Image source: The Austin Times (http://theaustintimes.com/wp-content/uploads/2013/09/starbucks.jpg)
A humble beginning is what Howard Schultz, former CEO of Starbucks, credits for his activism. He was born in Brooklyn, New York and raised just southwest in the projects of Canarsie. Schultz knows what it takes to come up from nothing and make a name for oneself. Not only has Schultz grown Starbucks into a multinational behemoth, ever since he assumed a leadership role in the company, he has guided the company’s corporate citizenship and activism. Therefore, Schultz’s respnse to the U.S. President’s travel ban comes as no surprise to anyone. For Schultz, a man who prides himself on doing the right thing, knew he had to act, no matter the consequences.
On January 29th, 2017, Starbucks pledged to hire 10,000 refugees over five years in the 75 countries that they do business. Starbucks had previously hired 10,000 veterans and had plans to hire an additional 15,000 by 2025. (Taylor, K. (2017, March 22).
Planning to hire 10,000 refugees was met with massive backlash. Supporters of President Trump planned to boycott the company and many said that the company brand had crashed. Millions expressed their opinions on social media and many American citizens were in dismay. Many companies and CEO’s of top corporations stayed silent on Trump’s travel ban, but that was not something Schultz could do. The plan was to hire refugees who had experience serving with U.S. troops as interpreters and support personnel abroad.
Many people want Starbucks to stick to making coffee and not involve themselves in international affairs such as the hiring of refugees. Howard Schultz has always wanted Starbucks to be about more than the coffee itself. Challenging themselves to do the right things while running a successful corporation is what the company strives for. But should a company like Starbucks care more about societal issues than making money? In this case study, we will analyze the situation and whether Starbucks is truly making a positive impact.
Starbucks opened its first shop in 1971, originally called Seattle’s Pike Place Market. Founded in Seattle, Washington by three students from the University of San Francisco, the company originally served as a coffee bean roaster and retailer. It was not until 1987 that Howard Schultz bought the company and began its transformation. Today, many consider Starbucks to have the best coffee in the world, not knowing that the company did not begin as a coffeehouse.
There are over 25,000 Starbucks shops in the world in 75 different countries (starbucks.com). Schultz used his success in previous business endeavors to shape how the company would evolve, but he also was always curious to learn more. In 1983, during a trip to Milan, Schultz saw the culture of coffee in Europe and wanted to make changes (astrumpeople.com). This led to Schultz making the decision to sell coffee itself, not just beans in his stores. This decision transformed the company into one of the most profitable in the world.
In 2000, Howard Schultz retired from his position as CEO of Starbucks. Other companies such as McDonald’s and Dunkin Donuts made their rise in the coffee industry when Schultz left as CEO. Schultz did return eight years later in 2008 to become CEO again (Fortune). Starbucks has dramatically increased their social consciousness since Schultz returned as CEO.
Starbucks wants to create a culture where everyone who goes there feels like they belong there. They want people to feel comfortable and happy when they are at Starbucks. This is evident as the company often goes out of their way to hire groups of people like veterans or refugees. Starbucks is not required to do this, and some say it only negatively impacts the company. Still, Schultz and the company believtheir core values and sticks to them. The company lists its core values as follows:
- Creating a culture of warmth and belonging, where everyone is welcome
- Acting with courage, challenging the status quo and finding new ways to grow our company and each other
- Being present, connecting with transparency, dignity and respect
- Delivering our very best in all we do, holding ourselves accountable for results (Starbucks, 2015)
Starbucks wants to make sure jobs are available to veterans, refugees and other groups of people who may not be given an opportunity at a different place. They try to be a performance driven company while also doing the right thing. It is evident that Starbucks has strong corporate values that it holds itself accountable for practicing in a very competitive market place.
