Political, Legal and Social factors impacting business Blog by Aaron Sherwood A-level ICT student. 

P6 CRITERIA: Describe how political, legal and social factors are impacting upon the business activities of the selected organisations and their stakeholders.

Company of choice: Starbucks Coffee Company

Businesses have many factors which can impact upon success in the marketplace. Political, Legal and social being three of the most important factors, which of course businesses must adhere to. A consequence of not adhering to these expectations can result in imprisonment and penalties for owners of the business. Accordingly, this means that putting these three factors on top priority is crucial to not only Starbucks but applied to any firm.Thorough market investigation will be essential to the market research process which subsequently can be used to aid the decision making process. Doing so be may be beneficial to a firm such as Starbucks in terms of increased competitiveness in the long term. 

Starbucks holds around 33 percent of the market share for coffee in the U.S. It sells almost as much coffee as do fast food and convenience stores combined, even though the bulk of its consumers are in cities or upscale suburban areas. Starbucks has been able to gain such a large share of the market by catering specifically to a well-defined target audience.
Source: http://smallbusiness.chron.com/starbucks-target-audience-10553.html

Political factors:

Degree of political stability:  Political stability is defined as the degree to which a countries governments able to make decisions based on the best interests of the people.

One of the first questions Starbucks will need to ask themselves is whether the country is politically stable. Given that Starbucks currently operates in over 50 countries with 5,500 coffee houses.  Political factors have huge effect on Starbucks not only because of its strategic ethical trading policy, but more importantly the stability of which the coffee houses source their raw goods (coffee, chocolate, vanillas etc..), which can affect Starbucks supply of products should any disruption occur from the location at which the materials are being sourced. This may be due to environmental factors such as a hurricane, tsunami or earthquake.

USAID, Starbucks Team Up to Help Colombian Coffee Farmers

Starbucks ethical policy is affected by the political stability of a country through ensuring that workers are paid a competitive and ethical wage including the suppliers in the countries where the raw materials are being sourced. If the government decide to change the rate of tax and inflation then this may have an effect on Starbucks prices which consequently impact the customer as they will not be getting value for money.

Add to these: 

International monetary fund
Government support




Legal factors:

Not only does Starbucks sell coffee, it also sell hot food, pastries sandwiches and different merchandise, which means that there are numours regulations and klaws regarding health and safety standards. In the USA the food and drug administration (FDA) are in charge of monitoring and inspecting Starbucks food items to ensure that they are safe and fit for purpose. However regulations often differ depending on the location which means that different standards are set.

 Each year it is compulsory for each of the Starbucks coffee houses to apply for a permit from the health board to remain in business. Compliance with the regulations is key to obtaining this permit, which may include ensuring that the coffee house is of a high standard of cleanliness, staff are given appropriate tools to conduct jobs safely and the quality of the food and drinks reach the set guidelines. 

Further to this, Starbucks receives 4 inspections each year in order to achieve the permit. The inspections involve a 100 point scale. Achieving 85+ on the scale is considered a pass, and anything below is a fail. If a coffee house hypothetically was to fail, they have 60 days to improve and is then retested. If it fails again they will be refused the permit. 

Employee Protection: “Starbucks Mission includes the commitment to treat its employees with respect and dignity, and to be a force for positive action in the community in which it does business. To this end, Starbucks is committed to support and uphold the provision of basic human rights and to eliminate discriminatory practices. Starbucks respects the inherent dignity of all persons, and seeks to enable all employees to do their best work by embracing and valuing the unique combination of talents, experiences and perspectives of each employee.”                                     Source: http://globalassets.starbucks.com/assets/1d7de46ff5f845d89c01a81bebdbdb59.pdf
provision of an appropriate legal framework 

Many of the coffee shops have an strategic ethos to remake any drink which a customer does not find up to standard. This is built into the companies mission which combines four essential points:

• Product quality
• Economic accountability
• Social responsibility
• Environmental leadership

Add to these: 

Trades descriptions act:

Minimum wage act:

Competition act: 

Safety at work act:

Social factors:

Demographics are constantly changing which means that it is often difficult to predict changes in the market dynamics, which may become problematic to a business such as Starbucks. For example Starbucks target market will be affected by different population structures. Starbucks target market is aimed at women and men of 20-40 years old, which is achieved through good differentiation methods and unique interiors of the coffee houses. A sudden change in the demographics of this age group could have subsequent effect on the companies’ revenues in the long term.  Migration is another key factor which is core to demographic change which is of course always changing. An increased  in migration may result in a decrease in demand in the original country, however Starbucks may still be in operation in the country the customer migrates to given that it operate in over 50 different countries.

The service that Starbucks provides most likely appeals to those with higher incomes, given its high pricing strategy. Starbucks is most likely to be subject to income elastic demand which means that a change in standard of living/quality of life may affect the demand of Starbucks coffee significantly. A perceived improvement in the standard of living may result in an increase in demand. On the other hand a decrease in standard of living which may be an effect of a recession may result in a decline in demand.

Attitudes to work: 

Religion

Ethics and morality