Recycling

1. Introduction:

We are living in an era described as an environmentally conscious age, where every deed acted by humans in terms of development, the effect is being weighed in relation to our environment. Consequently this has prompted a substantial number of environmental regulations being endorsed to hold business organizations more accountable for their environmental responsibilities. These policies tend to focus on tackling such problems from the source, with the knowledge of how certain insignificant decisions taken by such organizations can have a detrimental effect on the environment as a whole. (Darnall et al 2008).

One of the strategies adopted by these organisations was to introduce a tool known as Environmental Management System (EMS) that can be used to achieve a high degree of environmental protection within the context of sustainable development. (Bansal and Bagner.2002). This tool was first developed by the British Standards Institute (BSI) identified as BS7750 published in 1992. By 1994 the European Commission published another management tool known as Eco-Management and Audit Scheme (EMAS).

According to Bansal and Bagner after an increasing demand for improved environmental performance by the United Nations, the International Organization for Standardization (ISO) was mandated to create an internationally recognised environmental management system called ISO 14001 which is being used up to date.

Over the years EMS has been seen as part of a policy frame work for establishing any type of organisation from Schools, hospitals to even shops. However, within the years researchers are beginning to question the authenticity of EMSs since organisations claim to have one, when infact they make no attempt to reduce their environmental damage. “In instances where EMSs enhances an organization’s environmental performance, critics argue that improvements are likely to occur within the organization’s operational boundaries rather than being extended throughout the supply chain.” (Darnall et al 2008).

Despite these emerging misconceptions EMS has been effective in reducing environmental impacts within and outside the organisations especially as fines and penalties are being enforced on non compliance of organisations by the regulatory bodies.

1.1 Scope of The Report:

This report will focus on EMS and how it relates to Eco campus, a tool established by Glasgow Caledonian University to regulate its environmental impacts. Furthermore, it will look at the positive and negative aspects of adopting an EMS, and the evidences of bronze and silver medals won by the GCU through implementation of eco campus and the steps towards achieving a Gold medal.

2. Ems and Eco Campus:

According to Coglianese and Nash an EMS can be described as a set of in-house policies, reviews, plans and functioning actions affecting the entire organization and its relationships with the natural environment. They went on further to say even though the specific institutional description of EMSs differ across organizations, all EMSs entail setting up an environmental policy or plan which goes through internal evaluations of the organization’s environmental impacts including computation of those impacts and how they have changed over time, creating quantifiable goals to reduce those environmental impacts, providing resources and training workers, checking implementation progress through systematic auditing to ensure that goals are being reached, correcting deviations from goal attainment and undergoing management review. Absolute incessant improvements are done on the model, which are anticipated to help organizations insert environmental practices deep within their operational frameworks so that protecting the natural environment becomes a fundamental component of their overall business strategy (Shireman, 2003).

Environmental management systems function under the Shewart and Deming cycle of continual improvement which can be actualized by a step by step procedure. . It is repetitive and based on the PLAN – DO – CHECK – ACT system. First of all, a re-evaluation of the institution is done and a plan is set out on how the review made can be improved. Next is to develop how to execute the plan and once the system has been implemented, it is verified frequently to see if it is performing successfully. Finally, any suggestions for improvements are implemented. The cycle then begins again so that the system is repeatedly improved and refined to have room for future changes. (ecocampus.co.uk). The figure below illustrates the process further.

2.1 Types Of Ems:

Presently there are quite a few recognizable standards in Environmental Management Systems, but most the recognised and certified are the:

ISO 14001: 2004 International Standard for Environmental Management.
Eco – Management & Audit Scheme (EMAS).
IEMA – Acorn Scheme.

2.1.1 ISO 14001:

ISO14001 objective is necessitating an organisation to implement an Environmental Policy within the organisation fully supported by the top management, and outlining the policies of the company, not only to the staff but to the public. The policy has to be in conformity with Environmental Legislations that may affect the organization and stressing a commitment to continuous improvement. Emphasis should also be placed on policy as this provides the direction for the remainder of the Management System. (Hillary 1999). Furthermore, ISO 14001 has grown at a very fast rate, and has gained acceptance as the “model T” among management systems perhaps not as a flashy or advanced as others, but prescriptive, reliable, affordable (in terms of cost and effort) and perhaps most importantly it gets you there.

2.1.2

Eco- Management & Audit Scheme (EMAS):

The EU Eco Management and Audit Scheme recognized as EMAS is a voluntary market based instrument designed to inculcate better environmental performance from all types of organisations. EMAS has also been intended to completely be well-suited with international standard for environmental management systems ISO 14001, but goes further in its requirements for performance improvement, employee involvement, legal compliance and communication with stakeholders. Uniquely EMAS requires organisations to produce an independently verified report about their performances. (www.iema.net)

2.1.3 IEMA – Acorn Scheme:

It has been mentioned by the Institute of Environmental Management and Assessment (IEMA) that Acorn Scheme is an officially accepted EMS standard suggested by the government, which offers a suitable step by step approach to environmental management using the British Standard BS8555. IEMA also described the scheme as a coherent practical tool that contains five stages of EMS implementation. Each stage is further subdivided into other individual stage profiles which match up to the schemes principle.

2.2.0 Eco- Campus And How It Relates To Ems:

Eco campus has been defined by the ecocampus website as both an environmental management system and an award scheme for the higher education sector. The scheme allows institutions to be acknowledged for adopting certain sustainable key issues. The main aim of the eco campus scheme is to encourage, reward and provide tools to assist institutions in moving towards environmental sustainability through good operational and management practices.

The eco campus programme consist of four phases; Bronze, Silver, Gold, and Platinum. By working through these phases, the university will -:

•  Renew its current environmental performance and plan how it can be improved.
• Develop procedures to implement the plan
• Check actual progress
• Ensure any recommendations for improvement and implement them.

The Eco campus like the EMS, share the same objectives which is to inculcate, promote and integrate steps, ideas, plans that have less effect on the environment. In terms of implementation Eco campus works in the same manner with the EMS which is the application of the four key steps “Plan- Do-Check-Act” and off course with the criteria of continual improvement. Basically an eco campus is a tool that helps institutions achieve sustainability through an EMS approach, the relationship being an eco campus is an EMS with a different name because it functions in an institutional organisation. The only difference between the two would be the award winning criteria your institution tends to gain by adopting eco campus, whereas EMS does not reward implementation especially in that manner (bronze, silver, gold and platinum).

2.2.1 The Award Winning Criteria:

The eco campus award criterion is based on the PLAN – DO – CHECK – ACT system and these four stages are awarded sequentially by the four medals assigned by the scheme. Bronze (planning), Silver (implementing), Gold (operating) and Platinum (checking and correct).

The bronze phase basically complements the “planning” and this has to do with how devoted the senior management are towards attaining a sustainable institution. Environmental awareness, training, baseline environmental reviews and drafting an environmental policy are the main key elements of the bronze phase. An institution must be able to show these four basic commitments before they can be certified a bronze worthy.

The Silver however is referred to as “implementing” and it requires the execution of the elements highlighted in the policy. It`s key elements include: legal and other requirements, significant environmental aspects, objectives, targets, programmes, and environmental policy.

The gold is recognised as “operating” and consist of resources, roles and responsibilities; competence, training and awareness; communication; documentation and control of documents; operational control; emergency preparedness and response.

Finally the platinum which is the checking & correcting requires monitoring, measurement of the success so far followed by the evaluation of compliance in terms of abiding by the restrictions placed & the non conformity, correctiveness, and preventive action. Furthermore control of records is required, internal auditing and finally the management review.(GCU Envirocampus, 2007)

3.0 Positive And Negative Aspects Of The System:

According to Glasgow Caledonian University/sustainability website EMS has the following beneficial qualities:

• assists in obtaining a licence to operate and complying with legal and other requirements such as planning consents;
• improves relationships with regulators;
• helps to prevent enforcement or civil actions;
• reduces hidden costs associated with legal action (including substantial draw on management time);
• avoids fines and damages awarded from legal action through criminal or civil courts
• improves operational and process efficiency;
• reduces operating costs and resource use thereby increasing profitability;
• reduces outlay on waste disposal;
• gives the institution a long-term sustainable future;
• develops relationships with stakeholders by satisfying investors’ lenders’ and insurers’ environmental performance requirements;
• helps to obtain insurance at a reasonable cost;
• enhances the internal and external image of the institution, making it more marketable;
• helps attract and retain quality staff and students;
• Reduces pollution and improves the environment.

And EMS has the following drawbacks:

• requires human and financial resources;
• takes time to convince people that it is worthwhile;
• requires good communication and training;
• can be time-consuming to implement and maintain

From the above mentioned list, it clearly signifies how the advantages of an EMS overshadow the disadvantages, and for an effective and organised improvement of an institution’s environmental activities, it is most recommended.

