SUMMARIZE THE CASE

Starbucks CoffeeCompanyand Stakeholder Engagement

Starbucks, generally considered to be the most famous specialty coffee shop chain in the world,todayhasover23,000stores worldwide.Manyanalysts have credited Starbucks with having turned coffee from a commodity into an experienceto savor.Starbuckshasalwaysfelt thatthekeyto its growthand its business success would lie in a rounded corporate brand identity, a better understandingofits customers, and a store experiencethat wouldgeneratea pull effect through word-of-mouth. Howard Schultz, Starbucks'founder, and chairman and CEO, had early on in the company'shistory envisioneda retail experience that revolved around high-quality coffee, personalized, knowledgeable services and sociability. So Starbucks put in place various measuresto make this experienceappealing to millionsofpeople and to build a unique identity for Starbucks'products and stores. SchultzfeltthattheequityoftheStarbucks branddependedlessonadvertising and promotion andmore on personal communications, onstrong tieswith customers andwithmembers of thelocalcommunity andonword-of-mouth. As Schultz put it:

Ifwe want to exceed the trust ofour customers,then we first have to build trust with our people. a brand has to start with the [internal] culture and naturally extend to our customers...Our brand is based on the experience that we control in our stores. When a company can build a relevant, emotional and intimate experience,it builds trust with the customer...we have benefited by the fact that our stores are reliable, safe and consistent where people can take a break.

StakeholdersAsPartners

Schultz regarded the baristas, the coffee makers in the stores, as his brand ambassadorsand consideredthecompany'semployeesas long-term'partners' inmaking thecompany's strategic vision a reality.This commitment to employeesisalsoanchoredinStarbucks'mission statementwhich,amongst otherthings, statesthatthe company aims to 'provide a great work environmentandtotreat each other with respect and dignity'.

From itsfounding onwards, Starbucks haslooked on eachof itsstores asa billboard forthecompany andasdirectly contributing tobuilding the company's brand and reputation. Each detail hasbeenscrutinized toenhance themoodandambience of thestore,tomakesure everything signals 'bestof class's andreflectsthe personality of thecommunity andtheneighborhood.Thecompany hasgonetogreatlengthstomakesurethatthestorefixtures, the merchandise displays,thecolours, theartwork,thebanners,themusicandthe aromas allblendtocreateaconsistent, inviting, stimulating environment that evokes theromance of coffee andsignals thecompany's passionforcoffee.

Just as treatingemployeesas'partners'is one of the pillars ofStarbucks' culture and mission, so is contributingpositively to the communities it serves and to the environment. Each Starbucks store supports a range of community initiativesand causesand aims to be a long-term'partner 'to the communities in which it trades. At the community level, Starbucks store managers have discretion to make money donations to local causes and to provide coffee for local fund-raisers.

Because of theseinitiatives, consumers andmembers of thecommunity whichStarbucks operateassociatetheStarbucksbrandwithcoffee, accessible elegance, community, individual expression and 'a place away from home'. Besidesengaging inlong-term relationshipswithcustomers, employeesand communities,Starbucks isalsoknownforitssocial progressive ethos and collaborates with Non-governmentalorganizations (NGOs) inpromoting the production andconsumption of'fairtrade' coffee. Back in2000, Global Exchange, anNGOdedicatedtopromoting environmental,political andsocialjusticearound theworld,criticizedthecompanyforprofitingattheexpense of coffee farmers by paying lowprices andnot buying fairtradecoffee beans.

Whilst thecompany is,attimes, stillbeingcriticized foritsaggressive tactics inthecoffee market, ithastriedtocollaborate withvarious organizations to promote theconsumption of fairtradecoffee.Starbucks hasbeenanongoing contributor toCARE, a worldwide reliefanddevelopmentfoundation, specifying thatitssupport shouldgotocoffee-producing nations. Thecompany alsobeganapartnership in1998withConservation International,a non-profit organization that promotes biodiversity incoffee-growingregions, tosupport producers of shade-grown coffee,whichprotects theenvironment.

ManagingStakeholderIssues

Despiteitsbestefforts, however,Starbuckswasrecentlycriticizedforitspoor handling of two issues, which demonstrate the broader challenges for big corporations such as Starbucks to manage their stakeholder relationships in a balancedand ethical way.The first issueemerged in March2007 when Starbuckswas accused ofattemptingto blockEthiopia'sdesire to trademark some of its most famous coffees. Premium coffee is a growing market, and to benefit from the rising demand the Ethiopian government set out to trademark three coffee-growing regions of the country associated with its finest beans: Sidamo, Yirgacheffe and Harar. With trademarks, the country could charge distributorsa licensing fee for theiruse and claimintellectualproperty rights over its coffees. The European Union, Japan and Canada all approved the trademark scheme. Starbucks, however, initially objected to the trademarks and wasworkingwith its industrylobbyiststo pressuretheUSPatentand TrademarkOffice to tum down Ethiopia'strademarkapplications.Unbeknown to the Ethiopian government,Starbucks had also itselfa year earlier tried to trademark Shirkina Sun-Dried Sidamo. Attaining trademark certification would haveconferredStarbuckswith a numberofbenefits, includingrecognitionof the ownershipofthe trademarkandexclusiveuseofthebrandname,both in the USA as well as potentially(upon registration)abroad.

