Starbucks Case Study

Starbucks opened its very first door in 1971, in Seattle’s Historic Pike Place Market.  They are not only famous for their luxurious coffees, teas, and pastries, but for their real coffeehouse experience. “We’re a neighborhood gathering place, a part of the daily routine – and we couldn’t be happier about it” (Starbucks, 2017).  Starbucks has even received the award for being the World’s Most Ethical Companies for the past twelve years including 2018.  

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This company makes sure everything is done through the lens of humanity, from the commitment to the world highest quality coffee to the way they engage with their customers and communities in doing business responsibly.  Starbucks has the competitive advantage over their competitors by the positive impacts they have made on their employees and rewarding them with great benefits.  Starbucks has really tried to do good in a world that faces so much evil.  For example, they have provided 25,000 jobs for veterans and offered part-time employees with health care insurance, but they have also faced their fair share of ethical dilemmas over the past few years, which has been commented and shared on every social media site, printed on worldwide newspapers, and talked about on every news station.  The CEO has called in public relations to oversee damage control and to turn these ethical dilemmas into teachable moments.

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“I know our store managers and partners work hard to exceed our customers’ expectations every day — which makes this very poor reflection on our company all the more painful,” Mr. Johnson said in his statement. He added: “You can and should expect more from us. We will learn from this and be better” (Starbucks, 2018).

The Ethical Dilemma:

On May 29, 2018, over 8,000 Starbucks Coffeehouses will close their door for a four-hour cultural-bias training for more than 175,000 employees.  This closure stems from a white store manager in a Philadelphia-based Starbucks calling the police on two black men, Donte Robinson and Rashon Nelson, who were sitting in the coffeehouse waiting for a business meeting to begin.  Starbucks has free Wi-Fi and keeps constant users around, so they should be friendly to anyone coming to visit.  However, one had to use the restroom, but since they did not order anything they were refused use of the restroom.  Then managers came in and asked the men to leave which they refused because they were not doing anything wrong or causing harm.  This is the point where managers made an unethical decision when they asked the potential customers to leave and called the police.  The men were arrested on suspicion of trespassing but had also endured embarrassment from the police officers and Starbucks.  In the end, the two men settled for $1.00 each, but with the promise that a scholarship of $200,000.00 would be set up for young entrepreneurs.  This Starbucks incident was talked about on social media, news stations, and magazines, as well as the video footage going viral, caused an overwhelming response from people all over the world. 

Kevin James, CEO of Starbucks apologized and planned the shut down for a racial-biased training.  James stated, “While this is not limited to Starbucks, we’re committed to being part of the solution” (James, 2018). In the end, closing the stores for racial bias training is just one of the steps in the journey of trying to make things right in the company and local communities. Starbucks claims to have learned from this mistake and is making amends to reaffirm their commitment to creating a safe and welcoming environment for all their customers. Many people believe it’s necessary for the biased training to take place because as long as there are racist people working there this should be implemented. The problem the community sees is that the policy of the company may apply to everyone, but it’s not executed on everyone. The training and loss of capital was an expensive choice, but you can’t put a price on the customers of Starbucks and the society in which we live being treated unfairly.  Starbucks’s training session was a step in the right direction for making individuals and other corporations around the world understand why racism should no longer be a part of the problem, but more of a solution.

Risk of Ethical Dilemma:

There are many risks that are involved with ethical dilemmas such as; racism, fraud, corporate scandals, and other unethical choices made by companies.  Starbucks had to turn their dilemma into something positive that would ease the public’s backlash on their company.  They chose to turn the dilemma into a teaching experience for not only their employees but for all those that were listening.  Lawsuits and legal issues are a costly risk that might potentially be a result of an unethical choice made by your company.  Your business will lose the trust of the public and question your intentions, morals, and values, which could potentially cost you your entire business.  Your customers will no longer be loyal to your brand and will start purchasing their items from other vendors because they do not share your beliefs.  The barista acted upon her own personal beliefs and not the beliefs of Starbucks.  Starbucks does not discriminate under any circumstance, but since she is employed by Starbucks she put the company at risk for many different types of consequences.

Since 1971, Starbucks has worked extremely hard to build its brand as a progressive enterprise.  This is when an organization uses its culture as a recruiting tool. From sourcing its coffee beans ethically to offering health insurance to its US store employees, the company has positioned itself as a leader in corporate responsibility (Staley 2018).  This helped persuade at least a segment of its customers to pay a premium for its coffee and helped fuel the growth of the chain to more than 27,000 outlets.  Relying on a progressive image as a marketing device is a major risk because they depend on over 250,000 employees to be brand ambassadors.  All employees will have dozens of customer interactions daily.  And as we just witnessed in Philadelphia where one bad encounter can derail the entire organization.  This led many protestors to Starbucks in need of answers and consequences. 

The risks of this ethical dilemma have consequences for the future as well as the current state.  Future risk includes; the ability to hire ethical and reliable employees, loss of trust in the public, and damaged relationships with stockholders and shareholders.  The future of Starbucks relies on strong relationships with society, customers, shareholders, and stockholders, as well as their competitors.