4.0 Evidence of Bronze and Silver Medals

According to the GCU/Sustainability website on June the 12th 2009 Glasgow Caledonian University received a bronze medal. It was presented by the eco campus Director, Dr Peter Redfern of Nottingham Trent University to Jim McQueen who received it on behalf of Glasgow Caledonian University eco campus team during workshop number 5 at Bournemouth University on the 1st of July 2009. It was on a time scale of 2 and 3 month and it covered the “planning stage”. It had an upfront cost of ?9000 for purchase of training tools. These tools are: web trainer tool, review tool, significance calculator tool and document control tool.

The silver medal was later awarded on the 28th of April 2010 after successfully completing the “implementation stage”. The certificate was presented to Therese Fraser and Jim McQueen on May the 18th 2010 at Nottingham Trent University in correspondence to their Workshop 9 attendance. This was undoughtedly accomplished based on the commitments the staff and students of GCU had put in. Presently, the institution focuses on programmes to reduce carbon dioxide emissions under the supervision of the university in areas such as administrative, accommodation, and leisure buildings. It also has in place a carbon management plan which was approved by the carbon trust on 30th April 2010. (gcu.ac.uk/sustainability).

As part of their commitment towards creating a sustainable and carbon free campus, GCU has joined the carbon trust scheme in addition to the eco campus plan. Besides that, their commitment goes as far as reducing their adverse impacts on the environment under the mandate set up by the Scottish government which involves an action to reduce carbon dioxide emission and to the climate change Bill 2007, commitments has been made to reduce emissions nationally by 69% by 2050. The School is also committed to promote projects which enhance society’s management of waste through collaborating with an environmental body that utilizes landfill tax credits called SCORE. (gcu.ac.uk/sustainability).

In terms of drafting an environmental policy under the bronze criteria GCU have been active in that department, a lot have been drafted but just to mention a few. The policies include:

1. Incorporate recycling initiatives within our waste management review, increase recycling by 5% year on year.
2. Develop the use of recycled materials and increase recycling initiatives.
3. Prevent pollution by reducing emissions and discharges.
4. Reduce the negative impacts associated with our travel by 4% in this year while developing partnerships with travel groups.
5. Reduction in water by 10% over the next 2 years by increasing automatic metering.

As mentioned in the policy document, it is underpinned by the values of the University and is subject to annual review by the Executive Board which is also another criteria for award attainment (environmental reviews) together with “implementation” of these plans which is the silver stage. The university achieved this through its collaborative effort between the EMS manager and certain specialists in each area of GCU. They reviewed aspects like electricity which has severe negative impacts especially as it is produced by burning fossil fuels. (gcu.ac.uk/sustainability).

Regarding the issue of awareness, trainings & workshops, GCU has achieved a lot in that area quite a number of awareness weeks & trainings have taken place like its carbon footprint programme that was held on Environment day May the 5th. Other awareness campaigns followed such as facilities management department held an Environmental & Energy awareness day on Thursday November 1st 2007. Amongst them the most successful one that took place was the Energy awareness day of September the 19th 2006. It was estimated that over 1,000 staffs and students passed through the exhibition.

5.0 STEPS TO ACHIEVE THE GOLD MEDAL

The Gold phase of the eco campus covers “operating” as mentioned earlier and is depended upon the institutions commitment. Operating consists of the following:-

• Resources, roles, responsibilities and authority;
• Competence, training and awareness
• Communication
• Documentation
• Control of documents
• Operational control
• Emergency preparedness and response. (eco campus Audit criteria 2005-2008)

1. Resources, Roles and Responsibilities

The university will have to provide evidence of appropriate resources put in place in order to implement the environmental management system. Roles and responsibilities should be allocated to member staffs and students; this will enable the institution to finalise the outline management structure.

2. Competence and Training

All training records shall be collated, recorded and stored. Assessment shall also be made on the competency of persons whose work may have a significant impact on the environment. Both staff and students especially those that are part of the eco campus team should have adequate training to ensure they understand the environmental issues relating to the institution and their roles and responsibilities for implementing the environmental management system. The same Training should also be done to any new persons joining the team and all training should be recorded and updated.

3. Communication

Procedures must be adopted for documenting and responding to environmental communication received from within and outside the institution. This can be achieved through presentations, briefings, lectures etc and key environmental impacts and relevant legal issues should be communicated to team members. Also, roles and responsibilities should be communicated to all relevant persons in order to meet the commitments made in the environmental policy and objectives and targets

4. Documentation/Control of documents

The institution shall develop an EMS manual describing how the EMS operates and cross referencing to relevant documentation. A procedure for controlling environmental management system documentation shall be established. This entails -documents shall be defined.

• An authorised person shall approve system document prior to release and the date of approval shall be shown on the document.
• Record of changes made to documents shall be maintained.
• Responsibilities, authorities and processes for disposing of absolute documents shall be defined.
• An authorised person shall approve system document prior to release and the date of approval shall be shown on the document.

5. Operational Control

Having control over all operational activities is a vital role in achieving the Gold medal. This can be made possible by looking at the guide as follows:-

A procedure should be developed to outline the management of operational control procedures; procedures that address significant aspects in line with objectives and targets should be developed. These procedures shall demonstrate how the institution controls those areas of its activities which could have an effect on the environment.

6. Emergency Preparedness and Response

System to identify and respond to emergencies which could result in damage to the environment must be put in place. A schedule of emergency procedure test drill should be established, this will help to describe how the institution review and test emergency preparedness and response.

Glasgow Caledonian University through some of its activities like being part of the carbon trust and the commitments to sustainability and creation of greener campus has already tackled some of the basic elements listed above. However, there is still more to be done to ensure the institution becomes a sustainable institution. Some key issues like waste management and creating awareness through campaigns still needs to be addressed. Most students are either not aware or refuse to comply with the waste management strategy. There seem to be a waste segregation and recycling that is going on but due to lack of awareness most of students do not know therefore, there is still much that has to be done in order to attain the Gold level and achieve a sustainable university. And a target for that should be the international students which GCU has quite a few, source segregation for example needs to be made aware especially during the first weeks of orientation about how it works and its importance. Water management and electricity consumption is another issue that needs to be addressed, motion light sensors and water meters should be installed in hostels because that is where most of the consumption takes place. Students should be enlightened on the impacts of such actions and the need to develop a secure, safe and sustainable institution for learning. I also recommend placing parking ticket fee or stamps to parking spaces this will help reduce emissions from staff and students from coming with cars and at the same time make subsidies and promos on bus fares to school.

6. Conclusion:

All institutional activities have an impact on the environment and there is need to review our mannerisms if we are committed in reducing the effects. This can best be achieved through the incorporation of an environmental management system which appears to be the most logical and effective way. The success of the systems without a dought takes a little while to be actualized but there are a lot of gains attached to it, such as the Eco campus award schemes, National Recognitions, an efficient structured management system and above all the Management of our Environment. And again the success as mentioned in the report requires the devotion of the People within the organisation. So it is about time Government Steps in and make EMS a more Standardize requirement for organizations especially schools where most of the daily activities occur in terms of resources usage.

7. References:

1. Caledonian Environmental Centre (CEC): 2007; implementing an environmental management system in Glasgow Caledonian University
2. Coglianese, C. Nash J.2001. Regulating from the Inside team can Environmental Management system Achieve Policy
3. Goals Washington: Resources for the future Press.
4. Darnall, N. Henriques,I. Sardosky, P.2008. Do Environmental Management systems Improve business Performance In an International SettingJournal on International Management, 2008, 14, pp364-376
5. Eco campus Audit criteria 2005- 2008; Available on blackboard via health and safety assignment materials
6. Ecocampus. (2010). Ecocampus [Online]Available at: http://www.ecocampus.co.uk/EMS.htm[ Accessed on 4 November 2010]
7. GCU.(2010). Sustainability[Online] Available at : http// www.gcu.ac.uk/sustainability/susprochtml.[accessed 3 November 2010]
8. Hillary, R. (1999). Evaluation of Study Reports on the Barriers, Opportunities and Drivers for Small and Medium Sized
9. Enterprises in the Adoption of EMSs. London: Network for Environmental Management and Auditing. Paper submitted to UK Government. Department of Trade and Industry: Environment Directorate (5/10/99).
10. Institute Of Environmental Management & Assessment.[Online] Available on http://www.iema.net.[Accessed 3 November 2010].
11. Shireman W. 2003. A Measurement Guide to Productivity: 50 Powerful Tools to Grow your Triple Bottom Line. Asian Productivity Organization: Tokyo

