Ethics Problems of Starbucks - Case Study Example

 Ethics problems of Starbucks Starbuck, the world’s most popular coffee company has transformed over many years to take the top position in the industry. This company which originally started in 1971 as a single store located in Seattle, Washington, boasts of 17000 stores today. These stores are distributed across the nations of the world and further expansion is expected in the next few years. In the recent past, Starbuck has come under criticisms that have faulted its ethical integrity while undertaking its business. The following work details some of the actions taken by this companies that are considered unethical. Although the company has worked hard since 2009 establishing a Fairtrade Coffee standard for its UK stores, the larger global operation has been dragging with regard to uptake. A good example is the U.S.A operation that has received much criticism from the Organic Consumers' Association (OCA) (Macdonald, 56). OCA has constantly blamed Starbuck for its slothfulness in launching Fairtrade. Additionally to the speculations laid on Fair-trade, Starbuck came under spotlight when the U.S court ordered it to pay its low –wage employees more than $100m following a ruling that implicated its management for demanding a share of tips given to the employees. This ruling was overturned later following an appeal. In 2009, Starbuck company slashed the costs by $580, however, the then CEO Howard Schultz got a 25percent pay increase. Exploitation of coffee farmers is the other unethical practice of Starbucks. Contrary to their claim of supporting coffee farmer’s welfare within the developing nations, this firm has been blamed for manipulating these farmers and even underpaying them. According to a NYC delegation that traveled to Ethiopia in 2007 with the aim of discussing working condition with exploited farmers, the farmers were being manipulated, getting only $0.57 per pound from the Ethiopian Sadimo coffee. This represented a mere 2.2 percent of the expected retail price. Tedasse, a farmer from Fero Co-Operative said “They deceive us by telling us that they’re going to help us grow, but they are the ones that are growing.”  Starbucks is blatantly conscious of its mistreatment of coffee farmers; however it fails to take action against the exploitation and help workers who are constantly living in poverty. While commenting on this matter with reference to what made Nike unethical, Douglas Holt, a professor in Oxford University said, “Just as consumers were disgusted by the fact that Air Jordans sold for $120 while Asian laborers produced the shoes in what amounted to slave-labor conditions, they will be equally disturbed by the fact that Starbucks is happy to sell coffee for $26 per pound while refusing to allow the coffee's producers a shot at climbing out of desperate poverty” (Thompson, 132) Starbucks have equally had their share of blame from union and labour disputes. Here it has been argued that Whilst Starbucks’ offer jobs to about 172,000 people across the world (New York Times, 2008) it has failed in respecting their rights. Such is the case that its baristas face unfavorable working conditions and are further barred from soliciting union mediation in their predicaments. Starbucks has also failed in paying liveable wage and securing work schedules for its employees. Baristas earning is as little as 6.25 pounds an hour and their work schedule keep fluctuating based on weekly store sales. Starbuck has been on the spotlight for preventing workers from joining international workers of the world union by using a union-busting company called Akin Gump. This company represses the union through surveillance, gathering of intelligence and dismissal of union activist (Thompson, 56). For instance, in 2006, Daniel Gross, a New York Barista got fired for allegedly engaging in union activities. He spoke of Starbucks unfavorable working condition saying “Every single barista works part -time. No one has a guaranteed number of working hours; one week you might have 35hours, the next you might have 14. The times you work also shift, making it difficult to budget for necessities, look after families or have second jobs” Starbuck has been faulted for its little environmental concerns. The measures taken by Starbucks stores located in the different parts of the world have been said to affect the environment negatively. A case study taken found out that averagely, each of the 19,736 Starbucks stores uses approximately 0.058 thermos of natural gas ‘6.78 kilowatt-hours of electricity, and 94 liters of water per square foot monthly(Jorge , 124-130). This company shows little concern for global diminishing energy sources and takes no action to lessen its energy output. In 2008, Starbucks’ stores within U.K. and those in America were targeted for wasting close to 23.4 million litres of water daily by constantly keeping water running from its 10,000 stores, notably wasting and ignoring the diminishing world water supplies. Starbucks’ environmental waste occurs largely during its packaging and retailing. Extensive manufacturing process used to assemble Starbucks’ coffee cups involve 90% new paper that need to be produced. Environmentalist commented on this saying “Paper must be harvested from trees and then turned to wood chips in a machine, rather than using recycled paper fibers. Additionally, due to the plastic lamination lining, Starbucks cups are unable to be recycled and will therefore end up in landfill.” Through their misleading marketing methods and wastage of resources, Starbucks totally fails to maintain their image with regard to environmental sustainability. Starbucks have also been criticized for continually putting other smaller coffee shops out of business. This company was served with a lawsuit for employing anti-competitive strategy to deny its competitors a chance to thrive. Such