, K. (2012, November). BIM Implementation: PESTEL Drivers & Barriers (Cross-national Analysis). In World Workplace 2012. IFMA.
  • Starbucks Coffee Company (2015). Company Information – Starbucks Coffee Company.
  • Yuksel, I. (2012). Developing a multi-criteria decision making model for PESTEL analysis. International Journal of Business and Management7(24), 52.
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