Chapter 1: Introduction

1.1 History of Coffee

Evidence suggests that coffee was first discovered as a hot beverage in Eastern Africa during 11th century, in an area known today as Ethiopia. Today, coffee is a giant global industry employing more than 20 million people. This commodity ranks second only to petroleum in terms of dollars traded worldwide. With over 400 billion cups consumed every year, coffee is the world’s most popular beverage. In the United States, sales of premium speciality coffees have reached the multibillion-dollar level, and are increasing significantly on an annual basis. (Coffee Universe, 2011)

1.2 Formation of Starbucks

In 1985, Starbucks was formed under the direction and leadership of Howard Schultz. Schultz presently serves as the Chairman of the Board as well as leads visionary of the trade. Starbucks purchases, roasts and sells high-quality whole bean coffees primarily through Trade-operated retail stores. (Starbucks website, 2010) In addition, it sells fresh coffees, Italian-style espresso drinks, chilled and blended beverages, a selection of complimentary food items, coffee related accessories and equipment, along with a selection of premium teas and a line of compact discs,

1.3 Company Overview

The original Starbucks was formed in 1971 by three academics– English teacher Jerry Baldwin, history teacher Zev Siegel and writer Gordon Bowker who opened the first store in Seattle that they called “Starbucks Coffee, Tea, and Spice”. These partners named the brand Starbucks after the coffee-loving first mate in Melville’s Classic Novel “Moby Dick”. The name resonated with the romance of the high seas and seafaring coffee traders. The logo of Starbucks Company was based on an old 16th century Norse woodcut: a two tailed mermaid siren encircled by the Store’s original name The Company grew slowly and by the early 1980s had a roasting plant and 4 retail stores that sold whole-bean coffee in the Seattle area. Starbucks has been profitable every year since it commenced trading.

In March 1987, Jerry Baldwin and Gordon Bowker decided to sell the whole Starbucks operation in Seattle – the stores, the roasting plant and the Starbucks name. Schultz raised capital and immediately bought the company. The new name of the combined companies was Starbucks Corporation. When Howard Schultz was 34 years old, he became Starbucks’ president and CEO.

In 1989, Schultz brought in Howard Behar who was familiar with opening and running multiple units. The following year, Orin Smith joined Starbucks as their Chief Financial and Operations Officer. Both Smith and Behar were 10 years senior to Schultz and brought with them seasoned experience to help build the Company’s infrastructure. By 1991, Starbucks had ventured into the mail-order catalogue business, licensed airport stores, expanded into California and had just over 100 stores. The company went public in 1992. (Case GS-54, 2007)

By 2005, Starbucks had more than 10,200 company operated and licensed stores in more than 35 countries. The stores offered coffee drinks, and food items, as well as beans, coffee accessories, teas, and music. Starbucks Corporation operated more than 5,200 stores in 10 countries (80% in the U.S. which were located primarily in shopping centres and airports), while licensed operators more than 2,800 units in 28 countries. . The company also owned and licensed the Seattle’s Best Coffee and Torrefazione Italia chain in the United States with more than 100 shops. In addition Starbucks marketed its coffee through grocery stores and licensed its brand for other food and beverage product. Most recent figures from January 2, 2011 show the total store count for Starbucks Corporation as 17,009; 8,870 owned stores and 8,139 licensed stores. (Starbucks Company Profile, 2011)

1.4 The speciality coffee industry and the Starbucks coffee Supply Chain

The speciality coffee industry has grown dramatically, especially in the period between 1980s and 1990s. A large number of specialists felt that the differentiated coffee supported by the speciality industry would continue to expand much faster than conventional coffees. Nevertheless, the definition of speciality in the United States continued to be refined. By 2005, it included less quality and flavoured coffees and the industry began to redefine “speciality” as meaning quality.

Coffee beans come from all over the world; from East Africa, Pacific Rim, and Latin America. The farms range in size from 5 acres for traditional farms to large plantations covering thousands of acres. Between 50 to 70% of the global coffee supply comes from small-scale farms. These small producers generally don’t own the mills that used to process the product from cherry to bean. While some did operate as part of a cooperative, not all small-scale farmers had this as an option. Often, mills were owned and operated by the large farms and consequently small farmers had little leverage when negotiating prices with the larger owners. Coffee must be processed and it was common for small farmers to accept a considerably lower price to be able to get their coffee to market. Starbucks also purchase coffee through agents from individual estates, producer associations, suppliers or directly from the processors.

1.5 The Company Mission Statement

According to Schultz, H. & Yang, D.J. (1997), the mission statement of this company is to “Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles as we grow”. These uncompromising principles have led the company to specific and imperative policy decisions.

In order for Starbucks to measure the appropriateness of their decisions, they use the following six guiding principles:

Provide a great work environment as well as treat each other with of respect and dignity.
Embrace diversity as an important component in the way we do business.
Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee.
Develop enthusiastically satisfied customers all of the time.
Contribute positively to our communities and our environment.
Recognize that profitability is essential to our future success.
Chapter 2: Literature Review

2.1 Starbucks’ Products

According to Pahl (2008, p.7) “Starbucks purchases and roasts high-quality whole bean coffees and sells them along with fresh, rich-brewed, Italian style espresso beverages, a variety of pastries and confections and coffee-related accessories and equipment, primarily through its company-operated retail stores”. Here are more details about Starbucks product range that they sell in their stores:

1. Coffee: more than 30 blends and single-origin premium Arabica coffees.

2. Handcrafted Beverages: fresh-brewed coffee, hot and iced espresso beverages, coffee and non-coffee blended beverages, Vivanno smoothies and Tazo teas.

3. Merchandise: mixed home espresso machines, coffee brewers and grinders, a line of premium chocolate, coffee mugs and coffee accessories and a variety of music, books and gift items.

4. Fresh food: Baked pastries, sandwiches, salads, oatmeal, yogurt parfaits and fruit cups.

5. Global consumer products: line of VIA Ready Brew coffee, bottled Starbucks Frappuccino beverages, Starbucks Discoveries chilled cup coffee (in Japan, Taiwan, and Korea), Starbucks DoubleShot espresso drinks, Starbucks Iced coffee, whole bean coffee and Tazo teas at grocery and a line of super-premium ice creams.

6. Brand Portfolio: Tazo tea, Ethos water, Seattle’s Best Coffee and Torrefazione Italian Coffee. (Starbucks, 2010)

In addition, Starbucks has introduced several successful product and brand extensions, including offering coffee on United Airlines flights, selling premium teas through its wholly owned subsidiary Tazo Tea Company, developing a bottled version of its popular Frappuccino blended beverage with PepsiCo, developing a premium coffee ice-cream with Dreyers and distributing whole bean and ground coffee at supermarkets though an agreement with Kraft (Tuck School of Business, Dartmouth, 2002).

2.2 Green Supply Chain (GSC)

Datamonitor (2005) states that Starbucks is a disciplined innovator. The company effectively manages its innovation time line, generating consistency in same store sales. For instance, in the fiscal year of 2002, the company introduced new Frappuccino Blended Beverages; in 2003, the ‘Iced Shaken’ refreshments product line was launched. In 2004, it introduced the new Frappuccino Light blended coffee. Starbucks’ ability to roll out new products relatively quickly is a considerable competitive advantage for the company.

Throughout Grande Expectations (Cole, 2008), Starbucks shows that it is a master at offering the right products to its customers. The company maintains a strong core range while also building demand for seasonally available drinks that are eagerly anticipated every year. In addition to an on-going expansion into food, sandwiches and entertainments product, Starbucks is not an organization prepared to stand still.

2.3 Supply Chain Visibility

Coffee and Farmer Equity (C.A.F.E.) Practices increased the visibility of Starbucks’ supply chain by demanding a documented and verified product as well as documented financial flows through the supply chains of its suppliers. In the past, Starbucks had very poor visibility in their supply base, as coffee farmers and processors were not very technologically sophisticated or mature in their business processes. By increasing the transparency of their supply base, Starbucks would be able to gain a better understanding of the needs and the working conditions of their suppliers. The increased visibility would allow Starbucks to improve its relationships with growers, who had previously been isolated from them by the coffee exporters and distributors.

On a practical note, increased visibility in the supply chain might allow Starbucks to better predict supply shortages as they arose. Since the majority of Starbucks coffee was grown in developing countries in Latin America, Africa, South America, and Southeast Asia, Starbucks had a significant risk of supply shortage due to regional instability. Devoid of visibility in the supply base, Starbucks could not reliably predict the impact of regional instability on its coffee supply. By raising corporate visibility, regional instability might be linked to a particular quantity of coffee, giving Starbucks advance notice of the need to find alternate sources of supply. This might allow Starbucks to be proactive in managing supply disruptions before they even arose. (Tarantino, 2007)

2.4 Corporate Social Responsibilities (CSR)

Starbucks firm are committed to do business responsibly and by conducting themselves in ways that earn the trust and respect of their customers, partners and neighbours. They call Starbucks a shared planet and there are three main areas of focus: ethical sourcing, environmental stewardship and community involvement. (Starbucks, 2010)

2.4.1 Ethical Sourcing

Starbucks have developed strong, long-term relationships with farmers all over the world, to make sure that they can buy the high-quality coffee that their customers. By 2015 it hopes that all of their coffee will be grown using ethical trading and responsible growing practices.

