Understanding Pestle Analysis of Starbucks

PESTEL Analysis is a strategy tool for assessing a company’s external environment by categorising possibilities and threats into Political, Economic, Social, Technological, Environmental, and Legal elements.

Wherein,

• ‘P’ is Political consideration regarding government restrictions and their impact on the economy or businesses.
• ‘E’ is the Economic consideration of a company’s long-term market prospects.
• ‘S’ is social consideration, for instance, culture and demographics, which can affect buying and lifestyle choices.
• ‘T’ is Technological consideration that can impact an industry directly or indirectly.
• ‘E’ is Environmental considerations regarding general and physical environmental protection standards.
• ‘L’ is a legal and regulatory consideration that can influence an industry’s policies and practices.

PESTEL Analysis of Starbucks

To run a PESTEL analysis of Starbucks, it is necessary to have some knowledge of the company. Knowledge of the company’s history can assist them in gaining a better understanding of the potential for future growth. Starbucks is one of the most well-known coffee shops in the United States. They have over 31,000 locations and serve millions of people daily with their coffee. Customers can order a variety of flavoured coffees and a variety of baked goods from Starbucks. Here’s a rundown of the company’s specifics.

Starbucks – As An Organisation

Starbucks works in a macroeconomic setting marked by the current global economic slump, which has weakened consumers’ spending power. However, recent market data indicates that customers have not reduced their coffee consumption and are switching to lower-cost alternatives. This means that Starbucks may still use its customers’ purchasing power to gain a competitive edge by providing cheaper alternatives. Besides that, Starbucks has already taken steps to capitalise on the burgeoning mobile computing revolution by partnering with Apple to provide discounts on iPhone apps.

Furthermore, this exercise has been pushed forward by cross-selling and co-branding, indicating that Starbucks is well-positioned to benefit from the smartphone revolution. It’s worth noting that customers in several nations are rapidly adopting “Ethical Chic,” which implies that the items and brands they buy must demonstrate that they adhere to social and environmental standards throughout production. This is the primary difficulty Starbucks has as it grapples with the new era of customer awareness and the accelerating Smartphone revolution.

Pestle Analysis of Starbucks

Political

One of the political factors affecting Starbucks is addressing concerns about sourcing its raw materials, which has drawn the attention of politicians in the nations and the West from where it obtains its raw resources. This is why Starbucks is committed to following ethical and environmental standards and proper sourcing techniques that are compliant with “Fair Trade” policies agreed upon by global companies and governments of developing and developed nations.

Another political challenge Starbucks confronts is adhering to the rules and regulations of the nations from where it receives its raw materials. This has become necessary due to rising political awareness and action in developing nations, which serve as the foundation for Starbucks’ sourcing policies.

The third political factor for Starbucks is the pressure from the home market regulators because of the business process scrutiny. Many multinational companies based in the US are now undergoing this.

Economic

• The most important external economic driver for the company was the economic recession that happened across the entire globe, which harmed the profitability of numerous businesses.
• However, studies suggest that instead of cutting back on coffee consumption, customers are switching to lower-cost alternatives, which presents an opportunity for Starbucks.
• Of course, the corporation still needs to deal with growing operational and personnel costs, as the company is squeezed from both ends by the inflationary macroeconomic climate and diminishing profitability.

Socio-Cultural

• Though Starbucks may offer cheaper options, it must do so without losing quality. This is the primary socio-cultural problem that the corporation has as it increases its customer base to include those in the lower and medium income categories.
• Besides, Starbucks must be aware of the “green” and “ethical chic” consumers concerned about the social and environmental consequences of the goods they buy.
• Third, when the baby boomer generation retires, spending by older consumers is expected to decline, forcing Starbucks to focus on Gen X and Millennials as part of its plan.
• According to the pestle analysis of the Starbucks chain in India, the country’s culture and food present an intriguing challenge. The country’s traditional tea-drinking populace, different religious distinctions and the expanding disparity between various areas make it incredibly difficult to split and put specific consumer groupings. The most noticeable difference in coffee consumption is still seen between urban and rural locations, with the urban population having far greater coffee preferences. 

Technological

• Starbucks is ideally positioned to benefit from the burgeoning mobile wave. With its partnership with Apple to deliver app-based discount coupons, it should be able to ride it with ease.
• Customers can surf the web and work while sipping coffee because the firm has already installed Wi-Fi connections at its locations. This adds value to the Starbucks brand and improves the customer experience.
• It can also implement mobile payments, which are now tested in pilot areas around the United States.

Legal

Starbucks must ensure that it complies with the rules and regulations of the countries from where it obtains its raw materials and the laws and regulations of its home market in the United States.

Environmental

Customers, international advocacy groups and activists have all expressed reservations about Starbucks’ business methods. As a result, if Starbucks wants to maintain its consumer confidence, it must consider these issues.

Conclusion

Starbucks operates in a highly stable external environment, as evidenced by the previous study. The major reason for this is that it works in the Food and Beverage sector, which implies that, despite the recession, customers reduced their consumption to some extent but not entirely. As a result, Starbucks’ challenge is to reduce expenses while increasing value to maintain and acquire customer loyalty.