Starbucks Mission Statement
to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time
Being responsible is key to the success and integrity of Starbucks. The company attempts to be a good corporate citizen while maximizing profitability. Though many will believe that being socially conscience will only negatively impact business, that is not true. Stockholders need to be able to trust the company they are investing in. Being involved in communities and doing positive things for the environment can go a long way in building trust. A socially conscious company shows its stockholders that they want to make money and make a positive impact in areas other businesses do not focus on. There are several ways for a business to be socially conscious, but three key ones are stated on the Starbucks website:
- Ethical Sourcing
- Environmental Stewardship
- Community Involvement
All three of these practices will help the company achieve its goals of being socially conscience. They will try to help farmers out with loans, use responsible practices when buying necessary supplies, and keeping a more stable climate for the planet. Starbucks is very involved in trying to do its role in keeping their environmental footprint as low as possible by energy and water conservation along with recycling and green construction. There are many companies as big as Starbucks that have little to no care for the environment and corporate character and reputation. For many big-time corporations, it is all about keeping billions of dollars coming in, but for Starbucks, they want to be as socially conscience and help the environment just as much as they want to make money, and it proves to be this way by their actions.
Source: Talent Egg (http://talentegg.ca/incubator/2013/03/25/encouraging-quotes-for-students/)
Starbucks strives to have high corporate character. Only behind Apple and Amazon, Starbucks is ranked as the third most admired company in the world (Fortune).
In 2017 more than ever, stockholders expect companies to be socially responsible and make a positive impact on the environment. Treating customers with respect, appreciating and building upon the ideas that customers bring to the company, and serving the best coffee in the world is part of the corporate social responsibility Starbucks has been and is trying to build.
Corporate social responsibility involves voluntary actions that a corporation makes towards becoming more involved in communities, satisfying stockholders, and making the world as a better and safer place. Starbucks goes well and far beyond what is required of them and is changing the game for corporate social responsibility. Other companies and CEOs should strive to take action like Starbucks and Howard Schultz have.
January 2013-Starbucks stated that they will hire 10,000 veterans
March 15, 2015– “Race Together” launched
January 28, 20117– President Donald Trump issued a travel ban on refugees
January 29– the first announcement that Starbucks is hiring 10,000 refugees
-Howard Schultz sent out letter to employees stating that hiring will first take place in United States
January 30- #boycott Starbucks was trending on twitter
February 2– Many people boycotted Starbucks due to the tweet
March 11– Second Announcement Starbucks made about hiring refugees
-Also talked about the opportunities for the youth
March 22– Annual shareholders’ meeting
-Howard criticized President Trump
-Many people angry because Schultz did not say he would hire refugees when Obama issued a travel pan
- Howard also said he wants to help people of color and LGBTQ community
- Later states, by 2025 that 25,000 veterans will be hired
April 3– Starbucks hires new CEO
-Kevin Johnson replaces Howard Schultz
RESPONSE TO EVENT
Starbucks Response & Corporate Communication
Following the incident, Starbucks did not hesitate to assure their message, standpoint, and morals were clearly explained to the public and Starbucks employees. Howard Schultz, CEO and chairman of Starbucks, quickly had the company respond to the back lash received from Trump supporters by sharing more detail, just a day after his heartfelt message sent out to all Starbucks employees releasing the announcement. Starbucks released an article entitled, “Starbucks Makes Global Commitment to Hire 10,000 Refugees by 2022” briefly explains the sympathy and support Starbucks has for the 21 million forcibly displaced refugees that have been affected by the Trump ban (Starbucks.com).
The message goes on to explain the requirements needed by potential refugee hires and their commitment to equal opportunity. In order to reassure the public of Starbucks’ integrity, the message closes with: “Partnering With Like-Minded Organizations”, displaying an abundance of support Starbucks has from various organizations ranging from the International Rescue Committee (IRC), to Veterans and their families who have served for the U.S. forces (Starbucks, 2017).
Starbucks released “A Message to Customers from Starbucks Armed Forces Network” issued only two days after the original follow up to show consistent care for their reputation, employees, and community (Starbucks 2017). Due to the “lack of Veteran employees” assumptions made by conservative supporters, the true Veteran employees of Starbucks shared their promise of the company’s honesty and commitment to the U.S. Forces.