Coffee

C.A.F.E Practices (Coffee and Farmer Equity Practices)

Coffee and Farmer Equity (C.A.F.E.) is a Starbucks initiative that has created a set of industry-leading, comprehensive coffee-buying guidelines. These guidelines address the quality of coffee, financial transparency, and social and environmental responsibility.

Starbucks did not use its purchasing power as a way to manipulate its coffee suppliers in order to improve profit margins. Instead they decided to use their market power as a way to implement social change within its supply chain. The C.A.F.E Practices Program helped the company to ensure the sustainable supply of high quality coffee beans, which is an essential component of Starbucks.

There are three types of environmental sustainable coffee purchased by Starbucks:

Conservation Coffee: Through its partnership with CI Starbucks encouraged coffee farmers to use traditional and sustainable cultivation methods. The basic aim was to protect shade trees, which were often stripped away and replaced with tight rows of coffee trees on large coffee plantations. This not only destroyed biodiversity, but also resulted in lower coffee production.

Certified Organic Coffee: This coffee is grown without the use of synthetic pesticides, herbicides or chemical fertilizers to help maintain healthy soil and groundwater.

Fair Trade Certified Coffee: Through a licensing agreement with TransFair USA, Starbucks tries to ensure that coffee farmers are fairly compensated for their crops. The Fair Trade Certified Coffee label certified that the coffee met Fair Trade criteria. Focussing primarily on price and other sustainable needs. Fair Trade Certified coffees only came from democratically owned cooperatives, not large farms or coffee pulled across supply channels. (Case GS-54, 2007)

Farmer support

The primarily objective of farmer support is to increase farmers’ loan guarantees to $20 million by 2015 and to provide farmers with incentives to reduce the environmental impact of coffee production

Support Centres

Starbucks has established Farmer Support Centres in Costa Rica and Rwanda to provide local farmers with resources and expertise to help lower the cost of production, reduce fungus infections, improve coffee quality and increase the production of premium coffee.

Loan Programs

During the growing and harvest cycles, many coffee farmers must use their modest reserves to cover expenses until they can sell their crops. Some farmers may experience a cash shortage, prompting them to sell their crops early (and for less) to local buyers. Starbucks provides funding to organizations that make loans to coffee growers, to help them sell their crops at the best time to get the right price. These loans also help farmers to invest in their farms and make capital improvements. “Over the years, we’ve committed over $15 million to a variety of farmer loan funds.” (Starbucks, 2010)

Tea

The Tea brand (Tazo) is dedicated to bringing high-quality, distinctive blends to the customer. Throughout the Community Health and Advancement Initiative project (CHAI) , they reach out to communities that produce Tazo tea ingredients. This project targets the tea and spice growing communities with health services and economic development. Since 2003, Starbucks and tea suppliers have contributed $2.4 million, including $530,000 in fiscal 2008, to the CHAI project. (Starbucks, 2010)

Fair Trade

Fair trade labelling in the food industry is now gaining momentum (Adams, 1993). Researchers have argued that food retailer must lead efforts to promote and support fair trade food products (Jones et al, 2003). Coffee represents one example of fair trade in action. Specifically, coffee bean supplies typically originate from small coffee growers, and supply prices have forced growers into poverty or even bankruptcy (MacKenzie, 2004). As a leading industry retailer, Starbucks was targeted by NGOs for not providing fair trade prices to coffee suppliers and has since instituted fair trade coffee offerings in their stores. Their success has been limited however, as Starbucks has found that consumer demand for fair trade coffee is relatively flat and that certified suppliers often lack consistency both in volume and quality (Scharge, 2004).This example indicates that although fair trade offerings may help alleviate public criticism of financial fairness with suppliers, they may not be profitable for food companies. (Maloni, M. J. & Brown, M. E., 2006)

2.4.2 Environmental Stewardship

Starbucks share their customer’s commitment to the environment and they believe in the importance of caring for the planet and encouraging others to do the same. Their goal is to have 100% of their cups reusable or recyclable by 2015. Moreover, they will work to significantly reduce their environmental footprint through energy and water conservation, recycling and green construction.

Recycling

Starbucks is committed to reducing the waste which their stores generate – especially when it comes to recycling.

Starbucks’ goal is to have recycling available in all of their stores where they can control waste collection and serve 25% of beverages in reusable cups.

Recycling in Stores

In the last year, 70% of Starbucks stores recycled at least one type of waste but recycling is reliant on the local availability of commercial recycling. However, there are also some local communities that provide a minimal cost or non-commercial recycling.

Greener Cups

Over the years, Starbucks has launched numerous initiatives to decrease the environmental impact of the one-use cups.

In 1997, they developed their recycled-content cup sleeve that protects customers from hot beverages and avoid the waste of “double cupping.”
In 2006, they launched the industry’s first hot beverage paper cup with 10% post-consumer recycled fibre.
In 2008, they rolled out a new plastic cup that has a reduced environmental impact over the original plastic cups.

In 2009, they hosted a Cup Summit in Seattle, bringing together all areas of their paper and plastic cup value chain to reach agreement on criteria for a comprehensive recyclable cup solution. (Starbucks, 2010)

Composting

In 1995, Starbucks introduced ‘Grounds for Your Garden’ which offers customers complimentary five pounds bags of used coffee grounds to enrich garden soil. In addition, many stores are able to divert other food waste and coffee grounds from the landfill when commercial composting is available.

Energy

The energy used in Starbucks stores makes up nearly 80% of their entire carbon footprint. In the last few years, they have made major progress in understanding and developing new strategies to reduce their energy consumption. They continue to purchase renewable energy and that now represents 20% of the total electricity used in the company operated stores in the U.S. and Canada. In addition, they are investing in new lighting and improving the efficiency of HVAC (heating, ventilation and cooling) systems and other equipment. They aim to reduce their energy use in new stores by 25% and to obtain 50% of their energy from renewable sources in all of their company owned stores by end of 2010. (Starbucks, 2010)

Water

Water is a valuable natural resource and considered one of the essential ingredients in most Starbucks beverages. The main uses of water in Starbucks stores is to make coffee and tea and for back of house operations such as dishwashers and ice machines. In addition, they have started to implement new alternatives to the dipper well system used to clean utensils; they believe this will significantly reduce the water usage across the Corporation. An example would be using a blast of higher-pressure to clean blender pitchers instead of an open tap. The main goal is to reduce water usage in company owned stores by 15% by 2012. (Starbucks, 2010)

Green building

Starbucks is using the U.S. Green Building Council’s (USGBC) LEED certification program as a benchmark for success. Since 2001, they have helped lead the work with other retailers and the USGBC to create a system to certify retail stores and store prototypes. This volume-certification process will pre-certify their green stores at the design, construction and operational strategy level. After opening, they will be monitored through spot checks and continuous review to ensure that they are meeting the high standards they have set for themselves. Conventionally, LEED certification has been accomplished one building at a time, making it difficult for retailers with hundreds of stores to participate. They have set an ambitious goal to achieve LEED certification globally for all new company owned stores, starting in late 2010. (Starbucks, 2010)

Climate change

Some researchers indicate that coffee-growing regions will be impacted directly by climate change. Since 2004, Starbucks has been aggressively implementing a climate change strategy, focusing on renewable energy, energy conservation and collaboration and support. This strategy can be used to minimize the use of energy and water, reducing the waste associated with their cups, increasing recycling and integrating green design into their stores. Their goal is to support programs that enable farmers to gain access to carbon markets, allowing them to generate additional income while helping to avoid deforestation. (Starbucks, 2010)

2.4.3 Community Involvement

From the neighbourhoods where Starbucks’ stores are located to the ones where their coffee is grown – the Corporation believe in being involved in the communities they are a part of. A good neighbour is one who can bring people together, inspire change and make a difference in people’s lives. They are planning to donate one million annual community volunteer hours to their communities by 2015. (Starbucks, 2010)

Youth Action

This program, they will create positive solutions for the needs they see in their communities. They believe that by using their spirit of innovation to speak to and support young people, they can make real change in local communities. By 2015, they aspire to engage 50,000 young people who will in turn innovate, take action and inspire 100,000 individuals in their communities.

