In this section, the reasons of selecting the topic are given. An introduction to the idea of brand acceptance and the case company, research problem, purpose and its limitations, followed by an outline of the thesis will be stated.
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Expansion of big brands on the new markets is not a brand-new idea. For example MacDonald’s made its very successful appearance on the Russian market in the 1991 and still remains one of the leaders in the Russian industry of fast-food. But the way a new market will take this brand is always different. One reason that a brand may be a success is that a home market could have a significant gap which the brand could conveniently fill. On the other hand, equally a brand failure may arise because there is a lack of understanding of culture of the market where the brand is moving into or perhaps because the brand moves away from the area of core expertise. It may also be possible that the consumers of the market have a negative perception of the brand. So in determining whether or not the brand is successful it is important to identify the factors that could result in either.
Starbucks Corporation, founded in 1971, is a retailer of specialty coffee. Starbucks retails a variety of drip brewed coffee, espresso-based hot drinks, other hot and cold beverages, complementary food items, coffee-related accessories and equipment, teas, ice cream, and items such as mugs, coffee beans, and music and other non-food products through retail stores in approximately 39 countries worldwide. The company operates primarily in the US. It is headquartered in Seattle, Washington and employs about 150,000 people. Starbucks mission is “To inspire and nurture the human spirit— one person, one cup, and one neighborhood at a time” (Starbucks.com).
This chain has about 15 000 locations worldwide, 4 500 of them in 47 markets outside the United States. (Starbucks, 2008) Recently Starbucks had announced that 600 stores will be closed in US and 61 in Australia in 2008. (Starbucks, 2008) But at the same time international market share will be increased. It might mean that some markets with great coffee culture, like Italy, will finally give up and open their gates to American coffee. Few times, in 2003, 2005 and 2007, Starbucks had mentioned its potential entrance to the Russian market, particular to Moscow and Saint-Petersburg (RosBusinnessConsulting, 2003), (Peterburg, 2005), (PeterburgCity, 2007). In 2007 -2008 Starbucks opened its first five coffee shops in Moscow.
This research explores how a well known brand influences the customer in other countries. Moreover, another important question that needs to be answered is would the branch have to adjust to the market or the market would itself adjust for the brand. A lot of American restaurant chains are coming to the European and Russian markets. Many of them are doing very well, such as McDonalds, KFC, Pizza Hut, Starbucks. This dissertation explores Starbucks as a new and successful brand in the US and as a new venture in Russia.
Aims of the Research
This dissertation is intended to research the question of how famous brand is making its appearance on the new market, using Starbucks and its potential location in St. Petersburg as its main focus. The particular questions addressed by the research are:
- To establish what brand acceptance in a new market involves.
- To evaluate the cultural impact on success of brand acceptance
- To analyze whether it is the brand that would have to adjust to the market or whether it is the market that may adjust to take in the brand and why this may also a cause of failure the possible ramifications of each.
- To assess those factors which have helped make international fast food chains successful, but which may not help make an international coffee chain successful
- To determine the differences in American and Russian cultures that could provide a strong opposition to Starbucks.
My research will demonstrate and will try to demonstrate an idea that potential entry to Saint-Petersburg market (the first Starbucks coffee shop in Saint-Petersburg is scheduled to be open by the end of 2009), known as coffee capital of Russia, will be very challenging and probably unsuccessful due to difference in perception of coffee culture. (RussiaToday, 2007)
This dissertation will address the following question:
- What are the potential barriers to the Starbucks entrance on the Russian coffee market and in what ways can these be attributed to due to the cultural differences of American and Russian (mostly Saint-Petersburg) coffee culture?
- The focus is Starbucks only and no other coffee brand that maybe successfully established in Russia.
- The center of the research is upon Saint-Petersburg and its strong coffee culture.
- The research does not cover other factors such as financial aspects, etc that may also be opposing the successful entry of Starbucks
- The research is also limited due to the time and therefore, could not fully exhaust all factors of culture.
For this purpose, a case study method will be used to collect and analyse data pertaining to the brand acceptance and how Starbucks successfully achieved this objective.
The purpose of a literature review is to discuss the theories and concepts which are used in the project in order to generate background information which will be used to analyze Starbucks and its entry into Saint-Petersburg.
A high level of brand awareness among consumers can be achieved through branding strategies. The brand can symbolize in the minds of consumers the very attributes that a company. The use of consistent brand strategy over time helps to reinforce the brand’s place in the consumers’ mind, and this helps to enhance brand recall
Brand equity refers to the total accumulation of marketing efforts on the brand name which add value to a product and which makes consumers desire that brand. Brand equity is an intangible asset which encompasses the command of price premium to consumers, the creation of long-term loyalty toward the brand and the market share gains it holds as a result of the marketing activities.
The brand’s positive brand associations with consumers and brand awareness then lead to high perception of quality of the brand, helping to boost brand loyalty. The combination of a distinctive brand promise and a superior brand delivery produces stronger brand equity.
According to the 2007 Brand Marketers Report published by Interbrand, there was high consensus among experts that consistency was the most critical aspect of successful branding. A brand can attain the status of a strong brand by building and maintaining strong perceptions in the consumers’ minds. For this not only is a provision of a unique brand promise important but also offering an outstanding brand delivery, which keeps true to its promise.
Brand acceptance internationally involves, firstly, brand awareness and then brand equity. Within this it is important to know and understand Aaker’s five levels of customer attitude:
- The customer will change brands, especially for Price reasons. No brand loyalty.
- Customer is satisfied. No reason to change brands.
- Customer is satisfied and would incur cost by changing brand.
- Customer values the brand and sees it as a friend.
- Customer is devoted to the brand.
How the customers view the new brand and what they feel about an existing brand is detrimental in whether or not they would be willing to try and use the new brand.
Moreover, today the entire process of marketing brands has become one of perception-building. Consumers make buying decisions based around the perception of the brand rather than the reality of the product (Haig, 2003). This means that for the acceptance of a brand, the image the company wishes to project has to be developed in the minds of the potential customers. The reality of the product is no longer a factor affecting the acceptance.
“Today most products are bought, not sold,” (Al and Laura Ries in The 22 Immutable Laws of Branding). “Branding ‘presells’ the product or service to the user. Branding is simply a more efficient way to sell things.” Scott Bedbury, Starbucks’ former vice-president marketing controversially admitted that ‘consumers don’t truly believe there’s a huge difference between products,’ which means brands have to establish ‘emotional ties with their customers. (Haig, 2003).
In order to understand the factors behind that may lead to Starbucks potential failure in Saint-Petersburg, it is important that the reasons in general of why brands fail is known. For this a detailed literature review was undertaken. This would allow one to understand that even the best and most established brands do not necessarily succeed in all markets.
The Brand when establishing itself in a new market or creating a new image, should conduct a detailed market research as to the culture there, the price that would be suitable, the names to be used and the marketing it would undertake. This is a major task since it is the only way to ensure to an extent that a brand is accepted. It is important one understands all factors tht may result in the failure of a brand though for research purposes one may focus on a single factor. This is also what has induced me to conduct this research, since the chances of brand failure, if not higher, are equal to the chances of its success. Here the researcher will identify some of the major reasons of brand failure to clarify the background of the research further.
