Understanding Business Purpose and Applying Stakeholder Theory

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To sum up, third place culture is the core value for Starbucks and is the ambitious philosophy necessary to achieve more than short-term results. Nevertheless, some factors of these values have been weakened by expanding the business, such as diversifying stores and homogenization.

Stakeholder theory

The definition of stakeholders by Starbucks is unique and has been both acclaimed and criticized. In the mission statement, three stakeholders are clearly described: partners (employees), coffee (suppliers), and customers (http://www.starbucks.com/about-us/company-information/mission-statement). In the first section, the position of stakeholders of the company are examined. In the following section, the criticism of key stakeholders, particularly the employee, is discussed.

Stakeholders defined by Starbucks are different from typical for-profit companies, because employees and suppliers are more significant than other stakeholders. According to the definition of stakeholder theory (Lawrence, & Weber, 2011), the company focuses on market stakeholders which consists of six stakeholders. Among market stakeholders, stockholders and creditors are not considered as essential stakeholders. While Starbucks is responsible for improving the stock value as a public company, it is not the core responsibility of the business to provide profit for investors. Next, employees and suppliers are more precious than customers. Many companies often put the burden on customers, because they are the source of sales and profit. However, the core of Starbucks is in the quality of services and products. In short, good employees and good coffee will attract customers, and customers will pay Starbucks prices ensuring profit for the stockholders. This strategy is different from both stockholder theory and stakeholder theory, and it is obvious that the company seeks to serve societies more than investors.

While the stakeholder strategy of Starbucks is revolutionary, some contradictions are found in reality. One of the most controversial issues is working conditions. The wage of Starbucks per hour in the United States is 7.73~10.98 dollars on average (http://www.payscale.com/). This figure is 5~10% higher than that of McDonalds and Dunkin’ Donuts (http://www.payscale.com/), but it is difficult to differentiate the pay level from competitors. Instead of increasing the wage, the company appealed to workers including part-timers by introducing health benefits. Executives such as CEO Howard Schultz repeatedly refers to the benefits. Nonetheless, the condition to enjoy the benefits is not easy for all employees. There are some requirements such as 80 to 100 dollars for initial cost, monthly cost as much as 15% of salary, and more than 20 hours work per week. As a result, only 40 to 45% of all employees sign up for the coverage (Simon, 2008). The company should consider developing the pay system rather than benefits if employees are the most significant stakeholders. As New York City raises the minimum wage for fast-food workers to 15 dollars an hour, social pressures for better wage continue to increase. Therefore, it would collapse the core value of the company if Starbucks does not anticipate the social change.

As we have seen, Starbucks has distinctive stakeholder strategy which pursue the company’s vision rather than short-term profit. On the other hand, there are some gaps between the vision and the actual system. As the company globalizes the business and society changes, the company will be required to look at the issue more than ever.

References

Ganguly, S., & Bhattacharya, P. K. 2013. International conference on digital libraries 2013: vision 2020: 217-217. India: The Energy and Resources Institute, TERI.

Kanter M. 2011. How great companies think differently Harvard Business Review. 89(11): 68-78.

Mistiaen, V. 2014, June 19. A better future is percolating for Vietnam’s coffee. The Guardian. The Guardian, http://www.theguardian.com/global-development/poverty-matters/2012/mar/26/better-future-vietnam-coffee-growth.

Simon, B. 2008. Consuming Lattes and Labor, or Working at Starbucks. International Labor and Working-Class History, 74(01): 193.

Weber, J., & Lawrence, A. T. 2011. Business And Society: Stakeholders, Ethics, Public Policy (13th ed.): 2-21. New York, NY: McGraw-Hill.