They explained that the pledge Starbucks had taken back in November of 2013 to hire 10,000 veterans and military spouses through the five years to follow was not only on track, but was ahead of schedule. Starbucks had already hired over 8,800 veterans and spouses by February of 2017. Signed by The Men and Women of Starbucks Armed Forces Network, their call to action effectively showed their respect for honest debate; high esteem for CEO, Howard Schultz and his dedication to the U.S. Forces; appreciation for their customers’ business, and their plead for their patrons to seek ethical information rather than negligent criticism (Starbucks 2017).
|Name||Goal||Scheduled Completion Date||Actual Completion Date||Increase|
|Veterans and Military Spouses||10,000 employees||November 2018||March 2017||25,000 by 2025|
|Opportunity Youth||10,000 employees||November 2018||40,000 in
|100,000 by 2020|
|Refugees||10,000 employees||February 2022||In progress||N/A|
|College Achievement Plan||25,000 graduates||2025||In progress||N/A|
To help secure their standpoint as the controversy starts to diminish, Starbucks released another message to their customers at the end of March 2017, almost two months after the announcement. As they celebrate their five-year goal of 10,000 Veteran and Spouse employees one year early, they also announce their continuing efforts for Veterans and promise to hire 25,000 veterans total by 2025 (Starbucks, 2017). Starbucks also expands on their five-year Opportunity Youth initiative announced in 2015, which had originally planned for 10,000 employees between the ages of 16 and 24 who were not employed or attending school. By 2017 their goal had been far passed with over 40,000 hires, leading Starbucks to expand their goal to 100,000 Opportunity Youth hires by 2020. On a final note, the company reiterates their commitment to hiring refugees around the world by informing their audience on their search for refugees who have a history of working with the U.S. armed forces as well as the relationship they’ve developed with United Nation High Commission for Refugees, International Rescue Committee, Tent Foundation, No One Left Behind, and the armed forces, to end the harsh criticism.
Given the tremendous amount criticism given by boycotters, media outlets, and customers, Starbucks did not receive a hard hit in their stock price. Just a few days before Starbucks announced their refugee hire initiative, on January 26th, 2017 the company was reported to have a stock price of $58.70. Once the news had leaked on January 30th, Starbucks saw a decline in stock price fluctuating from January 30th through February 8th, reaching a low point at $54.04 on February 2nd, but staying close in consistency to $55 for the nine-day span. After February 8th, their stock price has shown a steady increase through the following months, reaching an open price of $61.65 on April 25th
|Starbucks Corporation Common Stock Historical Stock Prices|
In response to the bad press spreading on the Starbucks brand and financial standpoint, according to Fortune Magazine (2017), on March 10th, 2017 the company released a letter from Kantar Millward Brown, a market research firm that conducted a detailed internal company analysis of their current brand status. Kantar Millward Brown confirmed there was no significant impact on consumer consideration of future visits, brand recognition, or any other key factors that could have made an impact on the Starbucks Brand. Chief Strategy Officer, Matt Ryan released the letter from Kantar to ensure stakeholders of the company’s good standing, stating “Over the past week, there has been misinformation widely disseminated in the market about our brand, and stakeholders need the facts” (Kell, 2017)
Starbucks is well known all across the globe for their wonderful coffee. Writer Walter White of InevitableSteps.com explains the relationship Starbucks has with their competitors. The company has over 23,000 stores worldwide and is currently the 52nd most valuable brand in the world. Starbucks serves almost one-third of total Quick Service Restaurants, coffee shops, and convenience stores, while all other competitors amount to 71%. Starbucks has always taken the lead for the coffee industry and even had little to no competition for some period of time. When other companies started producing coffee at a similar quality but for a lower price, Starbucks obtained two major competitors, Dunkin Donuts and McDonalds (White, 2016).
Dunkin Donuts did not serve as a threat until 2006 and had caught Starbucks off guard when they entered the coffee business. Starbucks had gone so long without any major competitors and their marketing style, that strictly consisted of word-of-mouth, was then challenged by Dunkin Donuts’ team of marketing professionals. McDonalds came shortly after Dunkin Donuts with the McCafe menu. They were able to create competition through their cheap prices of $1 for a hot or iced coffee, compared to Starbucks $4 or $5 (White, 2016).