Starbucks has established relationships with the International Youth Foundation and Youth Venture, as these organisations are specialists in providing comprehensive support to help young people identifying and address the needs in their communities. The young people will receive advocacy, training, financial help and other resources to ensure that their efforts flourish around the world. (Starbucks, 2010)

Starbucks Red

Every time a customer buys a Starbucks Red product or pays with their Starbucks Red card, they make a contribution to the global fund to help people living with HIV/AIDS in Africa. With the help of customers, they have already generated a contribution equalling more than 18 million daily doses of medicine.

Ethos water fund

There are more than I billion people on our planet who cannot get clean drinking water. For this reason, the Ethos water fund was created, in order to help raise awareness and provide children with access to clean water. Starbucks have given 5 cents to the Ethos water fund for every time a bottle of Ethos water is purchased. (Starbucks, 2010)

2.4.4 Health and Wellness

Starbucks provides nutritional information on all its products to help keep their customers healthy. It has reduced trans-fats in its products as well as allowing increasing customisation by its customers. Starbucks is an advocate for health care reform inside the United States. (Starbucks, 2010)

Chapter 3: Research Methodology

3.1 Primary Research

For this piece of work, I carried out a piece of primary research with a prepared questionnaire and target participants were Starbucks’ customer. Time constraints and the inability to provide an incentive that would encourage participation resulted in a sample size of only 60. This questionnaire can be found in Appendix 1.Because I was unable to gain permission from Starbucks Corporation to do this survey, I had to remove the Starbucks brand from the questions and generalise them for coffee shops. I travelled between Newcastle and Glasgow and visited Starbucks’ stores in both cities and have written up my observations in these stores.

3.2 Secondary Research

The secondary research was based on electronic journals, researcher’s articles, Starbucks’ website and other useful websites. I used social networking sites such as Facebook, in order to discuss the topic with colleagues and friends, helping me to gather further information related to the topic.

Chapter 4: Findings

4.1 Starbucks’ Objectives

In terms of Starbucks’ coffee bean supply chain, Starbucks primary goal is to provide total customer satisfaction by ensuring their coffee is available in all varieties, at reasonably affordable prices, meeting and exceeding customer expectations, while keeping costs low throughout the whole chain from supplier to customer.

The expectations of Starbucks’ customer would be to receive a perfectly made coffee, as recognised by the Starbucks’ mission statement. The notion of perfectly made coffee at Starbucks includes freshness and richness of taste, choice (varieties by origin, type and flavour), consistency, the image of being a “premium coffee” (an exotic experience, a gourmet beverage, unique blends), and at the same price at every location and every day. The intention is to help customers find a beverage that’s right for them from over 19,000 choices by giving them an opportunity to try new.

4.2 Supply Chain Management and its impact

4.2.1 Green Supply Chain

In mid-2009, Starbucks announced a legitimate attempt to address some very vocal stakeholder issues to clean up its supply chain by starting efforts to ensure that single-use cups are recyclable by 2012. They convened a “cup summit” with representatives from every part of the paper and plastic cup supply chain. This included raw material suppliers, cup manufacturers, retail and beverage partners, local municipal governments, Starbucks employees, and environmental NGOs and systems thinking Guru Peter Senge. This was no small task given the internal (vendors and suppliers) and external (end use customer) variables necessary to make this program a success. They modified their goal to a target of 2015. Starbucks reconvened this summit in spring 2010 and they are continuing down this open, transparent path to a sustainable supply chain one city, one franchisee at a time. They are also working with customers and cities to develop more proactive, use friendly recycling solutions.

In its approximately 2,200 company-owned stores in North America that control their own waste collection, recycled items are made from one or more materials. While the company has continued to encourage recycling in cities where it’s “marketable,” a great deal remains to be done on the customer side. The company is offering farmers incentives to prevent deforestation, with pilot programs currently underway in Sumatra, Indonesia, and Chiapas, Mexico. This represents both an upstream and a downstream approach to green supply chain management. Sustainability is built into the company’s business vision, performance metrics and product development decisions. Starbucks has a long way to go to meet its goals but theoretical goals like theirs may take time, coordination, patience and above all, will. (Meyer, 2010)

4.2.2 Starbucks’ Operations

Starbucks sells coffee beverages and beans through their owned and licensed retail outlets. The company’s stated mission is to establish Starbucks as the most recognized and respected brand of coffee in the world. Through its retail outlets, the Seattle based company also sells bakery goods, confections, coffee equipment and merchandise. The company has expanded both its product line and its marketing channels as it has grown. To serve these new channels, the company has partnered with several high-profile corporations, including PepsiCo, Dreyers and Barnes & Noble.

What follows below is a description and discussion of two points of Starbucks’ operations. Firstly, material flow, explaining how the beans flow from the original supplier to the retail stores all over the world. Secondly, purchasing systems, explaining how Starbucks handles the purchasing of such large volumes in a global market.

1) Material Flow

The production, preparation and delivery of coffee is an international process, as no coffee is grown in the continental United States, and Starbucks has had to develop procedures to not only protect the, but also the customers who visit our stores. The material flow of Starbucks, as shown in the diagram below, start from purchasing the green coffee to the shipping port to unloading the containers at their destination, from roasting and packaging the coffee to brewing and serving it to millions of customers.

Purchasing coffee beans form the point of origin

1. Starbucks is required to have the submitted material tested for contamination before it is disposed of, after receiving shipping containers of coffee beans at the roasting plant with the customer seals in place.

2. Starbucks implemented GPS tracking devices on some coffee shipment to monitor their progress from farm regions to shipping ports, ensuring that coffee has not been stolen or tampered with en route.

3. Starbucks implements rigorous quality control procedures, the coffee is inspected at various points, sampled at several points, and tested numerous times to ensure that what arrives in stores is the same coffee that buyers found at the point of origin.

4. Starbucks coffee buyers have to travel the world in search of the best coffees available, even in regions where economic or political instability create hazards for travellers.

5. After the coffee is roasted, it will be placed in the warehouse until required by the production schedule. The coffee is sampled, roasted and cupped to make sure it is the same coffee that was purchased. 10% of the bags will be sampled and compared to the flavour profile that was established from the point of origin. Once it has passed the taste test, the coffee will be loaded into roasting system

Roasting Plants

Once the container of coffee finishes its journey from the point of origin, Starbucks receive it at one of their three U.S. roasting plants or at their European roasting plant in Amsterdam. Today’s coffee roasters use computerised controls to help identify any hot spots and internal quenching systems to cool the coffee beans down if the temperature gets too high.

Distribution Centres

When the coffee has been packaged, it is sent to the Distribution Centre (DC), where it is picked by partners filling store orders.

Stores

Once the coffee arrives at one of the stores, it is available for retail sale either as whole bean coffee or as a component in one of the hand-crafted beverages.

2) Purchasing System

Although most coffee is purchased in the commodity market, coffee of the quality sought by Starbucks is usually purchased on a negotiated basis at a substantial premium above commodity coffees, dependent on supply and demand at the time of purchase.

After a new coffee has been purchased and sold for a period, Starbucks will implement quality control to produce high-quality green beans that can be sold to speciality coffee companies. Starbucks is always concerns about the supply chain management for its coffee beans as a priority and creates many programs to ensure this process is both effective and efficient for all stakeholders:

In 2000, Starbucks introduced a line of fair trade products and now offers three options for the socially conscious coffee drinker. Starbucks have become the largest buyer of Certified Fair Trade coffee in North America (10% of the global market) and the only company licensed to sell Certified Fair Trade coffee in 23 countries.
Starbucks entered into fixed-price purchase commitments in order to secure an adequate supply of quality green coffee beans and to limit its exposure to fluctuating coffee prices. Starbucks is confident in the subsequent relationships and believes the risks of non-delivery on purchase commitments are remote.
During the past year Starbucks has been developing a new set of coffee sourcing guidelines. These sourcing guidelines are a flexible point system that rewards performance in sustainable categories with financial incentives. Ultimately, those who qualify for 100 points will be granted preferred supplier status with the Company’s coffee buyers. This program is called Preferred Supplier Program (PSP).

Starbuck’s Consideration in Purchasing

uStarbucks’ concern about the quality of the coffee bean is due to their aim to establish Starbucks as the most recognized and respected brand of coffee in the world. However, quality is not everything in the eyes of Starbucks.

Beans-Related Concerns to Better Choose the Supplier

There is the Starbucks program to find the effective supplier, “Preferred Supplier Program (PSP)”.

This is a set of guidelines which will not only protect high quality standards but will also promote the long term viability of quality, economic and environmentaly sound practice. Starbucks sets the program and requests the supplier to meet the specific requirement. Preferred supplier status will be awarded to vendors who achieved a score of 100 points. (Starbucks Corporation, 2011)

The first dimensions in the Preferred Supplier Program (PSP) relate to the beans:

Quality Criteria: Prerequisite: every coffee must meet Starbucks quality standard in order to be considered for purchase. High quality is an integral component of sustainability at all levels of the coffee supply chain.
Quality varieties: the company will purchase only Arabica varieties of coffee.
Flavour characteristics: Starbucks cup quality standards are based on specific descriptions for each coffee purchased. Every coffee is expected to represent the flavour character unique to the country or region. All coffees are expected to provide a perfectly clean cup, with medium to heavy body and excellent aroma. All washed coffees must be of good hard bean (or better density) and have good acidity.

