Below is a detailed Pestle analysis of Starbucks, the premium coffee and beverages retailer. This analysis will list the 6 factors i.e. political, economic, socio-cultural, technological, environmental, and legal factors that affect the premium coffeehouse chain brand. All factors are considered as per the condition of the market and the company as of early 2019.
Starbucks is a premium coffeehouse chain and its success is relying on addressing its external environment challenges and opportunities which will identify in Pestel Analysis.
Recommended for you SWOT Analysis of Starbucks Coffee Shop.
Table of Contents
Political Factors Affecting Starbucks
Starbucks is a highly globalized company with more than 30,000 outlets in various countries. Thus, the primary political factor that affects the company is the laws and regulations of the various regional markets. Globally regional business integration has become a trend, so Starbucks can expect to grow even further in countries outside the United States.
The political condition of developing countries is a perfect market for Starbucks to expand into. These countries are rigorously improving their infrastructure and ability to draw in international brands. As a result, Starbucks outlets can be seen opening in various developing countries such as India. One of the political factors that adversely affect Starbucks is the political stability of such countries. Many of them also subject foreign businesses to a great level of scrutiny.
Economic Factors Affecting Starbucks
As mentioned before, Starbucks is a highly globalized brand. And since its primary business expansion opportunity lies in developing countries, the economic conditions of those countries also affect it a lot. The wage levels of these countries are lower than that of the United States. So, only the upper economic layer of these countries can actually afford Starbucks’ products. As a result, the primary profit of Starbucks is still achieved from its home market. Added to this are also tax levels and other customs charges in developing countries.
Another economic factor is the various cheaper alternatives that create a highly competitive market for Starbucks. And due to low wage levels many people actively take to the competitors as they can still buy the generic products but for lower prices.
Socio-cultural Factors Affecting Starbucks
The generation that was the primary customer base of Starbucks, the ‘baby boomer’ generation, is almost at an end. The company needs to reinvent themselves to fit the needs of the millennials and the Gen-X. Since both these generations mostly sport middle income tier individuals, Starbucks will need to diversify their product range and include cheaper items.
Starbucks is highly dependent on the upper class trend of buying from premium coffee brands. Due to the rise in consumerism the nature of the people’s demands are highly volatile. It maybe tough for the brand to remain relevant unless they choose to diversify their product range and meet the changing market demands.
Technological Factors Affecting Starbucks
Catering your brand for the tech friendly generation is absolutely important to remain relevant in the current market and Starbucks is using such factors to its advantage. It has tied up with Apple to introduce app based discounts which is quite useful to the large Apple user community. Another great move by Starbucks was to introduce free wi-fi in its outlets. This has attracted a lot of new customers and also allowed customers to sit in the cafes for longer times and order more beverages.
Mobile based online payment methods have been enabled by Starbucks to help ease the payment process for customers. It is also using the latest developments in agriculture to farm quality coffee seeds in large quantities.
Environmental Factors Affecting Starbucks
Starbucks uses single use paper cups to serve most of its beverages and this has achieved large amounts of criticism from environmental activist groups. The amount of wastage that corporations such as Starbucks lead to is indeed huge and thus they need to employ more environmental friendly means of serving their products. Since their primary customer base is millennial, a generation that is highly concerned about the environment, not complying with environmental friendly regulations might lead to loss of customer base.
Another environmental factor that Starbucks needs to be aware about is the conditions of the countries where its coffee beans are produced. These countries often face environmental calamities which need to be countered in order to ensure the quality of the coffee beans being produced.
Legal Factors Affecting Starbucks
Caffeine consumption levels are being strictly regulated in various countries due to the harmful effects it can have on individuals if consumed excessively. Starbucks needs to ensure that it follows all such legal regulations and also caters to the custom and trade laws of each of its foreign markets. Unites States is also facing demands for regulating caffeine content in beverages and Starbucks needs to regulate its products accordingly if such laws are passed. Additionally, licensing factors in various foreign markets are quite varied and thus they require compliance on multiple levels.