INTERNAL ASSESSMENT PART B
My research on the rewards and risks of Starbucks switching to shade-grown coffee was conducted through the use of many environmental societies and programs websites as well as research from the official Starbucks coffee website.
Starbucks coffee introduced Shade-grown Mexico Coffee in August 2000 as part of an environmental effort with Conservation International (CI). A press release from August 2000 shows that in the agreement, Starbucks coffee agreed to feature the coffee and commit $600,000 over the years 2000-2003 to Conservation International. This deal signified the start of Starbucks shade grown coffee sales. In addition, Starbucks also agreed to develop 5 new projects throughout the coffee growing continents of Asia, Latin American and Africa.
The chairman and CEO of CI, Peter Seligmann was quoted saying: “Starbucks is making a real difference in the quality of the natural environment while helping farmers that live in sensitive ecosystems.
According to the official Starbucks coffee company website, Shade-Grown Coffee is beneficial for the environment. Starbucks states on their website that “Shade trees help protect tropical ecosystems by increasing the retention of soil nutrients and moisture, reducing erosion and offering protection from frost and wind. They also promote biodiversity by providing an environment for a mix of birds and wildlife.
The Atlanta Audubon Society’s Shade-Grown Coffee committee cites the problem with sun-grown coffee as opposed to the shade grown varieties. In a shade-grown coffee environment, migratory and resident birds may find sanctuary. In contrast in the Sun-grown coffee environment, 90% fewer bird species are found than in the former. Also, Shade trees protect plants maintain soil quality and maintain lower pest numbers due to an increase in their predators. Su-grown coffee requires usage of pesticides as well as chemicals to fertilize. Finally, shade-grown plants can produce beans for up to 50 years, while sun –grown coffee plants only produce for 10-15 years.
The Transfair USA website indicates that the type of shade grown coffee that Starbucks has been using is considered “Fair Trade” coffee. A fair trade label shows that the farmers of the coffee received a more generous price for their coffee beans than is normally received. The increase in these farmers income gives them the opportunity to maintain a healthy lifestyle and to have chances at a higher level of education for their children.
Another positive side effect of growing shade-grown coffee is the increase in quality of the coffee beans. Growing Fair Trade Coffee is more profitable than growing sun-grown coffee. Due to this, the farmers do not need to partake in practices that may diminish the quality of the beans.
The disadvantage of growing shade-grown coffee lies in the increase in expenditures. In order to brew shade-grown coffee, Starbucks would be required to spend far more than they are currently. The increase in prices may be too much for Starbucks to afford losing, and the consequences could be plentiful for the company. The cost of maintaining such high prices for coffee, although environmentally friendly and helpful to farmers could cost Starbucks more than the “Socially responsible” image is worth.
Part D
The evidence found in my research suggests that Starbucks should make a transition from Sun-grown coffee to shade-grown coffee purely on an ethical basis. However, a thorough investigation yields that intelligent business practices are not always based on ethical practices.
Throughout the research, many environmental positives were identified with growing shade-grown coffee. These positives points included decreasing erosion, usage of pesticides and increasing production, wages, prices internationally, and promoting biodiversity. These are all extremely important environmental issues associated with growing coffee beans.
There are numerous positive effects for Starbucks Coffee Company first-hand as well,. One of the largest positive effects for Starbucks is the image that would accompany such a large-scale environmental effort. Ansoff’s matrix, a system that compares markets and products can be used to analyze the positives and negatives of a business, or a new product. On Ansoff’s matrix, switching their sun-grown coffee to shade-grown coffee could be classified as a new product and a new market, implying “diversification” or as a new product in an established market, implying “product development”. Shade-grown coffee would bring in a new market of those consumers who are focused on environmentally friendly coffee. Those consumers who may patronize competitors such as “Caribou coffee”, which offers only shade-grown coffee, may begin to patronize Starbucks instead. Also, those consumers who may consciously avoid Starbucks due to their sun-grown coffee may begin to consume Starbucks coffee. The established market would be the consumers who always drink Starbucks coffee. The regular consumers would begin to drink the Shade-grown coffee if that is the only option. This would mark the introduction of the new product to Starbucks’ established market.
A SWOT analysis can also be used to analyze the effects of Starbucks’ switch to shade-grown coffee. A SWOT analysis looks at the Strengths, Weaknesses, Opportunities and Threats for a company or a decision. In a SWOT analysis of the switch from Sun-Grown coffee, some strengths include: Better tasting coffee beans, the environmental implications that accompany the switch, such as biodiversity, and increased payments to farmers. A weakness of the change might be the increased prices of the coffee being purchased. In addition to a raise in Starbucks costs, the raise in prices may also affect consumers’ coffee prices negatively.
Some opportunities that accompany the change are mainly in diversification. The introduction of a new market may positively affect Starbucks sales. They not only have the opportunity to increase sales, but also to improve their image. Although Starbucks is already known for its socially responsible ways, the switch to shade grown coffee could increase the association between the company and environmentally friendly products and policies.
Some of the potential threats to the company include the loss of customers who may not pay increased prices for the coffee. The change may also diminish profits if the coffee prices for consumers are to be maintained. Also, a threat could be the new form of competition between Starbucks and its competitors (such as Caribou) for the market of shade-grown coffee drinkers.
These are just some of the positives and negatives associated with such a drastic change for Starbucks.
Part D
Based on the evidence and the analysis of the evidence, Starbucks seemingly has a choice between remaining the same and not taking the risk and perhaps opening a new market with better quality but less profit. The latter would also be the more environmentally friendly choice.
After the analysis of the information a more thorough financial investigation into the cost of shade grown coffee and prices would need to be conducted in order to fully understand the risks involved. The question still remains, should Starbucks make a change to all shade-grown coffee selections?
Based on my research, my recommendation would include extensive test marketing and surveying regarding the taste difference and level of importance to consumers. After testing, I would recommend a slow transition to detect an increase or decrease in shade-grown coffee. If these tests and numbers show positive results, I would recommend the switch to Shade-grown coffee. | 