Other-than-Beans-Related Concerns to Better Choose the Supplier

Other elements in Preferred Supplier Program (PSP) are those not related to the beans:

Environmental Impacts
Soil management: Farm management practices should effectively control erosion and enhance soil structure and fertility, relying as far as possible on means such as organic fertilizers, covering crops, mulch and compost.
Water reduction: Coffee should be processed using methods that reduce water consumption.
Clean water: Coffee should be processed using methods that prevent pollution of surface water and ground water.
Water buffer zone: Vegetative buffer zones should be in place adjacent to all water sources. No alteration should be made to the courses or hydrology of streams or other surface water bodies.
Energy use: Coffee growing, processing and drying should use energy efficiently, employ renewable sources wherever possible and not rely on firewood obtained from forest clearing. For example, patio drying should be used as much as practical and solar coffee drying technology employed where feasible.
Acceptable agrochemical: Coffee production systems should minimize and wherever possible eliminate inputs of agrochemicals such as chemical pesticides and synthetic fertilizers.
Waste management: Waste and coffee by-product are managed to minimize environmental impacts by applying the principles of reduction, reuse and recycling e.g. composting or recycling of coffee pulp and parchment.
Economic issues

Coffee production systems and commercialization should benefit rural communities by boosting producer incomes, expanding employment and education opportunities and enhancing local infrastructure and public services. In order for coffee production to be sustainable, it must be economically viable at all levels of the supply chain, from seed to cup.

Long-term relationships: Starbucks seeks to develop long-term trading relationships with preferred suppliers.
Incentives: Through its purchasing and pricing policies, Starbucks seeks to provide incentives and support for sustainable coffee production, processing and shipping methods.
Economic transparency: In order to ensure that the entire supply chain – farmer, miller, exporter and importer – benefit from the Starbucks preferred supplier program, vendors are expected to provide reliable documentation regarding prices paid to their suppliers.

Chapter 5: Discussion/ Data analysis

5.1 Starbucks’ Strategy

Starbucks Corporation’s growth utilised mainly a differentiation strategy but also a cost leadership strategy. Its differentiation strategy was exemplified by their stores providing a full experience, offering interesting coffee-related drinks, in a theatrical atmosphere, their unique coffee blending and roasting process creating an extensive product variety, their highly trained employees, exceptional service and their ability to find the perfect location for their stores. This enabled them to maximize market share in a given area of a city and build their regional reputation, which then increased their image to a national level of high prestige and status. For all these reasons, consumers were willing to pay a premium on their product.

Their cost leadership strategy was exemplified by their supply chain operations, whereby they received the best transportation rates and were able to achieve economies of scale by eliminating redundancy and maximising efficiency. Starbucks was also a cost leader due to its good relationship with coffee exporters who were “very anxious to become Starbucks suppliers”, a fact that enabled the company to get better prices and reduce bean-sourcing costs.

5.2 Operational elements

Operational objectives ensure that the next step in the supply chain meets strategic and tactical goals. It provides for compliance with SB’s standards, while constantly minimizing costs by controlling and managing inventories |n other words, the quantity of the product has to be forecasted, planned, scheduled, delivered, processed and distributed in order to secure smooth operations of every SB outlet and distribution channel. A set of tools delivers this objective: RFID for “dark deliveries” by suppliers and for shipping containers (Operation Safe Commerce), Integrated Supply Chain Operating systems, Lean Operations, Inventory Control and forecasting accuracy, high-tech roasting and grinding equipment, automated POS systems, Distribution Resource Planning (DRP), Transportation Requirement Planning (TRP) and Enterprise Requirement Planning (ERP) systems.

Purchasing

One of the factors that has made Starbucks successful was the use and purchase of high quality coffee beans. In order to have competitive advantage over its competitors, Starbucks’ purchasing personnel need to visit coffee-producing countries on a regular basis. The visits form better relationship with growers and exporters, allows checks on agricultural situations and crop yields and supports the search for diversity and sources that would meet Starbucks’ critical standards for quality and flavour.

With a strong belief that being successful in the coffee business is due to the quality of coffee beans, Starbucks has been the leader on contributing and promoting the preservation to the environment and community in coffee-origin countries. The company has a policy on paying prices high enough to small coffee growers, to allow them to cover the production cost and have a better standard of living.

Distribution & Warehousing

Distribution and warehousing functions will be the final steps in delivering the product to the end customer, again, minimizing costs and maximizing profits. Long-term agreements with logistics providers and foodservice distributors e.g. Sysco & HAVI complement the Company-operated retail stores and the network of distribution channels. This includes retail and grocery store licensing agreements, wholesale club accounts, joint ventures and direct-to-consumer channels, via mail orders and online. Convenience stores, department stores, movie theatres, businesses, airports, schools and medical facilities are other examples of the distribution network.

5.3 Value Chain Analysis

By examining each of the activities of the value chain, we find that Starbucks is very strong in almost all parts of it primary activities – Inbound Logistics / Operations / Outbound Logistics / Service.

Inbound Logistics – Suppliers & Logistic Centre

Starbucks has a formal process for developing both strategic and operating plans, which ensures it links manufacturing, procurement and logistics to the needs of the business. The material flow of Starbucks, starts from purchasing the green coffee, to the shipping port, to unloading the containers at their destination, from roasting and packaging the coffee to brewing and serving it to millions of customers.

In order to establish a highly organized and efficient logistic system, the following practices have been implemented:

Modernized Information Systems ensure that the information flow is efficient but Starbucks can revert to manual processes if required. The IT manager in each store controls the allocation of the goods through the database which enhances the efficiency of Starbucks’ inventory. Starbucks combines this with manual processes so that staff know how to make alternative arrangements in an emergency.
Distribution centres ensure the efficient management of inventory to better fulfil the requirements from all stores globally from a convenient location.

The company recently announced its intention to establish a 125,000 square foot distribution centre in suburban Nashville. The distribution centre will provide logistics and shipping services to 900 Starbucks locations from Wisconsin to Florida. Their major distribution centre at Memphis, is also the home to Federal Express Corp., the world’s major overnight cargo handler, and Ingram Micro, one of the nation’s largest distribution companies. This helps Starbucks to achieve efficient transportation from the distribution centre to its stores.

Reliable logistic partner and great supplier partner: Starbucks strives to maintain good relationships with their key business partners, their suppliers, distributors and vendors; this process adds value by having an understanding of basic backups and efficient service.

Operations – Products

The main strength of Starbucks’ operations is its ability to provide high standard quality products throughout the world. In every Starbucks store, regardless of location, customers need never have concerns about the quality of the product. This standardization guarantees that Starbucks enjoys a reliable reputation for its products and this strongly consolidates the long-term relationship with its customers.

Outbound Logistics – Distributors

Starbucks is much more flexible in its distributions channels than other companies. The distribution channels divide into two parts: company-operated store and non-company channels. Although the non-company-oriented channels account for a very small percentage of sales, this channel involves partnerships with several important distributors, enabling the company to reach more customers through diversified channels. Some of the partners in North America are:

• Joint Venture: Hyatt Hotel, Pepsi (bottled Frappuccino beverages), Dreyer

• Partnership: Albertsons, Safeway, Draft Foods

• Direct sales: on-line / mail order http://www.starbucksstore.com/

Starbucks’ Competitive Advantages

Competitive advantages sustain the company’s continuing growth in market share, customer base and business exploration and each successful company has its particular characteristics. Analysing the competitive advantages of a company is an important step to better understand the secret behind their business success. The three main features on competitive advantages of Starbucks are product, service and distribution and logistics.

Competitive Advantages Related to the Products

Starbucks provides standard high quality of products throughout the world:

High quality control

In order to achieve this high quality, Starbucks takes the process of choosing their coffee beans one big step further, by insisting that their purchasing managers experience the supplier countries although they don’t generally buy coffee directly from the farm. They meet the people who cultivate the coffee and develop relationship with them. Through this process, they have achieved the best quality control the for their coffee bean and developed strong and solid supplier relationships. This competitive advantage supports Starbucks by always providing the customer the highest quality of products, reducing the indirect cost which might be generated during the process and also enhancing the relationship between their suppliers and Starbucks.

