In the current business environment, companies must take strategic initiatives to prevent the losses and overcome the rough economy we are currently facing. Starbucks Corporation (furthermore, Starbucks) is known as one of the leaders for the retail sales of roasted and specialty coffee. Starbucks is focused on creating a detailed strategic and financial planning that can take the company to the next level. The aim of this paper is to investigate Starbucks’s actions upon creation of strategic and financial plans, and its impact on cost and sales and risks associated.
Starbucks has a long-standing effort in ethical conduct and global responsibility. One of the major efforts is sourcing ethically grown coffee. For example, Starbucks’ Annual Report for the 2009 states that “the Company’s focus is on ethically sourcing high-quality coffee, reducing its environmental impacts, and contributing positively to communities. Starbucks Global Responsibility strategy and commitments are integral to the Company’s business strategy.” (Starbucks Corporation, 2009, Annual Report).
The strategic plan includes the Shared Planet initiative. Starbucks has commenced plans to make environmental transformations to the company’s business practices through the Shared Planet. These changes include buying ethically traded coffee, which encompasses environmentally responsible grown coffee and the ethical treatment of coffee farmers. Starbucks collaborates with Conservation International to ensure that the company is meeting purchasing guidelines for socially, environmentally, and economically responsible coffee. Starbucks’ Shared Planet also embraces conservation of the growers’ surrounding communities. For example, Starbucks is committed to creating environmentally clean water filter systems in the communities that the coffee is grown. The company has also committed to recycling and reducing waste. Starbucks Initiative Plan states that by the year 2015, the company will serve 25% of its beverages in reusable cups and introduce in-store recycling stations for the non-reusable cups. The company is devoted to reducing energy use by 25% in all new stores and obtaining 50% of the used energy from renewable energy sources for all company-owned stores by the end of 2010. By the year 2012, Starbucks plans on reducing water use by 15% company-wide. Obtaining LEED certification for all new stores globally will begin in late 2010. Such efforts are commendable and provide a solid platform for successful business. However, to be financially sound, Starbucks must consider financial aspects of the aforementioned initiative and costs associated (Starbucks Corporation, 2010, Responsibility).
Based on the aforementioned information regarding Shared planet one can easily determine that this initiative is closely aligned with Starbuck’s mission: “to inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time” (Starbucks Corporation, 2010, Our Starbucks Mission Statement). However, important to note are relationship between this initiative and financial planning of Starbuck’s. Sourcing ethically grown and socially responsible coffee has cost Starbucks $1.28 per pound in fiscal 2005 (Starbucks Corporation, 2006, Investor Relations). The green coffee price is on the rise, as Starbucks paid $1.49 per pound of coffee on average in fiscal 2008 (Starbucks Corporation, 2008, Global Responsibility Report). Ultimately, costs associated have increased cost of sales. For example, “cost of sales including occupancy costs increased to 41.0 percent of total net revenues for the 13 weeks ended July 2, 2006, compared to 40.6 percent in the corresponding 13-week period of fiscal 2005” (Starbucks Corporation, 2006, Financial Release). In the same financial release, Starbucks has stated that the increased costs of sales are result of increased cost of green coffee. Similarly in 2008, the cost of sales...
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