It is possible to consider a stakeholder as “any group or individual who can affect or who is affected by the achievement of the firm’s objectives”. (Freeman et al, 2002, p. 30). Moreover, in accordance with figure 1, it is possible to classify such groups or individuals in the light of two different groupings. The primary stakeholders “are constituents, on which the firm relies for its continuous survival and prosperity” (Peng 2009, p. 356). They are the following: suppliers customers and employees. The secondary stakeholders are defined as “those who influence or affect or are influenced or affected by the corporation, but they are not engaged in transactions with the corporation and are not essential for its survival”.
Finally, it is important to put an emphasis on the fact that “stakeholders have interests in what the organisation does. At the same time, they may or may not have the power of making the impact on the organisational activity in order to protect their interests. Stakeholder’s interests are varied, even while taking into account the fact that their interests may coincide on some issues and not coincide on others. Organizations do not choose their own stakeholders; rather, the stakeholders choose to have a share in the organization’s decisions”.
The impact that the shareholders make on the company’s activity and its strategic development is analyzed in this paper due to the fact that the operations of Starbucks Corpare influenced by their decisions. In addition, there is a set of options, that the impact of the stakeholders decisions may have on the company’s activity and its development. This research paper mainly focuses on the set of examples, which illustrate the effects that such individuals or groups have on the daily activities of the company.
I. Analysis of Stakeholders
CSCC and Howard Schultz (Starbucks’s chairman) consider that Starbucks’s partners “are the cornerstone of our success, and we know that their ideas, commitment and connection to our customers are truly the essential elements in the Starbucks experience.” CSCC.
Therefore, while taking into account the fact that “by most accounts, employees are important stakeholders in the firm”; as well as the fact that “few stakeholders are as vital in a business as its workers”, it is obvious that the impact of personnel is essential for the company, which has the purpose of achieving its initial aims.
In other words, given that Starbucks is a customer-oriented business entity. Consequently, its main purpose is defined by the company’s characteristics and core features of its partners. Therefore the behavior of the personnel, their motivation, and job satisfaction is the set of examples of approaches in which the company may evaluate the effectiveness and role of its business activities for these stakeholders; as well as the effects that such actions have on the general purposes of the business entity achievement. Pathak explains this issue in the following manner: “the greater the motivation of an individual towards the organisation, the more is the likelihood that the employee will work willingly, efficiently and enthusiastically to contribute his efforts towards the goal of the organisation.”
That is why it is obvious that the personnel of employees Starbucks’s is the core and initial company’s stakeholder and that is why they should be considered as an effective tool for the organisational goals of the company achievement.
Duchac, et all consider that “suppliers are stakeholders in the continued success of their customers. Suppliers may invest in technology or into other capital equipment in order to meet customer’s buying and manufacturing specifications.”
The top management of Starbucks (2012c) explains that the company’s “approach to ethical sourcing includes verifying the social and environmental performance of all manufactured products that end up in our stores – whether it be merchandise, retail supplies or store fixtures. We let our suppliers know what we expect and offer assistance when corrections need to be made to their business practices.”
That is why while taking in account all the above listed facts and factors, suppliers have the significant impact both on the products and services offered by the company and on its business style. That is why, while maintaining the partnership relations with the suppliers, the company gets an option of durable business relations establishing, and as a result, competitive advantage getting.
Crane and Matten (2007, p. 218) consider that “for many people, corporations exist, and indeed act, solely for the benefit of shareholders”. That is why it is possible to state a fact that shareholders are principal stakeholders for the corporation. That is why in accordance with the authors; opinion “the relationship between shareholders and the company is therefore defined by relatively narrow, but well-defined rights for the shareholder”. Such rights are integrated into the Corporate Governance of the company, which, in turn, “describes the process by which shareholders seek to ensure that ‘their’ corporation is run according to their intentions”.
As an evident example, it is possible to consider the Starbucks ‘Corporate Governance Principles and Practices for the Board of Directors, which in turn, explain that the core basis for the company’s board of directors responsibility implies the promotion of the company’s and of its shareholders best interests by monitoring of the business activities of the company’s management. In doing so, board members have two basic legal obligations to the company and its shareholders: (1) “the duty of care” and (2) “the duty of loyalty.”
That is why it is clear that the shareholders’ impact is significant for the company’s operations. The position of these operations and their power in the scopes of the company is significant in the same way as their ability of influencing the top management of the company decision making process.
4. Local Communities
As explained by Mallin (2007, p. 52) “local communities have a number of interests in the companies that operate in their region. First, the companies will be employing large numbers of local people and it will be in the interest of sustained employment levels that companies in the locality operate in an efficient way.” That is why while taking in account the importance that this type of stakeholder for the business operations, carried out by the company, the set of both local and global programmes has been implemented by the Starbucks in order to help such communities to be successful.
For example, the company’s “Youth Action” programme “awarded more than 100 grants totaling $2.6 million to organisations around the world to inspire and support youth action in their local markets” (Starbucks 2012d). Moreover, the company’s “Community Service” program accomplished “more than 700,000 individual acts added up to significant impact in more than 34 countries around the world”.
In such manner the company both positions itself as a corporate citizen, which causes the significant positive change within the communities, where it operates, and in addition, the long-lasting relationships, which are mainly directed for the social contributions improvement are established.
In other words, the significance of this type of shareholders implies the core basis of a profitable business entity- such as Starbucks. That is why the local communities could possess the potential impact on others both in positive and negative ways. . For example, as reported in the Guardian (2009), in the timeframes of the economic crisis peak, thousands of baristas have lost their jobs as Starbucks shut stores “to cope with dwindling sales of lattes, cappuccinos, and frappuccinos as cash-strapped consumers lost their thirst for coffee.”
Given that, as mentioned above, the company failed to act in an efficient way, local communities – as well as other stakeholders – reacted in such a way that “Starbucks’ share dropped 2.5% in after-hours trading on the New York Stock Exchange”. In a nutshell, this situation exemplifies both the role and impact that stakeholders, such as the local communities, have on the company’s operations.
Also, in the scope of this section, it is important to rely on the taxation, problem that Starbucks had lately faced in the UK. In accordance with the Reuters investigation, there is a set of the apparent discrepancies between the actually declared information to the US investors and the declared HM Revenue & Customs. In addition, the dismissing of the charges by the Starbucks executives, concerning the European tax underpaying has been done. That is why in the UK, Germany and France politicians have called for investigation of the tax arrangements into the company.
In accordance with the information, provided by the news agency, the investors were told that in 2011, the European businesses had made $40m (£25m) profit and in accordance with the investigations, the $60 m loss had taken place. That is why the financial activity of Starbucks became the target of activist group UK Uncut (Guardian.co.uk. 2012, p. 1).
The contradiction of the tax avoidance is mainly caused by the legal tactics, which are widely applied by the lion share of the multinational companies and Starbucks in particular. The core reason of Starbucks standing out is the fact that different information has been provided to its investors and to the taxmen.
In the timeframe of 2009-2011, no profit was reported by Starbucks and consequently, no income tax was paid. At the same time, the investors’ transcript shows that in the time frames of last 12 years, the officials of Starbucks regularly talked about the UK part of business as the profitable one. They have been completely satisfied with its revenue rate and more than that, they cited it as an example for other branches of the company, and for home one (US) in particular. At the same time, Troy Alstead, the Starbucks` Chief Financial Officer, stated that the international accounting rules are strictly followed by the company and consequently, the appropriate level of tax is paid.