Corporate Social Responsibility:

Corporate social responsibility also called CSR, is a corporation’s initiatives to assess and take responsibility for the company’s effects on environmental and social wellbeing.  CSR’s focus is to ensure companies are administering their business in an ethical manner.  Conducting business ethically towards social, cultural, economic, and environmental issues as well as the importance of human rights.  These issues are key for a corporation to be successful within a community, it’s the individuals within an organization who are socially responsible for their actions to ensure a balance between the economy and ecosystems.  Most people think of CSR as being productive in the community, anti-corruption measures, and corporations taking care of the planet in which we live.  All of this is very true and important, but another part of Corporate Social Responsibility is customer relations, upholding social equity, gender equity, and other human rights goals.  Starbucks looks for employees who display ethical behavior and have values that align with their own.  It is our hope that we can always employ those that share our values.

The incident at Starbucks is a key example of not maintaining social responsibility because those guests who entered the establishment were part of the community and were humiliated by the actions of one employee. It meant a lot to everyone in Starbucks at the time even customers of other races, that they make a drastic change in management and the way their company treats the community in which they serve. We say this because management is the leadership, and they must make not only major decisions but strategic ethical decisions.

Ethical Principle:

Ethical principles are the standards of what is right and what is wrong when describing the kind of behavior an ethical business or person should or should not engage in (Josephson, 2015).  Ethical principles provide a foundation for making good decisions, but they also establish a benchmark by which your choices and decisions will be judged by others such as; your customers, competition, and the public.  In the business world, you are often judged by your reputation and character.  This is important to the success of your company because it is the core of creditability and trust. Executives, owners, management, and all employees must choose to make ethical choices and be concerned with their decisions, actions, and character for the good of the company. With every poor decision comes consequences that could lead to unfortunate events for both the reputation of the company as well as the individual.  There are 12 ethical principles to always live by.  They are as follows; honesty, integrity, promise-keeping, loyalty, fairness, caring, respect for others, law-abiding, commitment to excellence, leadership, reputation moral, and accountability (Josephson, 2015).  Starbucks employees did not keep their promise to their employees nor did they show care, respect, or fairness towards the two men who were just waiting for a meeting to start.  They made poor ethical decisions which put the company in the spotlight for all of the wrong reasons.  Employees, regardless of what position they hold, will be held accountable for treating anyone in a way that does not follow the ethical principles listed above.  Employees will be terminated immediately with no questions asked.  It is the standard of this company to act in a manner that demonstrates a bias towards anyone.

Expecting others to live up to the level of quality that we consistently violate is a violation of the basic principles deep-rooted in the concept of integrity, equality, and justice (Westside Toastmaker, 2017). 

Ethical Concepts:

Ethical concepts are understanding the ethical significance of the problems we face is the first step in responding well to them (Middlebrook, 2014).  Ethical concepts that are related to business involves the discussion of conduct that is connected to problems and situations that can emerge in a business setting. Ethical concepts help businesses in three ways by:  discouraging the employees of breaking laws, helping business entities avoid actions that may result in costly civil lawsuits against the business, motivating companies to avoid engaging in actions that can harm the company’s image by having a moral code of conduct (Middlebrook, 2014).

As a global company, Starbucks employees are held to the highest standards of ethical conduct and behavior.  This also goes for managers when making decisions that could impact the organization, they must take certain things into consideration.  For example, moral obligation and moral rule which have some characteristics in common.  Most moral rights and obligations specify which one is morally permitted, forbidden, or equipped to do so.  This is important for our case study because of what occurred between the two black gentlemen and the manager.  The moral obligation for the manager was to not to be biased and assume these men were coming to the coffee shop to do any harm but to treat them as a regular customer.  Starbucks has high standards and a strong culture that they worked tremendously hard to build, and one unethical decision altered the way society viewed our company.  Managers in firms have a required obligation to make sure customers feel a certain way when entering and leaving their establishment. 

To continue protecting the culture and values of Starbucks, not only managers should be trained on ethical concepts and theories but employees as well.  This gives them an advantage over competitors because they will have the information needed to make the right ethical decisions.  When faced with a problem and a solution is needed quickly, many managers turn to their own ways of decision making, instead of the organization’s standards which are forgotten on many occasions.  However, to minimize unethical decisions, training on morality, and other ethical concepts will play a major role in any organizations continued success.

Ethical Theories:

Racial discrimination has led to people being treated unfairly in many different circumstances throughout history.  In today’s world, we believe this should be a thing of the past, and we should embrace everyone regardless of race, sex, age, religion, education, or any other differences we share from each other.  Many theories have been applied to figure out the differences in why people behave the way that they do.  A theory is an attempt to explain how things are.  An ethical theory is an attempt to ask why certain things are bad, but others are not.  There are several theories that apply to Starbucks unethical dilemma.