is the case that, its employees would position themselves outside the premises held by small coffee shops within their surrounding and dish out free samples to people trying to get in. Consequently, the Starbucks gained more business that translated to higher profits. To, make the matter worse, the Starbuck tried to buyout the same neighboring coffee shops. They also signed shop leases for higher market value (said to be three times more) as a way to stop the landlords from renting them out to other interested coffee sellers. One good example relates to a small coffee shop that was located in Boston, MA. This shop had been doing its business for about 25 years when suddenly the manager of the premise refused to renew their lease. The most annoying thing is the fact that Starbucks took over the premise as the next renter. Considering all that was happening, it would be wrong to think of this as a coincidence. Kapinos and Rollins, business analysts commented on the same saying “Trying to buyout her company so there was no other competition on the block". Boston case represents just one of the many examples of how Starbucks was dealing unfairly with small companies, prompting the court to issue a lawsuit. Starbucks strategy that has realized coffee market oversaturation is the other unethical practice. Recent reports have clearly indicated Starbucks as controlling 73 percent of the coffeehouses market. This company owns more than 17000 stores across 55 countries of the world with about 5 additional stores opening each day. Starbucks has indicated suggested its expansion intention that will see it control 40,000 stores across the world. In the recent days much complains have been raised over the its move that has oversaturated the market. Additional allegations pointed to the fact that it was employing anti-competitive techniques to gain an upper hand over its competitors, an allegation it denied insisting that its many stores arise as “one main complaint they hear from customers is that Starbucks isn’t convenient enough” and state that “going across the street can be a barrier.” Traditional coffee shops are constantly under pressure following Starbucks monopolistic control; the firm is famous for exploiting its huge market share and has constantly been targeted for employing predatory methods to stifle competition. Starbuck practices are completely unethical considering the fact that the small coffee shops offer much to the residents within their location, a factor that may not be true of the Starbucks. Majority of the residents enjoy visiting the small local coffee shops which are known for offering coffee at reasonable cost. It is true that a certain group of residents prefer Starbuck to small shop; however the majority would rather take their coffee from the local coffee shops (Thompson, 97). Any reasonable person would agree that pushing a long serving coffee shop out of business is not the best way to compete in business. The traditional coffee shops have been found to satisfy the needs of a much larger population drawn from a wide range of people as opposed to Starbucks that tend to target a particular group. There is also the issue of overpriced coffee, a factor that is also considered unethical based on utilitarianism theory. Starbuck has been blamed for charging their customers highly. Such is the case that absence of the smaller coffee shops (which have been forced out of business thanks to Starbucks unhealthy competition) leaves them with no alternative but to buy the overly charged coffee from Starbucks. The major stakeholders in this matter are the stockholders of Starbucks, coffee drinkers at Starbucks, and above all the small coffee shops. All of these groups are affected by the actions taken by Starbucks. By destroying the small coffee shops and ultimately forcing them out of business the Starbucks have succeeded in gaining huge customers and in turn gained abnormal profits. This is unethical when considering the humanity concept. Here, Starbucks come out openly as being less concerned over the customers well being and only use them to profit. Additionally, their method of expansion is questionable since it is carried out with wrong motives without any goodwill  CONCLUSION Starbucks positioning in the industry gives it much power that can translate into serious unethical issues if not well checked. Such is the case that its numerous stores across the globe almost make it a monopoly creating a room for issues such as exploitation of coffee farmers, exploitation of workers, negligence on environmental concerns and unfair competition. In this regard, the concerned national and international i8nstitutinis should take serious measures to prevent the occurrence of such vices. Works Cited "Enter the Fairtrade Awards." Fairtrade International (FLO). N.p., n.d. Web. 7 Apr. 2014. . "Ethiopia." — Cooperative Coffees. N.p., n.d. Web. 8 Apr. 2014. . "I Jorge (2012)The Truth Behind Starbucks - Pizza Comedy . [online] Available at: http://pizzacomedy.com/pictures/the-truth-behind-starbucks/ [Accessed: 12 Aug 2012]. .Kamenetz, A n.d., The Starbucks Cup Dilemma, , accessed 19 July 2012, http://www.fastcompany.com/1693703/starbucks-cup-dilemma .Macdonald, Kate. "Globalising Justice within Coffee Supply Chains? Fair Trade, Starbucks and the Transformation of SupplyChain Governance."Third World Quarterly  28.4 (2007): 793-812. Print ndustrial Workers of the World." Starbux workers (CNT-France). N.p., n.d. Web. 8 Apr. 2014. . "Justmeans." Starbucks Disposable Cups Deemed "Unrecyclable" by Major Recycling Companies. N.p., n.d. Web. 8 Apr. 2014. . "Storm in a coffee cup." The Economist. The Economist Newspaper, 2 Dec. 2006. Web. 8 Apr. 2014. . Thompson, Craig J., and Zeynep Arsel. "The Starbucks Brandscape and Consumers’(Anticorporate) Experiences of Glocalization." Journal of Consumer Research 31.3 (2004): 631-42. Print Read More