Matt Haig (2003) identifies the seven greatest mistakes that management makes in relation to its brands:
- Brand amnesia: For old brands, as for old people, memory becomes an increasing issue. When a brand forgets what it is supposed to stand for, it runs into trouble. The most obvious case of brand amnesia occurs when a venerable, long-standing brand tries to create as radical new identity, such as when Coca-Cola tried to replace the original formula with New Coke. The results were disastrous
- Brand ego: Brands sometimes develop a tendency for over estimating their importance, and their own capability. This is evident when a brand believes it can support a market single-handedly, as Polaroid did with the instant photography market. It is also apparent when a brand enters a new market for which it is clearly ill-suited, such as Harley Davidson trying to sell perfume.
- Brand megalomania: Egotism can lead to megalomania. When this happens, brands want to take over the world by expanding into every product category imaginable. Some, such as Virgin, get away with it. Most lesser brands, however, do not.
- Brand deception. Brands cannot bear a lot of reality. Indeed, some brands see the whole marketing process as an act of covering up the reality of their product. In extreme cases, the trend towards brand fiction can lead to downright lies. In an age where markets are increasingly connected with the internet and other technologies, consumers can no longer be deceived.
- Brand fatigue: Some companies get bored with their own brands. You can see this happening to products which have been on the shelves for many years, collecting dust. When brand fatigue sets in creativity suffers, and so do sales.
- Brand paranoia: This is the opposite of brand ego and is most likely to occur when a brand faces increased competition. Typical symptoms include: a tendency to file lawsuits against rival companies, a willingness to reinvent the brand every six months, and a longing to imitate competitors.
- Brand irrelevance: When a brand radically evolves, the brands associated with it risk becoming irrelevant and obsolete. Brand managers must strive to maintain relevance by staying ahead of the category, as Kodak is trying to do with digital photography.
Also the reason that brands fail is that they believe in certain myths which result in them becoming complacent. They may think that if the product is good the brand will succeed. This is a fallacy since good products are as likely to fail if they do not appeal to the customers. The idea that brands are more likely to succeed then fail is again not true. According to some estimates, eighty percent new products fail on introduction and a further 10% fail within 5 years.
Human resource management (HRM) has become one of the most popular issues in international management and business practice recently. Due to the increasing importance of qualified staff in multinational companies, the international human resource management models have been developed (Chen and Wilson 2003). In the beginning, multinational companies adopt standardization of human resource management, which believed coherence strategy and coordinate practice can lead to operational effectiveness and efficiency. However, they met difficulties after the international dimension becoming more and more popular as a result of changes in operating environment and structures (McGraw and Harley 2003). Different people in different countries have different culture and conception on organization behavior.
The diversity and complexity of cross-nation and cross-culture may result in strategy conflicts for multinational companies when they implemented international standardized human resource management (Daft, 2007). In order to overcome these difficulties and reduce cost, more multinational companies began to localize employment in host countries. Localization of Human Resource Management has hence emerged as the times require.
According to Noe et. al (2006, p. 5), Human Resource Management is a branch of an organization which recruits and develops personnel to promote the organization’s objectives. It involves interviewing applicants, training staff, and employee retention. Compensation, benefits, employee relations, health, safety, and security issues are a few of the aspects of the Human Resource Management division. Human resource is a crucial factor which could be a competitive advantage for company’s long term development and reputation (Decenzo & Robbins 1999).
“Culture is the integrated sum total of learned behavioural traits that are shared by members of a society”. (Terpstra, 1994)
We cannot avoid seeing that the business environment is changing in many ways. As well does the cultural environment that is one of the most challenging areas for most international marketplaces. In order to understand and influence consumers’ wants and needs, foreign companies must understand the different cultures.
Culture has been defined in many different ways, reflecting the variety of cultural phenomena that can be observed. According to Morrison (2002), cultural symbols include language, religious rituals and art who have shared meanings from the unique fingerprint of a particular society.
According to Czinkota (2007), cultural factors have an important impact on the flow of business. Each society has its own elements of culture. These elements of culture are manifested through:
- Values and attitudes
- Manners and customs
- Material elements
- Social institutions
The most important issue for a foreign company is cultural analysis, which includes information that helps the company´ staff to take planning decisions. This information from the cultural analysis must be more than collecting the facts; these must also be interpreted in the proper way (Czinkota, 2007).
Culture in each country is meditated through three factors: cultural forces, cultural messages and consumer decision process. Family, education and national identity manifest cultural forces. Ethics and morality, behavior and roles and design influence cultural messages. Culture is also influenced from universal needs and wants in the society and consumer trends.
These cultural differences are different in country A and country B. The foreign company must analyze and cope with these cultural differences and harness the tension to bring about reconciliation between these countries. By or through combining and synthesizing cultural differences the foreign company can integrate different cultural perspectives and seek a dynamic solution to problems that may arise (Bradley, 2002).
Hofstede (2001) states that masculinity versus femininity describes the degree to which societies display the stereotype male female or related to division of emotional roles between men and women.
Confucian dynamism is the new dimension added of the cross-cultural framework. It relates to whether a culture is universalistic or particularistic. Culture that is universalistic believe what is true and good can be applied everywhere, whereas particular culture believe circumstances and relationships are more important in determining what is good and right (Hofstede, 2001).
Tayeb (1998) says that the decision to become involved in international business depends, among others, on the size of the company´ domestic market, its production capacity and capability, and the financial and other resources that the foreign market requires. In that way, firms can be placed on an internationalization scale ranging from domestic single nation to totally globalize.
Tayeb (1998) also states that there are some aspects of culture that manifest themselves in a negotiation situation. Foreign partners not only speak languages other than one’s own, but also have a tendency, for cultural reasons, to think in different ways and have different priorities in the way in which they do business. For example, some people prefer to do their business meetings with foreigners in a formal way, and would be offended to be addressed by their first name; some might believe that the use of an informal style and first name would signal to the partners that they are trusted. Two partners from these different cultural backgrounds could easily misunderstand each other if they negotiate without a previous knowledge of one another’s assumptions and values.
Cultural advantages can arise from different values and ways of seeing the world. To realize competitive advantage from them, it is first necessary to try to understand them.
For cultural differences to be lower these should be managed. According to Hoecklin (1994) there are four strategies for managing cultural differences:
- Building a strong corporate culture internationally
- Developing a common technical or professional culture worldwide
- Relying on strong financial or planning systems
- Leaving each culture alone
Knowing about the cultural circumstances of the target country can either help save money, or prevent making mistakes – and no consumer products company can afford to make mistakes in an intensely competitive market.
When Starbucks finally opened up in Moscow local franchises like Coffee House and Shokoladnitsa were quite dominant. In some areas, they even reach the Starbucks standard, two stores from the same company located right across the street from each other. (Russia Journal)
Furthermore, while the café culture is strong in Moscow, the Starbucks culture is not necessarily so. Unlike the west, rarely does someone walk down a Moscow street drinking coffee on the go. Muscovites prefer a sit-down café where the waiter serves the customer, not where customers have to wait to bring their own coffee to the table.
Also due to the differences in culture Starbucks had to make certain cultural concessions for the local market. These included offering actual mugs in addition to paper cups and an outdoor veranda where people can smoke since smoking cafes is a norm in Russia.