Encouragement of high product innovation levels

Starbucks invests considerable funds in developing new products and new features to meet customer needs. Starbucks encourages a creative mind to bring new environments and experience to customers, such as introducing breakfast, music selling and other cookware selling. This innovative spirit provides Starbucks with the competitive advantage to maintain the leading position in coffee industry. (Koehn, 2005).

Competitive Advantages Related to Services

Starbucks provides ‘legendary service’ and a ‘coffee experience’

Starbucks not only provides the best service to their customers, but they aim to provide a ‘legendary service’. Each employee is trained to deliver the Starbucks’ style, elegance and.

The coffee experience each customer gets from a Starbucks store is far more unique and special. The artistic design of each coffee shop, the background music and the whole atmosphere, aims to deliver the most fashionable coffee drink in the country. (Moon & Quelch, 2004).

Starbucks’ innovation creates unique service

Starbucks provides a wide service and supplies based on customer needs, such as On-line sales, Pre-paid card and Pre-order and High Speed Internet in store. Customers can even make their order through their mobiles before entering the store, to avoid queues.

Competitive Advantages Related to Distribution and Logistics

Starbucks exploits more channels of distribution than its competitors.

Company-operated stores: Franchised stores and license stores contribute to Starbucks’ rapid global growth.
Non-company-oriented channels: Joint Ventures with Hyatt Hotel, Pepsi and with Dyner and partnerships with Albertsons, Safeway and other supermarkets who have built Starbucks coffee shops have greatly increased its market share.
On-line order and sell and mail-order: these new distribution channels provide the greatest convenience to the customer, whilst increasing its sales volume and convenience base.

5.4 Porter’s Competitive Forces Model

I have used Porter’s Competitive Forces Model to analyse the competitiveness of Starbucks. This model recognizes five major forces that could endanger Starbucks position in the coffee industry, namely the threat of new entrants, bargaining power of customers and buyers, bargaining power of suppliers, substitute products or services and the intensity of rivalry among competitors.

Threat of new entrants

The threat of new entry is considered to be low since the start up costs for this business concept are relatively high. Starbucks is a well established brand for coffee lovers; it is not easy for new entries to imitate this concept in short run. There are several barriers that discourage new entries to this market.

Economy
Product differentiation
Access to distribution channels
Intangible barriers to entry
Unique services
When the economy is good, threat of new entries may be slightly high and some businesses will start up. If the country is facing economic crisis, new business may not start up as easily. However this can also affect Starbucks’ business in long run; a strong economy will lead to good business and vice versa.
The Starbucks store offers a complete menu of Starbucks internationally beverages, pastries and coffee accessories in addition to Tazo® teas, espresso, fruit juices etc. They import coffee beans from Colombia, Sumatra, Indonesia, New Guinea, Costa Rica and offer various types of cheese cakes, muffins and cookies with their own secret recipe that is difficult to imitate. They also offer special customer loyalty promotions and festive promotions. Start-up entrepreneurs will fight for recognition as, in general, customers are risk averse and at the same time, they must source beans and supplementary product lines. Even with good managerial skills, training, collaboration, marketing can still hinder success.
Starbucks’ distribution channels are wide; there are around 50 Starbucks outlet in Malaysia alone, more than 503 in Japan and 5000 outlets worldwide. This strong brand makes it difficult for new entries to compete. Starbucks has spent very little money on advertising, preferring instead to build the brand, cup by cup with customers and to depend on word-of-mouth and the appeal of its storefronts.
Intangible barriers to entry such as the reputation of Starbucks intimidates new entrants to the market. Customers go to Starbucks for its coffee and the comfortable environment And although a cup of coffee costs only 40 cents, customers are happy to pay $4.00 for the atmosphere, music, wi-fi and brand. The company went to great lengths to make sure the store fixtures, merchandise displays, colour schemes, artwork, banners, music and aromas all blended to create a consistent, inviting, stimulating environment that evoked the romance of coffee and that rewarded customers.
Starbucks integrates with ‘Hear Music’ which offers a new experience for customers, combining coffee drinking, Internet surfing and listening to music. This is difficult to for newcomers to match. New entries must first consider are they able to compete with Starbucks and can they deliver a unique service

Power of Customers and Buyers

The bargaining power of customers when purchasing coffee is high as there are many alternatives to choose from, such as McDonald’s Corporation, Green Mountain Coffee small restaurants and coffee shops. All coffee companies use the same product – coffee beans and competition is based on quality of roasting, product innovations, variety and excellence of service. As a result, it is easy for the customers to switch between competitors and competition for brand recognition is very high.

As time passes, many people have learned to distinguish and differentiate the taste of good coffees, increasing the buyer bargaining power. Since coffee can be bought almost everywhere the switching costs are very low and product differentiations are minimum. Therefore, buyers have all the power to make a choice. In the future, the bargaining power of buyers in seems uncertain. The quality of coffee that Starbucks provides helps maintain customer loyalty, but the increasing the threats of substitution may lead to a higher bargaining power on the part of the customer.

Power of Suppliers

The bargaining power of coffee suppliers is low as coffee is considered a commodity, which usually renders the supplier a lack of power. Starbucks has contracts in place that secure its exclusivity to the coffee suppliers, which means there is a reliable continuous flow of supplies without the threat of potential competition for resources. Starbucks is developing a stronger relationship with its suppliers. It proactively ensures that there is fair treatment of foreign subcontractors, child labor procedures, minimum working conditions and wages and this relationship can prevent future breakdowns in supply.

Threat of Substitute Products

The threat of substitute products to Starbucks coffee is moderate. An example of a substitute product would be the premium coffee products available in the supermarkets. Customers usually turn to substitute products because of convenience and cost. However, from the coffee quality point of view, Starbuck’s coffee is better.

Competitive threats can also originate from non-coffee related products, such as tea, juices and soft drinks. People who are coffee-lovers will always stick to coffee, but people who drink coffee to combat fatigure will drink non-coffee related products interchangeably. Since there are no natural substitutes for coffee beans, the actual specific threat is considered to be low.

The Intensity of Rivalry among Existing Competitors

The rivalry among existing competitors is relatively high, due to the lack of genuine product differentiation which leads to fiercer competition. Among the strongest competitors of Starbucks are Gloria Jean’s and Florida-based coffee chain Brother’s Gourmet Many of the local and regional chains merge in efforts to grow and better position themselves as an alternative to Starbucks. In addition, restaurants are picking up on the growing popularity of speciality coffees and have installed machines to serve espresso, cappuccino, latte, and other coffee drinks to their customers.

Starbucks also faces competition from nationwide coffee manufacturers such as Kraft General Foods (the parent of Maxwell House) and Nestle, which distributed their coffees through supermarkets and speciality coffee companies that sell whole-bean coffees in supermarkets. Because many consumers habitually purchase their coffee supplies at supermarkets, it is easy for them to substitute these products for those of Starbucks.

5.5 Survey analysis

How often to do you drink coffee?

Why do you drink coffee?

Do you consider drinking coffee to be a part of life style choice?

Do you consider drinking coffee in a cafe a part to be a luxury?

Why do you visit coffee shops?

Have you heard about Corporate Social Responsibility (CSR)?

Are you familiar with Coffee & Farmer Equity (C.A.F.E.)?

Are you aware that coffee shops use responsibly grown coffee beans?

Would you be willing to pay more for a cup of coffee if it was fairly traded and responsibly grown?

Which age category are you in?

Chapter 6: Conclusion

Starbucks’ strategy is fairly simple: reach customers where they work, dine, travel and shop. This was achieved by increasing the perception of a high quality commodity product, adapting stores to the customers’ lifestyle and blanket developing areas completely, even if the stores cannibalize one another business. The company’s approach cuts down on delivery and management costs, shortens customer lines at stores and increases foot traffic for all the other stores in an area.

Integration of the activities will help Starbucks to achieve their objectives. This integration plays a crucial role in the whole Starbucks’ supply chain, as poor performance or failure at any step or activity of the supply chain will jeopardize the whole venture. Examples of activities and elements involved in this integration include building long-term relationships with suppliers, elimination of obstacles to cooperation, establishing common goals and tools for cooperation, strategies and tactics, analysis and sharing of information by all supply chain participants. An example of such activities at the beginning of the chain would be the work with coffee growers on cultivation practices that improve coffee quality and provide consistency and continuity. This in turn better matches the roasting process, allowing for paying premium prices to growers which then contribute to creating a sustainable source of coffee beans through C.A.F.E. practices, etc.

Socially responsible organisations consider themselves to be part of a larger society and that they are accountable to that society for their actions. As with ethics, agreement on the nature and scope of social responsibility is often difficult, given the diversity of values present in different societal, business and corporate cultures. In order to have a sustainable business, Starbucks need a reliable and responsible supplier base that can keep pace with its growth. Starbucks invests in measures to ensure its suppliers have the opportunity to do this. An example of this is C.A.F.E. Practices, which give preference to verified suppliers by paying premium prices and signing potentially long-term contracts.