Social Media Response
The decision to hire 10,000 refugees in the next five years did not go over well with many people. In response to the announcement, many Americans took to social media to voice their concerns. The most popular platform by far was Twitter, and that’s thanks in large to the hashtag that started not even a day after the announcement. The #BoycottStarbucks hashtag has been a rallying point to those who want to express their discontent for the Starbucks company. The comments that were made are mostly negative, but it accurately expresses the emotional state of the public when the announcement was first broadcast.
Here are some examples from the #BoycottStarbucks hashtag feed:
Photo from Twitter, https://twitter.com/hashtag/BoycottStarbucks?src=hash&lang=en
Photo from Twitter, https://twitter.com/hashtag/BoycottStarbucks?src=hash&lang=en
The comments were just as vulgar across the other social media platforms like Facebook and Instagram. Most of the pictures revolved around berating the Syrian people or mocking the Islamic faith. Starbucks has responded to these comments by simply stating that “they’re going to stick to their beliefs and move forward with tier plans.” This level of resiliency is typical for Starbucks, especially after they faced such negativity for their “Race Together” initiative back in 2015.
Reputation and Financial Impacts
As of March 2017, Starbucks is still disputing claims that their brand was “tarnished” by the pledge to hire 10,000 refugees across the 75 counties that they operate. (Fortune, John Kell) After conducting their own internal and external analysis, a report from Kantar Millward Brown confirmed that the Starbucks company will not see any severe changes in their reputation. The company outsourced to various firms for a more diverse report pool, and all reports showed nothing but growth in the upcoming quarter.
Caption from CNN – Money, http://money.cnn.com/
Caption from CNN – Money, http://money.cnn.com/
Starbucks wants to shut down any rumors about the company’s supposed “tanking brand name”, as reported by Fortune. Reports like these are generally issued to reassure stakeholders of their investments. As reported by Millard Brown, other companies that have had any sort of media backlash that has reported statistics like those that we see here. If the reports are saying that customer fallout is an impossibility, Starbucks will continue to push their ideals and act as they see fit.
Tell the truth President Donald Trump issued a travel ban on all refugees entering the United States. Starbucks is willing to put their company on the line to fix race relations, by hiring refugees. Starbucks wants to create a culture that makes people feel like they wanted and everyone is the same.
Prove it with action Even though #boycott Starbucks is trending on twitter, their sales are rising drastically. Howard Schultz could have given up once he saw the hashtag, but he did not. This shows they are really working hard to fix race relations by sticking to what the company believes in.
Listen to stakeholders During all this taking place, Starbucks shares stayed close in consistency to a one-dollar decline in a week’s time span. After February 8th, stock prices showed consistent growth. As of May 1st stock prices have shown a significant
increase compared to stock prices prior to refugee announcement. Starbucks released a letter to the press from Kantar Millward Brown, sharing its brand status after Starbucks stating they are going to hire refugees, to assure the stakeholders of the company’s stable reputation.
Manage for tomorrow Starbucks is taking an effort to bring goodwill to the communities, which is their top priority. As they plan for tomorrow, they are continuing the mission of hiring refugees to fix race relations in the US.
Conduct public relations as if the whole enterprise depends on it The main goal Starbucks has in mind is to create a workforce where everyone is welcomed. Even though the goal was not accepted by republicans and many other people, Starbucks is not giving up their goal. In the end, Starbucks wants to have a clear goal in mind and achieve it.
Realize an enterprise’s true character is expressed by its people Starbucks’ initiative is to create positive change for the corporation and also in the community that will last a lifetime. Starbucks does take into consideration what their partners say and what the people have to say but they do not let it affect them tremendously because they are strong-willed and plan on continuing with their plan.
Remain calm, patient and good-humored Howard Schultz knew there would be backlash from the media and the people, but he stayed calm through it all and would not back down. Even though many people are boycotting Starbucks, their sales are still on the rise
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