There’s one more difference between the coffee cultures in Russia and in the West. “In the West, most people go to coffee shops just to have a cup of coffee. All they need is first-quality coffee. They don’t care that much about interior decorations or anything else. In Russia, most people still come to a coffee shop to spend some time. So, they need to be entertained, and what we try to do is promote coffee culture. So, if a person does not understand it, he or she will never be able to explain coffee culture to customers.”(Russia Journal)
United States (Starbucks motherland) scored 62 points in the Hofstede Masculinity Index where 0 is related to the most feminine and 100 to the most masculine country. Russia scored 36 points. (Hofstede, 2005, Table 4.1, p.120) Even though many countries do not oppose the perception of life, but still Russia possess the feminine way of life (work to live) and USA holds on the masculine way (live to work)
For the feminine cultures “coffee is a symbol of togetherness” (Hofstede, 2005). That is the main difference with the American coffee culture approach. The main symbol of Starbucks is a paper cup “to go”. Even when this cup is filled with delicious Brazilian, Colombian or Italian coffee flavored with different syrups it won’t change the concept – this coffee is made for a busy person. Also, Starbucks cup is became a status symbol for the people within age of 20 to 40. This cup demonstrates success, wealth, independence and prestige. Hofstede (2005) states that status purchases are more common for the masculine cultures.
Relationships and quality of life are playing the dominant role in the feminine cultures. And coffee drinking traditions in Russia are leaning towards this direction – quality coffee, good company and interesting conversation are the key components of the successful coffee shop. For the masculine culture challenge, recognition and earning are essential, which again shows importance of the famous Starbucks paper cup.
Even though Russia is stated as a feminine country, not all the cities in country are even. Moscow and Saint-Petersburg were always located on the different poles, but named “two capitals” with different meaning. Moscow (actual capital) is a huge mega police with a very fast speed of life and Saint-Petersburg (former capital) is positioning itself as a cultural capital. Both cities are considered as main ones in Russia, but they are having a different approach to the way of living. In this respect Moscow is more masculine and Saint-Petersburg is more feminine. And everything which was mentioned before about difference in perception of coffee related more to Saint-Petersburg, rather to Moscow.
Saint-Petersburg is considered as cultural capital and coffee capital of Russia. That could be linked to its close location to European countries and history of the place. In the city centre almost every corner has few different coffee shops; on the outskirts of the city they are located in the various malls. And number of the coffee shops is continuing to grow every year without any sign of decline in coffee consumption. This makes Saint-Petersburg a potentially attractive market for Starbucks for many years.
Moreover, there are particular peculiarities of doing business in Russia, such as dealing with officials and other problems. People’s mentality in Russia is also different from that in West.
In West, people’s motivation is more obvious. If someone has a job, that person can be sure that he or she cannot be arbitrarily fired. What is said in the contract is 100 percent guaranteed. But in Russia many employees don’t even have contracts, and those who do have them do not really believe in what is stipulated in their contracts. As a result, some people try to cheat. These are the most significant differences — people in Russia are less confident about their future, and money is not the most substantial motivating factor for Russians. People are highly motivated if their ideas are employed. (Russia Journal) Another factor is growth prospects. In organizations that provide a higher chance of moving up the hierarchy, the Russian workers feel more satisfied.
Every country has its own nuances, as Starbucks learned the hard way. Their plans to open in Russia were put on hold until 2005, when they won a court case against a Russian trademark squatter who claimed that he owned the rights to the Starbucks name in Russia and wanted $600,000 from the company to give it up. (Russia Journal, 2009)
Last summer main coffee chain in Saint-Petersburg “Coffee House” introduced a new way of serving coffee – in the paper cups “to go”. This covered the need of busy people to enjoy the nice cup of coffee while they are still on the move to somewhere. After this all other coffee chains implemented the same concept in their cafes. Starbucks lost its main competitive advantage while its entrance to the Saint-Petersburg market is still expected by the end of 2009.
The first location for the pilot Starbuck store in Saint-Petersburg was chosen on the Nevsky prospect, main city street. But then it was moved to the outskirt, to one of the trading malls located close to the international airport. The main reason for this was changing of targeting to the international visitors instead of local consumers. (Saint-Petersburg Times, 2009)
Starbucks is one of the leading purchasers and grinders of quality coffee beans. The company has an international market with shops established around the world. In conducting a SWOT analysis of the company, there are four considerations. First are the strengths of the company. Starbucks enjoys the position of having high brand equity as well as satisfied employees. The company has strong brand equity because of the quality of the products that they offer. Starbucks prides itself with offering exclusive coffee products or products that customers cannot find in other coffee shops. People make the effort to go out and purchase the exclusive coffee of Starbucks. The company also enjoys the benefit of satisfied employees expressed in the recognition of the company as Fortune’s top 100 companies to work in. The company attracts the best employees in their different branches ensuring service quality.
Second are the weaknesses of the company. Starbucks has several weaknesses, one is the lower price of coffee in supermarkets and another is its shrinking target market. Starbucks competes with the cheaper make-your-own coffee sold in supermarkets and it also felt the dwindling of its original target market of people belonging to the 35 and above age range.
Third are opportunities. Starbucks is faced with several opportunities. One is the expansion of its market to include the younger age range by making the company accommodating to the preferences of younger people through the variety of their products. Another opportunity is the introduction of its coffee products in supermarkets but which should include instructions on the specific manner that coffee is to be prepared if the final product is to become at par with coffee sold in the Starbucks shops.
Fourth are threats. Several international companies also operate through the exclusivity of products espoused by Starbucks. This means that Starbucks has to continuously develop new varieties of their products if the company is to succeed in maintaining product differentiation. Another threat is the superiority of the access of competitors to channels of distribution. Companies selling ground coffee in supermarkets enjoy the benefits of this channel of distribution that Starbucks does not enjoy. Starbucks only provides its products and services to people within the vicinity of its cafes.
The weaknesses of Starbucks as to losing its target customers in its existing markets means that it has somehow loosed out on the image it had built. This would be a serious concern since when it is not maintaining customers in existing markets; it decreases chances of creating customers in new markets. The marketing mix of the company seems to have deteriorated and before moving and establishing in Russia it should try to reinvent or introduce some appeal to the customers in its existing markets. However, one cannot say anything conclusively unless research is carried into why it is losing customers. This area is beyond the scope of my research, therefore I will not include it in the current review in detail.
The literature is extensive as far as the intercultural differences that the multinationals face and other challenges they have to overcome are concerned. The differences in the culture of Russian organizations and the way they are handled by the businesses moving into Russia have been identified to some extent. The coffee culture of Russia has also been highlighted in the literature till now. Starbucks, of course has been researched upon in great detail.
However, the area that is not researched upon in depth nor is much literature available on it is the affect of Starbucks on the Russian coffee culture. This is an area that has not been focused upon and is an obvious gap in the literature review. Therefore, this dissertation focuses on whether Starbucks move into Russia would be successful or not and the reasons that may result in its potential failure.
In this section the researcher will discuss the research strategy, different research methods, techniques, collections and ways of analyzing data, as well as discussing the quality of research. This section also explains how the secondary data for this study was collected and interpreted.