As a result of Starbucks'efforts, the Office approved the trademarking of Yirgacheffe but has continued to refuse the registration ofSidamo and Harar as they refer to generic names for a type of coffee. The outcome ofthis decision is directlyfelt byEthiopianfarmers. WhereasUSretailers generallyearn up to

$28 per kilogram, farmers were receiving aslittle as $1 per kilogram (ofthe retail price). In the case of Yirgacheffe, the price has, however, increased substantially for Ethiopian farmers, who now collect up to $4 per kilogram, with estimates that they could secure up to $8 per kilogramover the coming years.

OxfamtookupEthiopia'scauseinamediacampaign,generatingsome70,000 complaints against Starbucks from consumers andthegeneral public.In response,Starbuckslaunchedmediacounter-offensive,publicly rebuking Ethiopia's efforts. Thecompany claimedthatlicensing wouldbe more appropriate thantrademarking thethree coffee regions, andargued that 'the trademark application isnotbasedonsoundeconomic advice andthatthe proposal asitstands would hurt Ethiopian coffeefarmers economically'.The activeblocking of theEthiopiangovernmentledtoapublicrelationscrisisfor Starbucks,withthenormally ethically mindedcompany accusedof acting tough with one of the world's poorest countries.

To defuse the situation, Starbucks agreed a wide-rangingaccord with Ethiopia to support and promote its coffee, ending the dispute over the issue. Starbucks also offered to promote Ethiopia's coffees in its stores, regardlessofany decision by the US Patent and Trademark Office. The company furthermore pledged that it was going to build sustainable long-termpartnerships with Ethiopian farmers,but this nevermaterializedand it has focused its efforts sinceon offeringsupportandcapacity-buildingservices throughFarmer Support centers inAfrica and the Caribbean. In addition, the company sponsors Conservation International through cause-related marketing efforts to replant coffee trees for every bag ofcoffee sold in one ofits stores.

In December 2012, Starbucks found itself in another difficult situation, when it emerged that over the course of 14 years of trading inthe UK the companyhad paid only8.6 million in tax and nothing in the last threeyears. The reason for this is that despite having revenues ofover 3 billion over this period, the company'saccountingschememeantthatprofitswerechanneledtoIreland and the Netherlands where these were more favorably taxed. Customers were outraged over the issue. They, in effect, felt let down by the companyand its pledge to care about the communities and societies in which it operates. David Cameron,thethenPrimeMinister,alsoopenlycriticizedStarbucks: 'Companiesneed to wake up and smell the coffee, because the customers who buy from them have had enough.'In responseto the media backlash and the effectit washavingon customers,Starbuckspromiseda further20millionas a'gift'for 2013 and 2014 on top ofthe tax that it legallyowed the British taxman. UK Uncut, a group that protests against corporate tax avoidance inthe UK, said that Starbucks'announcementwas not enough and that they would continue to stage actions at Starbucksstoresup and down the country. Politiciansalsobranded themovebyStarbucksas'odd'andasaPRgimmick in thatpaying tax is not'voluntary'but a legal requirement.Starbucks admitted in turn that the degree ofhostility and emotion ofcustomers, politicians and the mediaover the issue had'taken us a bit by surprise'and that the move was an attempt to rebuild trust with its customers.

EngagingStakeholdersThroughSocialMedia

Alongside managing these specific issues, Starbucks uses social media to reach out directly to stakeholders and to strengthen the brand and community ties around the company. The companyhas active strategies for Facebook and Twitter,posting unique feel-good and eye-catching content, including helpfultips for coffee aficionados,subtle sales messagesto its customers and stories of its community outreach and volunteering events. The company's social mediateam also responds directly on Facebook and Twitter to information requests or comments online and actively seeks out social media users who mention Starbucksin their own timeline, in either a positive or negative way, to get in touchwiththecompanyfor follow-up.Inaddition,forsometime,Starbucks ran theStarbucksV2Vsite,whichwasasocialnetworkingsite thatthe companyran up until 2008 where people were able to connect on global relief causesandcommunity issues.Thenetworkingsitewasclosely connectedto thecompany; manypeopleon the siteeitherworked forStarbucksorwere loyalcustomersormembersofthecommunity.Thecompanydirectly facilitated the discussionand supported the identifiedcausesand issues.On

another sitethatisstill live(www.mystarbucksidea.com), people cansuggest ideasforproducts, storeexperiencesandcommunity involvement. Mostof thepeopleonthesiteareloyalcustomers andinthiswayStarbucksisabletogive themadirectvoiceinthecompany. Dedicated communication staff'listen' to theideasbeing discussed, provide customers withinformation onwhatthe company isdoing andmay help develop theseideas intoaction.