STARBUCKS COFFEE HONG KONG PEST ANALYSIS
Political Factor – One of the biggest political threats of Starbucks in Hong Kong is the latest China’s Antitrust Crackdown. It is a political scrutiny of foreign investors where price regulatory practices of foreign companies that are earning will be under this law. Although the Ministry of Commerce in China says that they will be equally treated, it still puts pressure on companies since prices will be regulated.
The possible effect of this price scrutiny is to put the price of their latte coffee in a stagnant position and they believe that this regulation is the most aggressive one to put on hold companies like Starbucks knowing that they are generating an operating margin of 35% in Asia Pacific Region which is higher than Europe (Bloomberg, 2014). The Hong Kong government since then has been following the Laizzes Faire Policy Anti- Competition Law (Nguyen, 2010), but it is further re-enacted thoroughly in 2014.
Economic Factor – Despite the political threat, Starbucks seems to be secure in their economic influence of today in terms of price and supply but their production will be affected in the future because of the price of supplies and labor. In reducing this economic risk they entered into different fixed price contracts with their suppliers that will ensure adequate flow of supplies over an extended period of time (Burks, 2009). They believe that this strategy will prevent the risk of non-delivery of supplies. Furthermore, the price control of the Hong Kong or Chinese government can be strictly followed without much problems of price change within the next few years. They believe if this strategy can push through they can continuously catch up with the demand.
Social Factor – In Hong Kong, coffee drinking is also a form of social event and not just a part of breakfast. People usually meet in the store for meetings and get-togethers, although most of the time, they are conducting their business by opening their stores until late at night and they are doing well (Bolt, 2005). There have been several cultural practices in Hong Kong that can serve as an opportunity in the company like adding additional coffee made from Chinese herbs and spices that people will generally love; opening in the morning is an option. They have also introduced new products related to Hong Kong culture like the Yum Burger of KFC that highly gained superstardom.
Technological Factor – Starbucks is turning their food waste into plastic. They have introduced a bio-refinery in Hong Kong in 2012. This has an advanced technological capacity that will up-cycle leftover foods into a mixture that can manufacture different plastic products using succinic acid compound that will stabilize leftover into a plastic. The compounds will deferment the bacteria into biodegradable materials that will eliminate the burning and dumping of their waste and instead, compost them into their landfill, which is a very environment friendly technology (Boyle, 2012). This technology will also boost sustainable production and encourage elimination of bakery waste.
Bloomberg (2014) China Antitrust Crackdown Threatens to Erode Foreign Profits, retrieved November 10, 2014 from: http://washpost.bloomberg.com/Story?docId=1376-NA4VVS6JIJV601-42EET4HO5J2917S795KPO79VD1
Bolts, K.M. (2005) Starbucks Adjust its Formula in China, retrieved November 10, 2014 from: http://www.seattlepi.com/business/article/Starbucks-adjusts-its-formula-in-China-1176089.php
Burks, M.B. (2009) Starbucks, US: Greenwood Publishing Group, p 127-128
Nguyen, T.T. (2010) Competition Law, Technology Transfer and the Trips, USA: Edward Elgar Publishing Inc. p 169
Waldron, K. (2014) Advance in Biorefinaries: Biomass and Waste Supply Chain Exploitation, UK: Woodhead Publishing, p 328
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