The research strategy undertaken depends on how the problem looks, what questions the problem leads to and what end result is desirable (Merriam, 1994). For this study, the researcher utilized the case study research method in order to collected necessary data. The case study is one of the oldest research methods. It is an in-depth study of an organization in the hope of revealing things that are helpful in understanding the research problem. One advantage of case study research is that it often suggests hypothesis for future studies. It also provides a method to study rare phenomena (Jackson.S, 2006). Case studies are appropriate to answer “how and why” questions, when the focus is on a contemporary phenomenon with a real life context (Yin 1999). The same author also stated that; case studies are suitable for practical problems, which are often problem centred, small scaled and entrepreneurial. A main advantage of a case study project is its ability to draw information from many different sources such as interviews, observations and historical data.
For the purpose of this project the single case study strategy is the perfect approach to take. Case studies are said to be complete, reality based, empirically grounded, and exploratory (Merriam 1994). The end product of a case study is an extensive descriptive analysis of the case studied.
In a case study the evidence comes from six different sources; documents, archival records, interviews, direct observation, participant-observation and physical artefacts (Yin 1994). The material can be primary or secondary nature. Primary data is collected to satisfy the specific purpose of the study. Secondary data is published findings from earlier research studies, often collected at the beginning of research to provide a background and basic information about the topic being researched (Andersson and Nylander 1999). Combining the two types of data will give a deeper understanding of the quantitative data (Halvorsen 1992).
To have a successful research methodology the quality of it must be high, to judge this the validity and reliability is assessed.
Validity concerns the issue whether or not the findings can be shown to be valid for the problem that is being investigated. Data collected must be relevant to the problem and the purpose of the thesis otherwise there will be low validity. Irrelevant data and unnecessary information leads to low validity. According to Merriam (1998) there are six strategies that can be used to check validity i) Triangulation, ii) Checks, iii) Long-term observation, iv) Peer examination, v) Participatory/ collaborative models of research, vi) Researcher’s biases.
In order to increase validity, I used comparative analysis of the data. For example, the data collected from the Starbucks was compared with the available from other journals and articles in order to ensure the accuracy and reliability.
Reliability concerns the issue of consistent results of the study if it was replicated. A good guideline is to make sure that if someone did the project again, the same results would be found (Rott 2000). Reliability is an important aspect of doing a case study and the goal of reliability is to minimise biases and errors in the research study. A prerequisite for reliability is that all the documentation is in order and can be easily found (Yin 1994). Heneman (1974) has shown that subjects are more likely to give unbiased responses when anonymity is assured.
The findings of the case study will be analyzed in detail in the next chapter. The study has helped the researcher determine the objectives that were set out with. It has helped decide why Starbucks would find it extremely difficult to establish itself in Russia.
In this chapter, the researcher presents the primary data collected through the case study research method from the Starbucks Coffee Company. The focus while data collection was on its marketing strategies, establishing its strong brand image and how it influences its customers to use the brand for retaining them as loyal customers. This process of data collection included extensive exploration and review of different data sources like journals, books, newspapers and marketing magazines.
The Starbucks corporate strategy is an integration of stakeholder concerns. For example, the Starbucks Mission Statement has six guiding principles that affirm the moral aspects of relationships, inclusive of respect, dignity, diversity, excellence, satisfaction, and community, and guided by those principles, Howard Schultz, Chairman of Starbucks Coffee Company, addressed himself to the consumer market interest in portable, good-tasting coffee drinks. Although one of his motives is to provide the best, aesthetically-pleasing coffee to the market, his original corporate mission was based on multi-dimensional market relationships. For example, Starbucks’ enterprise is also a growing agricultural project. Starbucks builds relationship alliances not only within the communities in which they operate stores, but within the communities in which they have developed ties to independent suppliers of coffee beans.
These communities are tradition-laden agricultural societies comprised of interdependent relationships. Starbucks envisions its going concern as a relation-based entity in respecting all of its stakeholder relationships, rather than succumbing to the lure of the short-term outcomes of its enterprise. Schultz’ mission as a corporate leader is to develop corporate responsibility toward furthering the integration of social, environmental, and economic values in communities as a tradition-laden, sustainable corporate legacy (Starbucks, “Company Fact Sheet” 2006).
In other words, Starbucks’ business practices are designed to foster business sustainability. In this case study, I will analyze the Starbucks model of sustainable corporate endeavors as brand building strategies. Starbucks, as a corporate entity, embraces the notion of “corporate social responsibility” with its stakeholders in each aspect of its market enterprise, including the company’s purchases of their primary resource, coffee beans, from small landholder farmers in Asian/Pacific, West African, and Latin American rural and developing economic regions (Starbucks, “El Món del Café;” Kleinrichert 2006). Corporate social responsibility means analyzing the impact of corporate “footprints” left by corporate endeavors because footprints always have an impact. But, Schultz’ direction goes further than “traditional” concepts of CSR – the company’s mission is to be responsible to others, in this order: for the social, the environmental, and the economic footprints of Starbucks’ impact in all communities in which they have a presence.
With reported net revenues of $7.8 billion, up 22% from the prior fiscal year per Starbucks Annual Report 2006, this organization has developed success in just over three decades as “the leading retailer, roaster and brand specialty coffee in the world” (Schultz, 2005). In other words, though the Starbucks Mission Statement Guiding Principles primarily stipulate the socioeconomic guidelines for the corporation’s decision-making, Starbucks has met the mandate of its last guideline which states: “Recognize that profitability is essential to our future success” (2007). In the U.S. alone, the company has almost 5,700 company-operated coffeehouses and 3,200 licensed locations, plus international sites in 36 countries. Starbucks produces and sells over 30 formulations of coffees, various teas, and an assortment of other related beverages, as well as branded products merchandised in their café-style stores (Starbucks, “Company Fact Sheet” 2006). In just a year’s time, from 2003 to 2004, Starbucks’ purchases of coffee beans from alliances with small planting coffee farmer networks amounted to 14.5% of their total purchases and rose from 13.5 million pounds to 43.5 million, surpassing their goal of 30 million for the year (Starbucks Key Performance Indicators Summary 2005).
Schultz built the company from a Seattle coffee shop enterprise, using high quality coffee beans to brew individual cups of coffee into a successful corporation with worldwide distribution of brewed products, with its growth based on balanced, ethical corporate endeavors inclusive of community enhancements. Schultz states,
We believe our growth and success are the result of our unwavering commitment to offer the highest-quality coffee and an exceptional customer experience while conducting our business in ways that produce social, environmental and economic benefits for the communities in which we do business. (2005)
A key element of the corporation’s perspective of its role in society is a commitment – it is responsibility to communities as an active, participative, and relational partner. Starbucks does not take its role to be one of interference, nor of “bandwagon” jumping. In other words, Macray describes this “Starbucks effect” as a “hand-in-hand” involvement (2007). Further, the corporation’s precepts assert the model of sustainability as both a concept and a practice of socioeconomic enterprise, which is distinct from altruistic or philanthropic financial provisions. In other words, while altruism and philanthropy are valuable corporate practices in which Starbucks engages, neither is defined as the essence of sustainable corporate responsibility. Rather, these activities are an extension of a corporate benevolent response to the consequence of some particular climatic event or perceived social need (Macray 2007).