 “Utilitarianism is based off of moral theory, the principle of utility states that the right action is the one that produces the most overall happiness” (Austin, Michael, 2015).  Utilitarianism relates to prejudice and discrimination because they have no place here in the United States because each individual counts the same when calculating the happiness produced by our actions (Michael, 2015). Discrimination should never occur because of moral principles, virtues, and human rights.  There will always be consequences for actions that involve discrimination at Starbucks.  It is Starbucks moral responsibility to defend anyone who is offended by the actions of an employee at our business.  Utilitarian’s believe that happiness should be maximized across society, and in the business world, this ethical theory does apply.  It is our job to make sure our staff, customers, and society feel safe, secure, and happy in our establishments.

The next theory that applies to the Starbuck ethical dilemma is Critical Race Theory.  Critical Race Theory is a framework that uses critical theory to examine society and culture in relation to race, law, and power.  It was developed by Derrick Bell, Anan Freeman, and Richard Delgado in the mid-1970’s.  Critical Race Theory is “A movement by a collection of activist and scholars interested in studying and transforming the relationship among race, racism, and power” (Barlow, 2016).  Critical Race Theory (CRT), is a study that focuses on our social situation and how society organizes itself along the racial lines and hierarchies and how we can transform them for the better (Barlow, 2016).  Starbucks would like to motivate social change in terms of racism.  It takes a large number of people to motivate others for such a drastic change to take place.  We want to be the face behind the power of perception on race in America. 

Today, Critical Race Theory is advancing and succeeding.  Critical Race Theory is being taught in law schools and judges, and lawyers are using CRT to advocate on behalf of clients who are revealed in racial situations. Critical Race Theory is trying to unmask color blindness in America in order to judge people by their character and not by their color. A critiqued framework should be implemented on Critical Race Theory that will change policies in education, employment, and society.  Our focus is to change the way racism is handled in the United States. Challenges need to be tackled rather than ignored, deconstruction needs to take place if necessary, otherwise, it will still remain problematic.

Turning a bad situation into a positive outcome:

As mentioned throughout our paper, Starbucks wants to be a part of the solution and not a part of the problem.  We want to make it mandatory for all employers to use our racial-bias training in the hopes that this will prevent future issues on race within our businesses.  We want to focus on changing each employee’s values, morals, and characters in terms of equality.  Everyone deserves to be treated fairly in our society.  It is our corporate responsibility to take action on the ways our employees treat people in our establishments.  It is our promise at Starbucks to continue to use the racial-bias training from this point forward.  Starbucks wants to take this unfortunate event and turn it into a learning experience not only for our company but for every company. It was once said, “I remember how the owner of the Elmwood Café told me that he didn’t train his employees to be racist, but he didn’t have to train them to be racist for them to act in racist ways” (W. Kamau Bell, 2018).  It is every owner, CEO, and managers responsibility to untrained their employees to not make unethical choices such as racism. Starbucks wants to be the advocate of ending discrimination in America.  In the end, if we let racism continue, it becomes routine and gets established into the way a society overall thinks/operates.

Advice:

Starbucks needs to be the face of change.  We advise that they offer their training programs to all employers, organizations, and businesses to help stop racism from happening in their establishments.  It is our hopes that Starbucks makes it possible for the racial-bias training to be a requirement for all business in the United States.

Conclusion:

Racism is not a matter of bad behavior by individuals but planted in American’s mindset.  People are not born to be racist, but it is the way they are raised.  At some point, the cycle of racism needs to be broken, and this starts with the way parents and guardians raise their children as well as it also starts with hearing positive views from their employers and people they trust.  Starbucks promise is to be the advocate of ending discrimination in America. 

References:

 Austin, Michael, PH.D. (2015). What’s wrong with utilitarianism? Retrieved from phychologytoday.com

Barlow, Bill. (2016). Racism Justified: A Critical Look at Critical Race Theory. Retrieved from hlrecord.org.

Bell, Kamau. (2018). CNN. Retrieved from www.cnn.com/2018/4/16.

Delgado, Richard & Stefancic, Jean. (2017). Critical Race Theory. Retrieved from uniteyouthdublin. files. wordpress.com

Fernando, A.C. (2016). Concepts and theories of business ethics. Retrieved from safaribooksonline.com.

Josephson, M. (2015). 12 Ethical principles for business executives. Retrieved from standardizations.org.

Lipschultz, Ruth, LCSW, ACSW. (2017). Ethics Corner: Resolving ethical dilemmas. Retrieved from naswil.org.

Living Our Values. (n.d.). Retrieved June 2, 2018, from https://livingourvalues.starbucks.com/living-our-values

Middlebrook, S. (2014). Defining basic business ethics concepts. Retrieved from toughnickel.com

Morris, D. (2018). Starbucks CEO apologizes for “Reprehensible” arrest of black men at Philadelphia Store. Retrieved from fortune.com

Staley, O. (2016, April 16). Starbucks spent years burnishing its progressive credentials. One employee may undermine it all. Retrieved July 1, 2018, from https://work.qz.com/1253403/starbucks-philadelphia-arrests-a-coffee-giants-progressive-image-may-be-undermined-by-one-employee/

Starbucks. (2018). Business Ethics and Compliance. Retrieved from starbucks.com

Westside Toastmasters. (2017). Ethical Concepts and Principles. Retrieved from westsidetoastmasters.com

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Daniel Fortune

Daniel Fortune is a successful business professional, entrepreneur, father, and lover of travel.

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