Business, Management

Starbucks Coffee PESTEL/PESTLE Analysis & Recommendations

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

Starbucks Corporation, founded in 1971, is an industry leader with one of the strongest international brands. As the world’s biggest coffeehouse chain, the corporation leads the industry in sustainable business and innovation. This success is attributed to the ability to address the external PESTEL/PESTLE factors relevant to the business and the coffeehouse industry. The PESTEL/PESTLE analysis framework indicates the external influences on Starbucks based on the characteristics of the remote or macro-environment of the business. To maintain its industry position, Starbucks must continuously monitor this external environment. The PESTEL/PESTLE analysis model can be used to satisfy this need. By effectively addressing the external factors identified in the PESTEL/PESTLE analysis of its remote/macro-environment, Starbucks Corporation can expect further long-term success despite the negative external forces impacting the business.

Starbucks Coffee’s success is linked to business effectiveness in addressing external factors like those identified in this PESTEL/PESTLE analysis. The PESTEL/PESTLE analysis framework determines some of the most important external issues that the company must account for in its business strategies, to strengthen competitiveness against food service firms like Dunkin’, Tim Hortons, and McDonald’s McCafé, as well as consumer goods like Maxwell House from Kraft Heinz and Folgers from The J.M. Smucker Company.

The Political Landscape (Political Factors Affecting Starbucks Coffee’s Business)

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

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

Political integration and disintegration of regional markets are an external factor that presents opportunities and threats to Starbucks and its global growth. Integration facilitates regional market penetration (opportunity), while disintegration creates barriers (threat) to the coffeehouse company’s expansion. Also, governmental policies for improving infrastructure creates opportunities for Starbucks to access more customers and suppliers. However, bureaucratic red tape persists in many countries. This political external factor is a threat because it impedes the coffee company’s business expansion, while possibly favoring local competitors that have extensive political connections. Thus, this aspect of the PESTEL/PESTLE analysis presents opportunities for Starbucks Coffee, but also points out political obstacles in growing the business.

The Economy (Economic Factors Important to Global Coffeehouse Chains)

This component of the PESTEL/PESTLE analysis model refers to the economic conditions and trends that affect the coffee and food service business. Starbucks faces the following economic external factors in the remote or macro-environment:

  1. Growth of developing countries (opportunity)
  2. Declining unemployment rates in the long term (opportunity)
  3. Rising labor cost in coffee suppliers’ countries (threat)

The 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 presents mostly opportunities for Starbucks Coffee, although supply stability could be an issue.

Social Influences (Sociocultural Factors in Starbucks Coffee’s External Environment)

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

  1. Growing coffee culture (opportunity)
  2. Growing middle class (opportunity)
  3. Increasing health consciousness (opportunity)
  4. Independent coffeehouse movements (threat)

Starbucks has opportunities to increase its revenues based on increasing demand for specialty coffee, which is due to a growing coffee culture and growing middle class populations around the world. Also, the company can widen its array of more healthful products to attract health-conscious consumers to its coffeehouses and merchandise. Despite these opportunities, Starbucks faces threats linked to independent coffeehouse movements, which are sociocultural movements that favor small independent coffeehouses instead of large multinational chains. This threat is also identified in the SWOT Analysis of Starbucks Corporation. Thus, the social external factors in this PESTEL/PESTLE analysis present opportunities, but also a considerable threat that could reduce the coffeehouse chain’s revenues.

Technologies (Technological Factors in the Coffeehouse Business Environment)

In this part of the PESTEL/PESTLE analysis model, technologies and related trends are identified, pertaining to their effects on the coffeehouse chain. Starbucks experiences the following technological external factors in the remote or macro-environment:

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

Starbucks has opportunities to improve its mobile apps and linked services to gain more revenues through mobile purchases. The company can also improve its supply chain efficiency based on recent technologies that coffee farmers use. However, the rising availability of home-use specialty coffee machines threatens Starbucks by increasing the availability of substitutes to the company’s products. Thus, the technological external factors in this PESTEL/PESTLE analysis shows the importance of Starbucks products that effectively compete while addressing new and emerging technologies affecting the industry.

Ecological Factors

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

  1. Increasing availability and adoption of sustainable processes in businesses (opportunity)
  2. Growing access to responsibly sourced materials or ingredients (opportunity)
  3. Rising support for environmentally friendly products (opportunity)

The increasing availability of sustainable business processes is a trend that gives Starbucks the opportunity to enhance its sustainability standards and implementations. This enhancement can strengthen the company’s brand image and attract more customers to its foods and beverages. In relation, responsible sourcing emphasizes corporate social responsibility, such as in Starbucks’s supply chain. The coffee company has opportunities to enhance its performance in these areas. The corporation can continue to improve its existing responsible sourcing policies, such as for its coffee supply and procurement. Moreover, Starbucks can innovate to make its products more environment-friendly. For example, the company can increase the use of recyclable materials for packaging food products and other merchandise. Thus, the ecological factors in this PESTEL/PESTLE analysis show opportunities for strengthening Starbucks’s corporate image based on the ecological impact of the business.

Legal Factors in the Café Industry

The legal factors in the PESTEL/PESTLE analysis model are laws and regulations that impose requirements on the coffee business. Starbucks must address the following legal external factors in its remote or macro-environment:

  1. Product safety regulations (opportunity)
  2. Developing GMO regulations (opportunity and threat)
  3. Increasing employment regulations (opportunity and threat)

Starbucks has opportunities to improve its performance by satisfying product safety regulations. Similarly, the company can enhance its supply chain to address regulations on ingredients from genetically modified organisms (GMOs). Starbucks is already performing well in these aspects, but further improvements help boost business performance. Also, employment regulations, especially in developing countries, threaten Starbucks Coffee’s access to the labor market and competitively priced coffee beans. This external factor also impacts the coffee business through increased spending for human resources. Nonetheless, the company can implement new strategies to improve human resource management. Thus, in this aspect of the PESTEL/PESTLE analysis of Starbucks, the identified legal external factors present opportunities as well as threats that influence the business as it continues its multinational growth.

Recommendations based on PESTEL/PESTLE Analysis of Starbucks

This PESTEL/PESTLE analysis shows that most of the external factors in Starbucks Corporation’s remote or macro-environment present opportunities. However, the company must work to address the identified threats, such as the threat of substitution linked to the increased availability of home-use specialty coffee machines. Also, improving operations and business processes to build on the identified opportunities can contribute to the fulfillment of Starbucks’s corporate mission statement and vision statement. A holistic strategic approach based on these opportunities and threats can ensure the company’s long-term leadership in the coffeehouse industry. Overall, the PESTEL/PESTLE analysis framework indicates that Starbucks Coffee has plenty of room for further global growth and development.

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