Social Footprints and Responsibilities
Schultz refers to the company’s mission as a process of ally-building, or partnership, in other words relationships, with each of the company’s stakeholders (Schultz, 1997). He aspires to “Striking a Balance” among stakeholders as an ethical mission in the organization’s Corporate Social Responsibility Fiscal 2004 Annual Report. This mission is still reflected in the Fiscal Annual Report 2006:
For us corporate social responsibility is not just a program or a donation or a press release. It’s the way we do business every day. (p. 2)
Based on company analysis of the key issues of concern to their stakeholders and the potential impact on the company, Starbucks determined that socioeconomic impacts on coffee suppliers were of utmost concern. The top three concerns are:
- Coffee purchasing practices:
- Prices paid to coffee farmers and suppliers
- Respect for workers’ human rights
- Long-term availability of high-quality coffee
- Growth and expansion
- Impacts on local communities
- Environmental impacts
- Climate change energy consumption
- Paper cups
(Starbucks Corporate Social Responsibility Fiscal 2006 Annual Report)
For example, Schultz has developed Starbucks as an inter-organizational ally in the communities in which small, independent supplier-farmers reside and work in coffee bean farming. Moreover, Schultz suggests that Starbuck’s “ongoing success will be measured by how well we balance our fiscal responsibility with our goal to enhance the lives of those whom we serve and who serve us,” based on notions of reciprocity and cooperation in community relationships (2005). The concept of reciprocity that Starbucks anticipates in its supplier communities includes supplier commitments to the Starbucks Supplier Diversity Program. Among these commitments, for example, are the criteria regarding the suppliers’ business characteristics – diverse ownership and employee population. This diversity program requires Starbucks’ suppliers to be: “51% women or minority-owned, or socially or economically disadvantaged as determined by the U.S.Small Business Association” (Starbucks Supplier Diversity Program, 2007). The intent of these criteria are to produce mutual benefits for Starbucks and the supplier/farmer communities based on reputation, loyalty, and commitments – necessary elements of duty and respect to others. These characteristics and the company’s extension of loan funds with low interest may be measured in terms of the social approval of the motives of Starbucks’ efforts as an ally-builder in coffee production enterprises in global communities. This is the kind of measurement of social approval Jeffrey Pfeffer (1994) sought in his analysis of ally-building and the corporate effectiveness of individuals’ motives for decisions in an intra-organizational environment. Schultz’ development of a diffuse, generalized obligation to others through Starbucks’ extension of “affordable credit to small-scale farmers” has meaningful qualitative reciprocity (Schultz, 2005). He has cultivated market allies based on more than direct economic ties in a stakeholder model. Further, Schultz expresses the company’s mission as “contributing positively to our communities and our environment” (1997, p. 293).
Put differently, he does not see his role as a corporate leader in the way Western standards portray –“a charismatic, ‘John Wayne type.’” Rather, a “consensus-building,” leader who uses “cultivated relationships” (Nielsen 2006, p. 269) to develop long-term corporate goals based on shared perspectives seems to fit his approach. I would also argue that Schultz’ leadership approaches what has been advanced as the three practices of citizenship – “engagement, networks of networks, and rotation” (Manville and Ober 2003, p. 120).
Engagement is the “voluntary, spirited participation by individuals in the work and decisions of the community;” human networking “foster[s] innovation by building small subcommittees of trust;” and rotation is “the habit of taking turns at public service” in leadership and community decision-making (2003, pp. 121-25). It could be argued that Schultz seems to initiate, rather than follow, corporate trends – in other words, his leadership has taken “responsibility” to mean instigation and action, rather than meeting the “moral minima.” In fact, in 1997 he eschewed the traditional terms, “corporate social responsibility” and “corporate social responsiveness” because each imply paternalistic, and possibly coercive, aspects of effecting change on some particular stakeholder (Schultz 1997). Rather, the focus of his efforts has been in ally building through reciprocal dialogue and practice based on a company mission of inclusiveness in decision-making in stakeholder communities. This has been the hallmark of Starbucks’ corporate community involvement which is vitally important for brand image building.
Corporate community involvement is analogous to some elements of William Clohesy’s notion that businesses are imbued with necessary social practices by serving the public good through a public market: “Business people are on the scene, know what is happening, can predict what could result from their products and practices” (1998, p. 5-6). In fact, Macray states that Starbucks may look more like a nonprofit entity in terms of its mission and practices, rather than a traditional corporate enterprise because few private corporations are willing to take the initiative to be sustainable. Why? He suggests it is because most corporations have not realized how they can add value through sustainable initiatives.
In addition, Schultz has used a model similar to what Samuel Culbert describes as the “new model” – “relinquishing control, increasing your spheres of impact, and getting involved in influencing people over whom you have no formal authority, [which] requires that you find persuasive ways to make your view known” (1996, p. 9). This latter strategy carries qualitative notions of understanding the mind-set of a community in advance of decision-making about support and ally-building. Starbucks establishes influence through small loan access for sustaining farmers’ working capital from season to season and through community development endeavors such as building health clinics or schools. These are vibrant, sustainable community resources for a multinational corporate enterprise to undertake. These relationships are the result of integrating corporate endeavors and community endeavors with a goal of human well-being, a holistic perspective.
Weissbrodt and Kruger have considered corporate social responsibility efforts by multinational organizations:
Transnational corporations evoke particular concern in relation to recent global trends because they are active in some of the most dynamic sectors of national economies, such as extractive industries, telecommunications, information technology, electronic consumer goods, footwear and apparel, transport, banking and finance, insurance, and securities trading. They bring new jobs, capital, and technology. Some corporations make real efforts to achieve international standards by improving working conditions and raising local living conditions. They are certainly capable of exerting a positive influence in fostering development. (2003, p. 901)
In other words, the relational aspects of corporate endeavors in any market are always already interdependent social structures based on reciprocity and sustainable ties to others. To reiterate, these models move beyond traditional concepts of R. Edward Freeman’s Stakeholder Model (1994) and Archie Carroll’s definition of “corporate social responsibility” (1979) because of the emphasis on the socioeconomic aspects of corporate community involvement.
For example, shareholder relationships are not Starbucks’ primary mission. The first three stakeholder relationships discussed in their annual reports are – in this order–partners (employees), customers, and coffee farmers. But, the coffee bean farmers come first in discussions of ally-building. Schultz and his management team have fostered an “integrated approach to building mutually beneficial relationships with coffee growers and their communities” by not only paying premium prices for and preferential purchasing of coffee beans grown by community-based farmers, but also investing in “housing, health clinics, schools, and other projects in coffee-growing communities” (2005). Further, Starbucks began committing loan funds to foundations willing to partner in credit ventures for rural communities in 2001 when world coffee market prices were dropping, leaving farmers struggling to survive in their communities. By 2004, Starbucks had provided $6 million for foundation small loan provisions at low interest rates to small-scale coffee farmers, which increased in 2006 to $9.5 million following the inception of its partnership with the expertise of three foundations – Verde Ventures Fund, Calvert Foundation, and Ecologic Finance (Macray 2007; “Access to Affordable Credit” 2007; Annual Report 2006). Providing low interest loans enables coffee farmers to remain economically viable, in other words sustainable. The small loans provide working capital to sustain the independent farmers between harvests of coffee cherries, providing a stabilizing socioeconomic force for the community and the ecosystem by supporting the continuing allocation of land use for traditional agricultural endeavors. In this way, Schultz is creating long-term relationships with the farmers as allies in the coffee trade. Further, this constitutes ethical practice as a business partner by taking into consideration and respecting the needs of all these particular stakeholders – the suppliers, the communities, and the environment. Macray states that Starbucks’ small loan initiatives meet the corporate mission and expectations, in fact often exceeding their intentions. Moreover, the value of the corporate mission of sustaining these farmer-supplier relationships in the community is valued equally with its outcomes (Macray 2007). This is the basis of Pfeffer’s (1994) sense of ally-building based on developing feelings of importance and security among allies.