Companies have responded to these ethical and environmental concerns by what is termed ‘green marketing’ i.e. marketing efforts to produce, promote and reclaim environmentally sensitive products. Starbucks has committed to purchase wind power to offset a portion of the energy used in its operations,set targets for reducing its emissions and defined a renewable energy initiative to reach its environmental targets.

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Increasing awareness of “green” movement globally  The Senate Finance Committee on Tuesday debated some $31 billion in tax credits and financial incentives to boost alternative energy supplied and promote energy saving steps as part of Obama administration (The Times of India, 2009).  Green Vehicles, which is a company based in California has started to sell an electric car that is pretty ‘economical’ and worth 20,000 dollars (Economy Watch). needs for alternative energy sources are felt by the consumers across the world and this urgent necessity is the main stimulator behind the development trends of alternative energy (Economy Watch)

Increased rate of health problems are forcing the public to go green to safeguard the environment and themselves Opportunities Companies should tout recycling to their employees/customers to differentiate themselves. Becoming a “green consultant” by helping companies and families learn how to be environmental could be a viable career. Using the existing greeneries to earn through “carbon trade”.  Becoming a “certifying agency” for the companies that go green by cutting the pollution hazards.  Promote institution to promote specialized courses for working in green companies that promote alternative energy resources. Read also emerging business opportunities at IBM case analysis

References

Economy Watch. Trends of Alternative Energy Companies. Retrieved February 5, 2009, from http://www. economywatch. com/alternative-energy/companies. html

Economy Watch. News on Alternative Energy. Retrieved February 5, 2009, from http://www. economywatch. com/alternative-energy/news. html

The Times of India. Senate panel OKs alternative energy tax breaks. Retrieved February 5, 2009, from http://timesofindia. indiatimes. com/Health__Science/Earth/ Senate_panel_OKs_alternative_energy_tax_breaks/articleshow/4039923. cms

Toyota Motor Corporation is a multinational car manufacturer in Japan, and the world’s largest automaker currently. One thing may be you don’t know, before the Toyota Motor Corporation, Toyota didn’t produce cars, they made clothes. After Toyota sell their technology of making clothes to the UK, they started manufacturing cars; and eventually became the world’s largest automaker. Presently, Toyota owns and operates the Lexus and Scion brand. Recently, people became more and more concern our environment and whether their cars economic or not, resulting in decision Toyota made that developed hybrid cars.

Toyota Prius, as the first hybrid car had went on sale in Japan in 1997. It was introduce to the entire world in 2001. Now, Prius is sold in more than 40 countries, and its largest market is Japan and North America. In accordance with the United States Environmental Agency, Prius was the most fuel efficient car sold in the U. S. Issues It has a rebound to positive growth in January and February since the number of car sales continued the downward trend in June last year.

In March, the number of car sales is about 110million in China, which is more than the first automobile consuming country-U.S. RMB loans increased by 24. 4% year-on-year in February, and credit terms has achieved a better level in history. According to this message, which is good news to cars company, Toyota maybe have some opportunity in china market. But in other European countries, it still has less business, because the cars market still has a disaster all over the world. For instance, Obama, president of the United States rejected the GM and Chrysler 21. 6 billion U. S. dollars of assistance to request in March 30th.

It means the U. S.cars market still has a decrease, and Toyota also has suffered from the economic recession. But in the other way, due to the economic recession, the price of steels has decreased than before around the world, it has a lowest price in near five years, and many steel-making factories have a lot of stocks in trade. So Toyota has an advantage to continue its business, because it can save money from materials, and it can use the same money to produce more cars. In Japan, rising unemployment and declining wages curbed car buying.

Japan in February to cash income of workers, and the fastest rate of decline in February over the past 5 years while the unemployment rate rose to 4. 4 percent for the highest level in 3 years. According to the Japanese car trade group predicted that the next fiscal year will be Japan’s new vehicle sales dropped 8 percent, only 4. 3 million, a 32-year low. Some countries have made some new laws of tariff to protect domestic industry and business. For instance, in Russia, the government makes a new policy in tariff to control the exporters to its country. (Raise the tariff in import cars from other countries)

Internal Analysis Sustainability in Three Areas -Technology (achieving sustainable mobility) Technological innovations hold the key to the environmental preservation and economic growth that are essential for Toyota to contribute to a prosperous society and the earth. Accordingly, Toyota is conducting research and development aimed at the realization of an automotive society that can coexist with the earth, or sustainable mobility. As you can see from the table 1, it shows trends and forecast of world energy demand by fuel. Obviously, renewable and nuclear energy would be used widely.

So based on the vision of “Zeronize & Maximize”, Toyota aims to minimize the negative impact that vehicles have on the environment, while maximizing their positive aspects, such as convenience, comfort, enjoyment, and excitement. To improve environmental performance, one of Toyota manager said “with respect to power trains, by 2010 we will have installed in all our vehicles a new series of gasoline and diesel engines and transmissions to boost fuel efficiency. In addition, we are currently increasing efforts to further evolve hybrid technology and expand our hybrid line up.

” -Manufacturing (implementing “Sustainable Plant” activities) Sustainability is also being pursued at the plants that drive Toyota manufacturing operations. In July, Toyota initiated “Sustainable Plant” activities with the goal of creating production sites that are in harmony with their natural surroundings. Toyota conducts its “Sustainable Plant” activities globally on three broad fronts. The first energy reduction through the development and introduction of low CO2-emitting production technologies and daily activities.

The second is energy conversion utilizing photovoltaic and other renewable energy sources. The third is tree-planting to foster involvement with local communities and ecological preservation. -Society (Environmental Activities for a Sustainable Future) Toyota engages in a wide range of nurturing society activities at home and abroad as it seeks to become a trusted global corporate citizen and to contribute to the sustainable development of a prosperous society. Toyota implements measures on a national and international level in its efforts to achieve a sustainable level of global environmental preservation.

Recognizing the importance of ongoing efforts deeply rooted in local communities, they proactively contribute to society in each country and region through their development programs for forestry, human resources and the local community. -Resource Saving To achieve efficient use of finite resources, Toyota industries promotes design and development that implements the 3Rs ( table 2 ); reduce materials used by utilizing them more efficiently, reuse products and parts that have completed their service life and recycle resources. Implementing 3R Design for all products

To ensure easy implementation of reducing, reusing and recycling of resources. Starting from the development and design stages they pursue the rationalization of rawmaterials usage and the safety and efficiency of dismantling process. Serval examples illustrate the scope of our efforts in this area. For their new two-wheel drive shovel, a certified environmentally friendly product, Toyota industries utilized recycled materials for the counter weight and re-evaluated the structure of the headlights to improve ease of recycling.

( Cho, F. 2007 ) -competitive advantage Toyota is outstanding at manufacturing equipment and serving a source of competitiveness for each business and protecting against any outflow of proprietary. They are also utilizing their strength in creating manufacturing equipment for the quick startup of operations at oversea production bases. Based on these strengths Toyota focus on raising the production technology capabilities of the industries. External Analysis Porter’s 5 forces Threat of New Entrants

In the past, people thought that the American automobile industry and the Big Three were safe; however, this did not last long time when Japanese automobile companies like Toyota went to American market, and took a lot of` market share of the North American companies. The reason for that is cars are big consumption for every family, and people consider various elements before their buying behaviour. That is rational, so consumer take the car with high quality and lower price home. The point is the threat o new entrants is high if the new entrants have the high technology to manufacture and they control the cost very well.

Power of Suppliers The power of the suppliers is low because that normally automobile supplier rely on the car manufacturer very much. The supplier will has no business if the previous car manufacturer decided to change their supplier. As a result, suppliers hold very little power. Power of Buyers Power of buyer is huge. There are a number of automobile manufacturer all around world, that means consumers have various alternatives. In addition, nowadays, the consumers are very price sensitive, if they think your car is expensive, they turn to look at the Japanese.

If they think your Japanese car is expensive, they turn to look at the cars made by China or India. In a word, consumer can influence the automobile companies to change their cars. Availability of Substitutes This force become higher today. That not only means people will bur other companies’ cars instead of buying your cars. Toyota should be careful with the fact that more people choose the public transportation from several reasons. Like it’s not easy to park private car when you go out, and the cost of having a car goes up.

That different factors makes the more substitutes. Competitive Rivalry Almost every automaker got loss during this financial crisis even the Toyota. But toyota become the top-seller in the period because their sales didn’t went down too much. That’s reasonable due to the fact that company invested a lot into developing some environmental and less gas consuming cars. Additionally, automakers avoid price-based competition, but now the competition has arisen. discount, buy today pay tomorrow, and many strategies are used by the automakers in order to survive.