Department of Homeland Security
My current work organization is: Department of Homeland Security - US Immigration and Customs Enforcement - Homeland Security Investigations. However, you do not need to utilize that as the assignment states that I could utilize an organization of interest. Currently the only organization that has my interests is Starbucks. Therefore, you could utilize both Starbucks and Dutch Brothers Coffee (just a suggestions0.
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Business: The Basic Legal, Social and Economic Environment of Starbucks and Dunkin Donuts (Course Instructor)
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Abstract
Globalization has opened up many markets and many firms are going global. The success of companies in the global stage is dependent on specific company strategies, market segment and the product line. Starbucks and Dunkin Donuts are two global firms who deal in similar product line with varying success. Starbucks deals exclusively in coffee and has over 12000 licensed locations in Europe, America and Asia. Dunkin Donuts on the other hand deals in more than one product line, however, over a half of the company revenue are as a result of coffee products and this made it third largest producer of coffee behind Starbuck which is ranked first. Therefore, the paper focuses on the external environments of the two companies, while considering their impacts as well as the impact of their managements styles.
The external environment has greater impact on the success of the two companies. For instance, the legal environment affects taxation regulations and employment in their subsidiaries. The economic environment has a huge influence on the inflation, taxation and exchange rates. These have a direct impact on the company revenues. On the other hand, the social factors exert a great influence on the company revenues owing to the changing population demographics and lifestyles.
The analysis of the two firms shows that although both have similar management and decision making styles, they have varying strengths, weaknesses, opportunities and threats. However, the differences, the two firms have similar threats in form of local coffee cafes, impact of global warming and the changing environmental laws, which alter the market product dynamics.
Introduction
The increasing global business competition and the changing political and economic situations mean global firms face various challenges. Global firms like Dunkin Donuts and Starbucks must have good global strategies in order to remain competitive in the market. Dunkin Donuts and Starbucks are major competitors in same market niche with different environmental, economic, political, social and legal strategies.
Starbucks
Starbucks Corporation is a leading brand, roaster and retailer of coffee, with the company having well over 12,000 licensed shops in Europe, North America, Middle East, Asia Pacific and Latin America (Starbucks Corporation, 2006). The company specializes in coffee and its licensed shops are located in universities, airports, grocery shops and other designated areas.
Starbuck’s Legal, Economic and Social Environment
Economic Environment
The economic environment forms an important aspect of the business environment of Starbuck. The key factors that affect the operations of the company include the fluctuations in the exchange rates between USD and the local currencies in the countries in which the company has its subsidiaries (Maskell, 2015). Moreover, the changes in pay rates in the individual countries of operation, the tax rates and global financial crisis, for instance the economic recession of 2007, have significant influence on the company operations. The economic recession of 2007-2009 had a significant impact on the consumer behaviour and greatly affected the company economically.
Legal Factors
The legal factors encompass the industry specific rules and regulations that have an influence on the long-term growth and profitability of the company. In addition, if a company engages in other practices that a unethical, it may trigger legal repercussions. Examples of unethical events evoked numerous legal implications on the company are the tax disputes in the UK. The company was reported to have made over GBP 400 million, while remitting only less than GBP 8.6 million (Duduvoskiy, 2015). However, further implications were avoided when the company paid an extra GBP 5 million in taxes.
Social Environment
The social factors that are of great concern in the Starbuck’s business segment include the changes in demographics and shifts in the consumer lifestyles (Duduvoskiy, 2015). These social factors have huge implications on the company revenues. Globalization has led to the spread of western culture and lifestyles to the African countries and among the Asian states. These have seen the increase in coffee demand, which saw a rise in the revenues of the Starbuck’s. However, there has been greater media focus in the health impact of the caffeine in coffee on the health of the coffee consumers. The greater publicity on the negative effects of caffeine has affected the company revenues and this has created greater attention and focus from the company’s strategies.
Dunkin Donuts
Dunkin Donuts Corporation is a global chain that specializes in the coffee and was once regarded as the world’s leading coffee chain store. Having operated for over 37 years, over half of the revenues generated by the company are attributed to the sales of coffee. According to (Sicoli, 2014), the company’s poor marketing strategies saw it cede its Canadian market to Tim Hortons in the 90s, and a similar fate befell the company in the Japanese market. The company has been embarking on numerous promotions targeted at its coffee consumers.
Dunkin Donuts’ Legal, Economic and Social Environment
Economic Factors
In the same way that the interest rates, exchange rates and changes in payment rates affect Starbuck’s, the same applies to Tim Hortons (Sharma et al., 2011). The volatility of the political environments in the markets in which the company operates is likely to affect the company revenues. A fast growing economy is likely to increase the disposable income of the population and consequently lead to increased consumption trends and this boosts revenues.
The Legal Factors
The legal factors that are of great concern to Tim Hortons are the importation tax tariffs, taxation policies and employment laws. When there are higher taxation and strict employment laws, they are likely to impact negatively on the economy of the coffee chain. In addition, a contravention of the company taxation policies can lead to economic sanctions and possible loss of revenue due to imposed fines.
Social Factors
Although the diversity in the product choices in Dunkin Donuts Corporation means that the company faces less consequences due to change in lifestyles, the changes in lifestyles and population demographics can have a similar impact as that in Starbucks. A change in taste due to bad brand name can greatly affect company performance. For instance, the racial discriminations labeled against the company in 2014 meant the company engaged in more training in order to improve its customer service.
The Managerial, Operational, and Financial Issues Affecting the Organizations
The two company headquarters have direct responsibilities of managing their subsidiaries. In addition, the subsidiaries are under local management. Both companies use democratic management, with the company CEO responsible for running and making company strategic decisions.
SWOT Analysis
Strengths
The analysis of the market segments of both Dunkin Donuts Corporation and Starbucks reveal highlights that both companies have some similarities. According to (Duduvoskiy, 2015), the strong brand name, high quality products, strategic supplier relationships and effective use of technology form the core strengths of the Starbucks. On the other hand, the strengths of Dunkin Donuts strengths include innovative culture, financial leverage, price power, strong brand name, cost advantage and low staff turnover (Krikorian, 2014). Both companies enjoy strong brand names; however, Starbuck has relatively higher product and service quality, which gives it an upper hand over Dunkin Donuts.
Weakness
The major weaknesses of Dunkin Donuts are the long lines, weaker managements at some locations, for example Japanese and Canadian market and tarnished reputation due to poor customer service. In contrast, the weaknesses of Starbucks are tall and laissez fair management style, oversaturation of markets, higher prices and higher employee turnover (Garet, Marcus, Bentley, & Nullz, 2014).
Opportunities
Both company opportunities are the younger drinking age and the ever-increasing world population and this presents and increasing market demand for their products (Garet, Marcus, Bentley, & Nullz, 2014). However, Dunkin Donuts enjoy lower prices and this presents other source of opportunities to the company. In addition, the company opportunities come in form of development of new products and services, which Starbucks lacks.
Threats
Starbucks and Dunkin Donuts face threats in form of global warming which is likely to cause a rise in food product costs. Similar, the increasing competitio...........…………………………………………………………………………………………………….
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