In the company’s annual reports, Schultz has emphasized these values in his relationships with coffee bean farmers and the communities in which the company operates. The financial role of small farm-sustaining loans is nine times that of each of the company’s recent philanthropic endeavors in 2006 – such as $1.7 million for community investments in coffee-growing regions and $1 million allocated to rebuilding projects in areas of Guatemala and Mexico that were impacted by Tropical Storm Stan. These activities imply that Starbucks’ position in these communities takes a central role in terms of increasing community enhancement and well-being. Further, these forms of community development engender a sense of exchange, or reciprocity, by creating a sense of security and commitment to this well-being. This would appear to be a source of sustainability using inter-organization ally-building for Starbucks’ position in the community, and in the world market in terms of market perceptions of ethical practice as a “good neighbor.”
A potential caution may be in order in some cases of the development of social ties based on loyalty. Pfeffer states that “networks of allies can obviously be misused, [but] they are nevertheless essential in order to get things done” (1994, p. 108). Social ties to others assists both individuals, and their organizations, in terms of viewing their respective roles in the market “because what an organization does is significantly affected by who it is connected to and what they do,” according to Pfeffer (1997, p. 56). But, Pfeffer’s intra-organizational model stops short of a reciprocal relationship based on social aspects, rather referring directly to market contacts in an economic sense of a resource dependence theory. Further, his view only includes the benefits of interorganizational business ties based on mergers, joint ventures, interlocking boards of directors, and other transactional interdependencies (Pfeffer 1997, p. 59). It seems to be the case that Schultz is committed to the interrelationship between position, reputation, and performance in the communities in which Starbucks develops social ties with indirect economic approaches.
In this respect, Schultz commits to both indirect economic and non-economic ally building sources of sustainability for Starbucks and its stakeholders. His company’s purpose has been to develop a “sustainable model for coffee production” (Starbucks Annual Report 2006). But, this production includes two types of human resources, or partners, in the Starbucks’ enterprise. First, in 1995 Starbucks initiated “a program to improve the conditions of workers in coffee-growing countries, establishing a code of conduct for its growers and providing financial assistance for agricultural improvement projects,” as well as becoming “the largest corporate contributor in North America to CARE, a worldwide relief and development organization that sponsored health, education, and humanitarian aid programs in most of the Third World countries where Starbucks purchased its coffee supplies” (Thompson 1999). Second, this model of responsibility to partners (employees) is also found in the retail endeavors of the company. The sources for ally-building found in the retail communities in which Starbucks operates includes allies developed through the community efforts of their partners (employees) and customers. For example, Starbucks donates $10 for every volunteered hour (up to $1,000 per project) to nonprofit organizations in which U.S. and Canadian partners (employees) and customers volunteered 383,000 hours of their personal time in their communities under an internal program called “Make Your Mark.” Starbucks has over 145,000 partners (employees) worldwide (Starbucks Annual report 2006). In Pfeffer’s account, these are “coalitions of support” (1994, p. 101), which are requisite for an organization to develop a reputation as a legitimate and ethical business.
Starbucks seeks to be supported by rural community farmers, its partners in their stores and their corporate offices, and its retail consumers. Starbucks ranks their individual community initiatives in terms of: “achieved,” “making progress,” and “did not achieve” as elements of their commitment to communities (Starbucks Annual Report 2006). These perceptions by Starbucks are based on societal views of social responsibility – in other words, social approval of a reputation – while community perceptions of how deeply this reputation affects their decisions are unknown. I advance that these initiatives are the “small wins” advocated by psychologist and organizational behavior scholar Karl E. Weick – problems to be solved may appear to be overwhelming, and of such magnitude as to preclude getting involved with any hope of achieving an effective outcome, particularly those with social implications such as unemployment or scarcity of raw materials (Kleinrichert 2007). Moreover, Weick states, “This strategy of small wins addresses problems by working directly on their construction and indirectly on their resolution” (2001, p. 427). In other words, corporate community involvement initiatives are those smaller components of larger projects that serve as stepping stones to bigger picture perspectives.
Pfeffer and Salancik argue that “organizational environments are not given realities; they are created through a process of attention and interpretation” (1978, p. 13). The financial growth of Starbucks and Schultz’ leadership seems to point to support for this statement. For example, the annual public ranking of the 100 Best Corporate Citizens by Business Ethics journal notes Starbucks at #45, noting the company’s strengths from the years 2000 – 2004 as:
- community relations
- women and minority staffing
- environmental consciousness
In this sense, organizations and their stakeholders socially construct their position, reputation, and performance based on perceptions of the roles individuals play intraorganizationally and inter-organizationally through socially responsible ally-building. The perceptions of the roles individuals play become shared in collective interrelationships in the setting of corporate enterprise goal-setting and practice. These relationships develop ties that bind individuals’ intentions for public endeavors to the role of the corporation in society – to be an ongoing socioeconomic concern. These relational ties follow from Kant who “proposes a very intimate connection between the moral incentive and the feeling of respect for the [moral] law” (Guevara 2000, p. 2).
The socioeconomic connections between corporations and individuals are the basis for relationships. For example, Gary Becker, in his Theory of Social Interactions, refers to “social income” as the sum of an individual’s personal income and the monetary value to her “of the relevant characteristics of others” (1976, p. 253). The monetary value of others is inherent in the social integration developed by multinational corporate endeavors. In other words, and this quote bears repeating: “the patterns of human relations and values that bind people together in time and place and that define their life opportunities” require analysis (Ghai and Alcantara 2001, p. 248). These social integrations are changed and charged by global market socioeconomic initiatives in both beneficial and harmful ways – interactions have the potential to promote greater understanding between corporations and their communities – developing a “civic culture,” but these interactions also have the capacity to extol consumerism over human well-being (Ghai et al 2001, p. 249-50). Nevertheless, social interactions have value –socially and economically. In this respect, a primary intention of sustainable corporate practice is community ally-building as a reciprocal relationship and a moral practice for corporate enterprise.
The previous chapter discussed main strategies and policies of Starbucks which have earned loyal corporate allies for it. This chapter further discusses the brand acceptance policies and how the Starbucks brand influenced its customers.
Starbucks’ status as a global phenomenon is undeniable. The Siren Starbucks logo, much like the golden arches, is recognizable to the masses. This success is the realization of Howard Schultz’s vision for the corporation.
