Business, Management

Starbucks PESTEL/PESTLE Analysis & Recommendations

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

Starbucks Corporation is an industry leader with one of the strongest international brands and effective strategies aligned to the external trends identified in this PESTEL analysis (PESTLE analysis). 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 analysis or 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 analysis model can be used to satisfy this need. Effectively addressing the external factors identified in this PESTEL analysis of Starbucks can further long-term business success despite negative external forces.

This PESTLE analysis of Starbucks identifies external factors affecting business effectiveness and success. The PESTLE analysis framework determines some of the most important external issues that Starbucks must account for in its business strategies, to strengthen competitiveness against coffee and food-service firms, like Dunkin’, Tim Hortons, McDonald’s, Subway, Wendy’s, and Burger King. The Five Forces analysis of Starbucks demonstrates strong external pressure from these competitors impacting the industry environment examined in this PESTEL analysis.

Political Factors Affecting Starbucks

This part of the PESTEL analysis framework identifies the impact of governments and related policies on the coffeehouse business. Starbucks experiences the following political factors in its 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 (e.g., single-market and free-trade policies) are an external factor that presents opportunities and threats to Starbucks and its global growth. In the PESTLE analysis model, integration facilitates regional market penetration (opportunity), while disintegration creates barriers (threat) to the coffeehouse company’s expansion. Also, governmental policies for improving infrastructure create opportunities for Starbucks to access more customers and suppliers. However, bureaucratic red tape persists in many countries. This political 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 PESTLE analysis of Starbucks presents opportunities but also points out political obstacles in growing the business.

Economic Factors influencing the Coffeehouse Chain

This component of the PESTLE analysis model refers to the economic conditions and trends that affect the coffee and food service business. Starbucks faces the following economic factors in the remote 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 revenue 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 on ingredients. The firm sources much of its coffee beans from developing countries. Thus, this part of the PESTEL analysis of Starbucks presents mostly opportunities, although supply stability is an issue.

Sociocultural Factors in Starbucks’ External Environment

This aspect of the PESTEL analysis framework shows the social conditions and trends influencing consumers and the coffeehouse business. Starbucks must address the following social/sociocultural factors in its 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, in this PESTLE analysis case, 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 external factors in this PESTLE analysis present opportunities, but also a considerable threat that can reduce the coffeehouse chain’s revenues.

Technological Factors in the Coffeehouse Business

In this part of the PESTLE analysis model, technologies and related trends are identified, pertaining to their effects on the coffeehouse chain. Starbucks experiences the following technological factors in its remote 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 revenue 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 for the company’s products. Thus, the external factors in this PESTEL analysis of Starbucks show the importance of products that effectively compete while addressing new and emerging technologies affecting the industry.

Ecological Factors affecting Starbucks

This component of the PESTEL analysis model identifies the effects of ecological or environmental conditions and trends on the coffeehouse business. Starbucks faces the following ecological/environmental factors in its 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. In the PESTLE analysis model, this enhancement can strengthen the company’s brand image and attract more customers to its foods and beverages. On the other hand, responsible sourcing emphasizes Starbucks’ corporate social responsibility and stakeholder management, such as in the supply chain. In this PESTEL analysis case, the coffee company has opportunities to enhance its performance in these business 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 environmentally 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 PESTLE analysis of Starbucks show opportunities for strengthening the corporate image based on the ecological impact of the business.

Legal Factors

The legal factors in the PESTEL analysis model are laws and regulations that impose requirements on the coffee business. Starbucks must address the following legal factors in its remote 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 can boost business performance. Also, employment regulations, especially in developing countries, threaten Starbucks’ access to the labor market and competitively priced coffee beans. In the PESTLE analysis model, 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 analysis of Starbucks, the identified legal factors present opportunities as well as threats that influence the business as it continues its multinational growth.

Recommendations based on this PESTLE/PESTEL Analysis of Starbucks

This PESTLE analysis of Starbucks shows that most of the external factors in the remote or macro-environment present opportunities. However, the company must work on innovation and marketing 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’ 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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