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Sample Essay on External Factors Affecting Business Operations: Starbucks

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Sample Essay on External Factors Affecting Business Operations: Starbucks

Starbucks is one of the exemplary profit making organizations whose operations deserve following. The company, which offers express coffee in its chain of coffee stores, prides itself in customer satisfaction based on the pillars of its products, services, and location ambiance (Moon and Quelch 3). This case of Starbucks is therefore relevant to the study of management as it gives insights into effective management practices with focus on the importance of various stakeholders to a business as well as the importance of quality service delivery of high quality products. For all these to be achieved, principles of management and sound leadership practices must guide the leaders involved in a business.

This paper intends to analyze Starbucks with specific focus on the effect of environmental factors that affect its operations, and the role of stakeholders in the business.

External Factors

In the planning of its business operations, Starbucks considers various external environmental factors in order to succeed. The impacts of the considered external factors are undeniable, and thus it is the responsibility of the Starbucks management to ensure that they are taken advantage of. The following external factors are considered by Starbucks:

Political Factors – Since Starbucks operates in varying political zones, it is imperative that in setting up a new outlet, the management should consider the political environment of the proposed locations. Politics plays an important role in the success or failure of a business. Political stability is therefore one of the keys that determines the suitability of a given location for hosting a new business outlet (Yuzbasioglu 35). In addition to this, political instability is often associated with economic instability, and thus unstable systems may result in unprofitable business conditions.

Economic Factors – The purpose of the business is to maintain profitability and hence grow over time. Starbucks considers the economic conditions of the intended new location for a primary business outlet as well as during business operations to ensure that the key aim of profitability is always achieved. For instance, Starbucks aims at providing differentiable products through quality customer services and in ambient locations. All these operations are aimed at attracting and keeping customers who grow the business. Apart from this, the economic conditions of host countries are stable such that any potential losses can easily be cushioned.

Customer socio-cultural practices – Different communities have different practices, especially regarding food and drink (Yuzbasioglu 35). Starbucks considers their customers’ coffee drinking cultures in determining the location and predicting the profitability of their businesses. In addition to this, the consumer cultures also influence the marketing strategy to be used by the company in promoting their product. Consequently, the company prides itself in engaging customers and working towards customer satisfaction. In order to do this, it invests in obtaining customer feed backs and aligning its deliverables to the customer needs.

Intensity of competition – although Starbucks has very few strong competitors in various locations in which it sets up its operations, it is important to determine the strengths and weaknesses of the major competitors in every new and growing business outlet in order to determine the opportunities and threats therein (Zakic and others 24). Consequently, the company strives towards understanding the strong points of competitors, and thus finding the best alternatives for marketing and for creating a niche for the company.

Legislation – the legislative requirements of the hosting jurisdictions are of great essence in setting up any business (Yugbasioglu 35). Starbucks, as a cross jurisdictional company, has to comply with the legislations of each of the locations in which business is set up. The legislation plays an important role in determining how a business is run, and how business practices result in profits.

Demand – The demand of the product determines the supply and the pricing strategy (Zakic and others 19). Starbucks employs opportunities based on the perceived demand for coffee in various locations. For instance, in the setting up of the first store in the chain, the founder was determined to start his planned business despite the challenges involved in operating a coffee shop business in an area lacking potential demand for coffee (Moon and Quelch 2). However, through product differentiation and specialization of the coffee offered, demand for the product in offer is created.

Stake Holders of Starbucks

Starbucks has a policy of ensuring all the business stakeholders are satisfied in their operations. The stakeholders of importance in Starbuck’s operations include suppliers, partners, consumers, and the surrounding communities. The partners of Starbucks are in essence the employees of the company. These stakeholders are described below.

Partners – Starbucks partners are essential in their operations as they determine the impact that the company has on its customers. In business, employee motivation is essential to effective service delivery. Consequently, Starbucks ensures that the employees of the company are given satisfactory treatment to ensure they provide effective service to the customers. The partners are given a share in the business, and their profits are shared based on performance (Starbucks 5). In addition to this, the company also offers a great work environment and dignified treatment. This helps in making the partners motivated enough in providing the required services to the customers.

The partners are important since the company deals with a people business, and not just coffee and thus interactions between the customers and the employees. It is therefore important that those at the forefront in forging and maintaining customer relations be treated with utmost dignity since they are the once that give business to the company. Apart from creating direct customer relations, the partners also portray the face of the business. The company is only as valuable as the employees it hires or maintains. Starbucks therefore benefits by engaging useful and qualified employees to portray a picture of a company that has value for its customers (Moon and Quelch 4).

Customers – the main reason for the initiation of any business is always to bring together a group of satisfied customers whose interaction with the firm results in business growth. The customers are the pillar in the business since the operations are directed towards customer satisfaction. The profitability of the business depends directly on the relationships between the business partners, and the customers determine the degree of customer retention that the business achieves. In maintaining the customer loyalty, the company ensures that the role of customers is capitalized upon. The company achieves this through customer incentives and provision of an inviting and enriching environment for the customers.

The second group of stakeholders is the suppliers group. Since Starbucks operates across diverse cultures and jurisdictions, it depends on various suppliers to provide the coffee that is required to satisfy customer needs. The suppliers affect the source of the coffee that is provided to the customers hence the quality of the express coffee that can be offered by the company. Consequently, in order to provide what the customers require, the company depends on the suppliers to provide quality coffee. Starbucks thus works with recognized coffee dealers to provide the desired quality of coffee. The suppliers form the foundation of the portrayed product quality that the company gives (Starbucks 41).

Another group of stakeholders associated with Starbucks is the surrounding communities in various locations where Starbucks stores are situated. These communities play a great role in the company’s public image. The impact that the company has on the surrounding communities concerning environmental preservation and the corporate social responsibility determines the surrounding communities’ perception of the company, and thus the probability of attaining customers from those communities. The role of good public image in a company is undeniable. The relationship between a company and the surrounding communities determines the public image projected by the company.




Starbucks is an exemplary company with regards to customer service and effective management strategies. From its operations, one of the key lessons learnt is the importance of engaging trained and effective employees in service delivery. To achieve this, the company aims at the application of internal promotions in the acquisition of high quality employees.

It has determined the relevance of effective managers in the maintenance of organizational prosperity. Secondly, the value placed upon various company stakeholders also offers an important lesson in profitability in that the people involved in a business determine the level of growth of a business. In using the available human and financial resources in a bid to grow, it is necessary that a company evaluates the impacts of various external environmental factors to company growth. At Starbucks, some of the external environmental factors include the political outlook of the location of choice, legislation, socio-cultural factors, and the economic factors of the location. These factors determine the profitability of a business, and have played an important role in the success of Starbucks as a company.








Works Cited

Moon, Youngme and John Quelch. Starbucks: Delivering Customer Service. Havard Business School, 2006.

Starbucks. Living Our Values: Corporate Social Responsibility. Starbucks Fiscal Report, 2003.

Yuzbagsioglu, Nedim. Analysis Of Environmental Factors That Affects The Success And Failure Of The Small And Medium Sized Tourism Enterprises (Smete) And Implication Of A Rational Strategic Management Model, 1999.

Zakic, Nebojsa, Ana Jovanovic and Milan Stamatovic. External and Internal Factors Аffеcting the Product and Business Process Innovation. Economics and Organization Series, 5. 1(2008): 17-29.

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