Starbucks’ physical design and atmosphere is the realization of Schultz’s (1997, p. 181) vision “to create an atmosphere in our stores that drew people in and gave them a sense of wonder and romance in the midst of their harried lives” and attract a particular clientele. The realization of this vision is a coffeehouse that mirrors the Italian espresso bar experience that is both European and contemporary. Schultz identifies his target audience and discusses their expectations:
Many of our customers are sophisticated and discriminating, and they expect us to do everything with taste, not only our coffee preparation but also the esthetic design of our stores and packaging. When they come into our stores, they’re after an affordable luxury, and if the setting doesn’t feel luxurious, why come back? (1997, p. 307)
Schultz states that he sought to gain public trust through innovative products and to provide a space for human interaction. This trust would make Starbucks, in Schultz’s words, “larger than life.” The physical design and atmosphere distinguishes Starbucks and is reflective of such a larger than life coffee experience that has made Starbucks the phenomenon it is today.
Starbucks’ vision, and cognizance of the need for a third place, is evident in design choices. Starbucks offers seating to accommodate interaction that fosters the social relationships that Oldenburg claims attracts patrons to informal gathering places. Schultz (1997) describes how early Starbucks offered limited seating, but before long, the need for additional seating became obvious as regulars became more numerous and conversations more frequent (Schultz, 1997). To meet this demand, a variety of table sizes were added to accommodate small to large groupings and promote interaction (Schultz, 1997).
Consequently, larger stores with ample seating were built, for the typical customers seeking an atmosphere and to promote camaraderie (Schultz, 1997). Ultimately, Schultz envisioned the coffeehouse as becoming the extension of the old-fashioned front porch, with an eclectic, handmade design as a place to gather with others. Furthermore, Starbucks are well-lit, and void of loud music, which contributes to the social interaction Oldenburg claims is craved as of late (Schultz, 1997).
Starbucks stores vary in only the four design templates which each highlight a stage of coffee making: grow, roast, brew, and aroma. Schultz (1997, p. 315) describes each of the templates: “Grow, for instance, highlights shades of green. Roast combines deep reds and rich browns. Brew emphasizes blue, for water, and brown, for the coffee. Aroma uses a light color palate with yellows, greens, and whites.” The Starbucks observed is of the “roast” template with deep browns as the primary color supplemented by deep reds. The result is a Starbucks’ experience that is “comfortable and accessible yet also stylish and elegant” (Schultz, 1997, p. 251). This attention to the environment includes “the style of the chairs, the edges of the countertops, the texture of the slate floor” (Schultz, 1997, p. 253). Schultz credits the store as the delivery channel and embodiment of the human spirit, which attracts customers.
The sophisticated ambiance is similar to the Italian espresso bar Schultz aspired to recreate. Schultz (1997, p. 252) explains, “All sensory signals have to appeal to the same high standards. The artwork, the music, the aromas, the surfaces all have to send the same subliminal message as the flavor of the coffee: Everything here is best-of-class.” We tend to associate such a modern, sleek décor with the contextual codes of a modern and hip urban experience.
These codes enable the consumer to associate their patronage of Starbucks with similar environments, and in turn, with an image ideal. Furthermore, patrons understand this environment based on its difference and design from like establishments (i.e. Dunkin Donuts) with a less stylized décor. Schultz (1997) intended the Starbucks’ experience to offer an affordable luxury in an oasis-like escape from the everyday where individuals enjoy a world-class product. He described the Starbucks’ “taste of romance” of an exotic brew from a far-away land as a reprieve from an otherwise mundane day (Schultz, 1997). This ambiance is what Schultz describes as “brand building,” setting the tone of style and elegance and realized in the music used to set the mood. Recent design changes pair the conception of the third place with images reflective of the Starbucks’ celestial logo. The design suggests an ambiance and stylized design intentionally constructed to invoke a response with certain patrons. Schultz (1997, p. 314) explains the choices:
They [Starbucks’ designers] explored the mythology of the sea, the idea of the Third Place, and the art and literature of coffee culture throughout the ages. They learned about coffee blends and origin countries. The design they created tries to convey these themes subliminally, through murals and icons and other images.
These mythical messages interest a public possessing the cultural capital to understand references to ancient mythology. However, the third place is a concept only briefly addressed in the book; instead, the coffeehouse is described as sought after by a customer in search of the finer things. These consumers are consistent with the style and elegance of the environment, possessing the cultural capital necessary for understanding and appreciating these abstract messages. These customers are attracted to the ambiance promoted in the plush velvet furnishings and expensive slate flooring with the overall look and feel that is the “best of class, top quality,” creating an ambiance that is sophisticated yet approachable” (Schultz, 1997, p. 306).
Although Schultz attributes Starbucks’ success to its fulfillment of a need for a gathering place, alternative interpretations arise. Status appeals characterize the design and décor of Starbucks and dominate his descriptions of the environment. Schultz himself argues that the sophisticated consumer is attracted by the expensive and modern appearance of the coffeehouse. As Schultz attests, the physical environment and atmosphere are paramount in attracting a particular kind of customer. The corporation’s attentiveness to creating an inviting space lures “sophisticated and discriminating” consumers expecting an environment and product of only the highest quality (Schultz, 1997, p. 307). Furthermore, Starbucks’ function as a third place is only mentioned in the beginning of the book and briefly near the end. Instead, detailed descriptions of Starbucks’ deliberate attempts to create a stylish and high-end space comprise the majority of the book. Schultz’s stated intentions will serve as a basis for comparison to the observations in the remainder of this chapter to suggest the importance of consumption to public identity performances.
Starbucks is an international chain with only four design templates, which guarantees similarity in locations. Despite these four templates, all locations are uniform in design with only slight aesthetic differences distinguishing each model. Regardless of the template, those coffeehouses observed all offer a seating area that surrounds the busy coffeebar, retail products available for purchase, and music amplified for patrons’ enjoyment.
Given the standardization of any chain, observational sites vary little in design. Furthermore, Starbucks are typically located in developed areas, in the midst of other retail and service establishments, which suggest similarity of location and clientele.
A Starbucks Coffee located in downtown Dearborn, Michigan serves as the primary observational site. Other Michigan locations, in Ann Arbor, Novi, and Farmington Hills, were observed to confirm findings. The observations detailed in this analysis began in February 2003 and concluded in April 2003. Observations of the physical environment included the interior and exterior of the coffeehouse; placement and arrangement of physical features such as chairs, tables, architectural elements, promotional materials, and items available for purchase; décor, such as color and composition of the interior and exterior.
The exterior of this Starbucks is similar to their other chain coffeehouses. Dark brick encases the interior entrance. Building-length windows comprise the vast majority of the remainder of the exterior. The familiar “Starbucks Coffee” white block lettering is positioned above the front entrance to identify the coffeehouse and is prominent from the city street. The exterior is simple, without added decoration or adornment. A busy parking lot is located directly in front of this Starbucks Coffee. Passersby gaze in Starbucks’ many windows on their way to other eateries and retail establishments on this block. Starbucks’ many windows also display patrons for public viewing.
The primary observational site is situated in the midst of Dearborn’s downtown business district. A home decoration shop, Mongolian Barbeque, AT&T cellular store, Breadsmith, Men’s Warehouse, and Life Uniform are located on the same block as Starbucks. Directly across the street are Buddy’s Pizza, Pizza Papalis, and Rio Wraps. Like Starbucks, the chain character of the majority of the businesses in the surrounding area suggests an expectation of particular goods and services because of their known reputation and similarity. The clientele of the chains represented have come to signify a patronage with the disposable income to afford the non-essential goods and services these businesses offer. Absent from this area are discount breakfast specials and extra value meals. Several bars, with younger clienteles, are also located within a three-block radius. These drinking establishments feature sports themes, or martini and cigar lounge atmospheres, which are popular with a younger and professional patronage. Establishments like Starbucks, and those identified, cater to a consumer appreciative of the status-laden martini instead of 99 cent beer night. Even services such as AT&T and Life Uniform are required by professionals, or those with disposable income, either to perform their jobs or to stay connected with others. Ford Motor Company is the area’s largest employer (United States Census Bureau, 2000) with their World Headquarters only a mile away from Starbucks and numerous Ford office buildings in close proximity. The area’s second largest employer is the Oakwood Healthcare System, with nearby Oakwood Hospital as its nucleus (United States Census Bureau, 2000). The University of Michigan – Dearborn campus brings the academic-minded to the city that is educated and appreciative of a pricy cup of coffee. Various banks, retail options, markets, and grocery stores populate the remainder of this growing downtown area. Dearborn has a diverse population. Residents of Arab descent comprise 30 percent of the city’s population (United States Census Bureau, 2000). The median price for a home in Dearborn is $129,300 and median household income is $44,560 (United States Census Bureau, 2000).
An alternative to Starbucks is available directly across the street. The Little Café is a local coffeehouse with an attached bookstore. The Little Professor Bookstore has been a staple in Dearborn for years, catering to a large population of loyal customers with a reputation for their array of magazines and newspapers. Furthermore, this bookstore is known for its personal relationships and attention to customers. Legendary are the stories of satisfied customers whom benefited from the willingness of Little Professor staff to go to extraordinary measures to locate hard-to-find books and periodicals. The attached coffeehouse, the Little Café, has been in existence for about two years and also has a loyal following, despite its closeness to Starbucks. This coffeehouse’s design is clean and the staff appears friendly. The Little Café is distinct from Starbucks in its lack of expensive and sophisticated décor as well as in having few retail items available for purchase. The Little Café is also dissimilar from Starbucks in its menu featuring soups and sandwiches in addition to live entertainment which attracts a large customer base on the weekend.
The primary site of observation contains approximately 16 tables and four large arm chairs; whereas, smaller Starbucks have as few as five tables and two plush chairs centered around the coffeebar. These light-colored wooden tables are relatively small, most comfortably accommodating two. The tables can be easily moved together to accommodate larger groupings. The design mindfulness is revealed in upscale and sophisticated furnishings. Large comfortable seating is available at the perimeter of the store in front of the windows that are the only barriers separating the customers from the outside. They too are positioned to enable the customer to witness all happenings in the main seating area. The perimeter chairs are plush, soft, purple velvet and the tiled stone floor looks expensive. Décor elements, such as the floor and chair described, are not of the type possessed by those on a strict budget. Instead, they are furnishings associated with those of disposable income to afford the finer things. The furnishings match and are consistent with the overall warm color hue combinations of the setting.
In this late-capitalist society in which we live, where products and consumption create cultural meaning, the constructed physical environment analyzed serves the dominant corporate powers. Just as Howard Schultz (1997) describes everything at Starbucks as the “best of class,” the interior is proof positive. From the upscale club chairs, to what seems like perfectly arranged tables and chairs eclectic yet similar in design, to the sounds of varied musical selections piped through the sound system for all to hear, Schultz achieves the elegant and stylish delivery channel he sought. These upscale elements collectively convey an image to patrons. This image is status-laden, and therefore enables customers to understand the coffeehouse’s meaning based on a network of similar visuals. Indeed, this is an environment signifying affluence, comprised of the belongings of those befitting such a lifestyle. Not all customers have the resources to afford such a lifestyle, but through patronage identification with this image is possible.
A classic Marxist approach, evident in this constructed theory of commodity culture, reveals the cultural codes employed to understand Starbucks as a space and the consumption of its signature product. These cultural codes are constructed are and reflective of prevailing ideologies of a preferred lifestyle image. Starbucks’ Chairman Howard Schultz (1997, p. 251) describes the Starbucks’ experience as “stylish and elegant,” as realized in the coffeehouse and product. Possession of a paper coffee cup with the Starbucks logo is a means to associate with this image. Within this fetishized cup is the status perceived by a public craving such a distinction. This connotated meaning is further reinforced in the physicality of the environment as well as corporate marketing of the product and popular media representations of consumption, such as those in the movie You’ve Got Mail. The value attached to the visual imagery of the environment, as well as the product, is understood from the cultural meaning viewers derive from the context of the observation and its similarity to other images associated with this stylized image. The coffeehouse, as a stylized environment, is the result of a shared system of beliefs of what a high status informal public gathering place should be. Through their patronage, Starbucks’ customers are associated with the social values attributed to the product and consumption. The ability of Starbucks to create a preferred image of the informal public gathering place enables their corporate domination through the creation of false consciousness and false needs.
The image associated with quality coffee consumption mirrors the status appeals explicit in the composition of such an environment. Despite Schultz’s insistence that Starbucks’ appeal is the result of its operation as a third place, alternative interpretations are more convincing. The standardization of any chain raises questions as to its local character, especially when the physical environment and product vary little from city to city. The space, consumption, and product suggest a preferred way to perform within such an environment. This persuasive environment masks a seemingly corporate establishment as a local gathering place. Through patronage, the customer is associated with the sophisticated image that this constructed environment and product embody. This value that customers attach to the coffeehouse and consumption is realized in public identity performances which benefit corporate creators in the profits that patronage and popularity generates. Everyday sites, and the products consumed within these spaces, become important to the larger cultural meaning as these are the places in which we perform our public self daily. These are also the spaces in which we compare our performances to others and gain meaning about our place among others.
Starbucks achieves a mass-produced style to serve as the image ideal within a class. Through consumption, customers perform this stylized image of affluence sold to them. Commodity selves exist when products and consumption characterize an individual. This commodity self is born out of this pursuit of the fantastical qualities associated with the consumption of a Starbucks’ products or association with the coffeehouse environment. Being seen within a Starbucks or with such a product is the way to achieve the qualities of status and style attributed to the product and place. Starbucks’ appeal as trendy and stylized creates a hip image. Association with this image ideal is achieved through consumption. This act of consumption has use and exchange value in that we buy an image instead of a cup of coffee or seat in a comfortable chair.
Starbucks as a local venue is in contrast to the commodity culture created within the environment. This standardized, mass-produced environment warrants a common image that consumers seek to obtain. How can this norm, performed within the common design template and product, be local and responsive to the neighborhood and regional interests? This image is the same regardless of where the Starbucks Coffee is located. Designs are not reflective of local interests and the décor is not reflective of the region. The image appeals are the same regardless of the location. We are left with persuasive appeals to a commodity self similar to portrayals by others, even a culture, that is not reflective of the community or its citizens. Instead, this chain creates a standardized image, realized through consumption.