Managerial Economics Assignment: Impact of Covid-19 On Starbucks

Question

Task:
Read the article “Impact of Covid-19 on Business Performance: A Case Study of Starbucks” by Rupesh Kumar Sinha, Daisy Mui Hung Kee and Navaneeth Kumar and prepare a managerial economics assignment based on the information below:

The case study includes some interpretations, analysis, and recommendations. The objective of the case study is to verify the ability of students to use and analyze a situation and make managerial recommendations. The case study will be determined by the instructor, either from the textbook or some other scholarly source. Once students have completed the analysis, they will need to interpret the results and finish with the economic recommendations based on their analysis.

The recommended components of a case study are:

• Summarize case.
• Identify and define central problem or problems.
• Justify problem(s) definition.
• Identify potential solutions.
• Analyze key elements of case.
• Propose and justify a specific solution.

Answer

Introduction

The goal of this managerial economics assignment is to assess the influence of Covid-19 on Starbucks' business success. There have been several studies undertaken on the impact of the ongoing pandemic of covid-19 on the economy of the world; however, this research focuses primarily on Starbucks and its problem and the possible solutions for overcoming the problems. Starbucks is specifically one of the most well-known companies in the world, Starbucks. In addition to having a tremendous impact on companies and marketing tactics around the world, the continuing COVID-19 epidemic has had a significant impact on Starbucks Coffee. The COVID-19 epidemic has had a wholly unprecedented influence on the present worldwide economy, making it a really ground-breaking event. The findings revealed that the effect of Covid-19 has had a financial, economic, and social impact on Starbucks, as well as on the behavior of customers toward the corporation. For this reason, Starbucks must maintain its optimism and position itself strategically to overcome the pandemic emergency.

Summary of the Case

As per the case study, Starbucks is an excellent example of a food and beverage company that conducts all of its operations solely via bricks and mortar outlets. It is the biggest coffeehouse in the world, and it runs via a network of company-owned and licensed locations. The coffee business, among other sectors in the food and beverage market, is one of the most successful, and many people love drinking coffee regularly in their everyday lives. It was clear that the current pandemic crisis harmed both Starbucks' financial and economic standing. The Covid-19 crisis, which occurred at the start of 2020 and affected the whole global economy, including the food and beverage industries, was a huge shock. The epidemic has apparently influenced the strategy and operations of Starbucks, as well. In the wake of the epidemic, the firm was unable to continue functioning in the manner that had been standard. They realized that the strategy and objectives of Starbucks needs to be distorted. The firm must analyze how the progression, strength, and recurrence of the pandemic have influenced its strategy (Sinha et al., 2021). 

Identification and Definition of the Central Problem 

Starbucks has profited from its customers' high levels of loyalty and low levels of elasticity by regularly passing on increases in expenses, such as those associated with labour and coffee prices, to its customers' benefit. As a consequence, four price increases for its goods were implemented between 2014 and 2016, with two of the increases occurring in the year 2016. The increase in pricing has been primarily motivated by the need to safeguard the company's operational profits (V. Lombardi et al., 2021). Because social meetings are not feasible owing to the Covid-19 outbreak, consumers' experiences have changed. Customer happiness and service quality are vital for the company. Although Starbucks stores have resumed normal operations, many still feel unsatisfied amid the Covid-19 epidemic. Covid-19 harms Starbucks' economy, equities, and cash flow. Aside from fewer consumer expectations, Starbucks must employ safety standards to provide a safe public atmosphere for its customers. The worldwide spread of covid-19 has also resulted in job losses in the tourist and catering industries.

Justification of the Problem

A sea shift has occurred in Starbucks' consumer perceptions after the Covid-19 outbreak. Customers are urged to follow Starbucks' safety guidelines since Starbucks is mandated to provide advice to customers whenever they visit a Starbucks outlet. As a consequence, customers must follow safety precautions including separating themselves from others and donning face masks for their protection. Because of the policy, Starbucks may see fewer customers and a drop-in revenue as a consequence of social gatherings and office chatter. Some consumers, on the other hand, may not adhere to the parameters set out, which has resulted in a slew of problems for the organization. Even if the prohibition has been gradually withdrawn, social distancing measures may need to be maintained for some time, and this will have an impact on the number of people who are hesitant to visit since restaurants must decrease the number of seats available for the safety of their customers. Starbucks is seeing the effects of Covid-19 in terms of economics, supply chain, food safety, and customer behavior (Nair et al., 2021). The majority of the implications are unfavourable for Starbucks. Even though the organization offers several delivery choices, few clients are ready to employ them during this epidemic. It is evident that Starbucks was able to steady its performance throughout the year despite the epidemic.

Identification of the Potential Solutions

Before the breakout of COVID-19, Starbucks was no different than almost every other store. It, too, was wrestling with and asking itself difficult questions about the future of multichannel retailing. Contrary to its retail counterparts, Starbucks has always had several large-scale trials happening in the background, unlike many of its competitors (Walton, 2020). Despite adhering to all standard operating procedures and maintaining cleanliness, the organization makes significant efforts to ensure the well-being of its employees. Aside from that, Starbucks might develop its business strategy during this rare period to meet as many demands or desires of its consumers as possible. Obtaining the problem during the Covid-19 era would drastically increase the incentive of the personnel of Starbucks and increase the number of clients who would become Starbucks customers. Additionally, Starbucks' involvement in the epidemic has allowed the corporation to set itself apart from its competitors, enhancing its uniqueness and providing it with a competitive edge over its rivals.

Key Elements of the Case

Several studies have shown that the effect of Covid-19 has had an impact on Starbucks' finances, economic well-being, and social well-being, which includes customer behavior toward the firm. Starbucks, on the other hand, was able to maintain its optimism and position itself advantageously in the face of the pandemic catastrophe. Though much research has been done on the economic impact of Covid-19 on the global economy, the scope of this study will be limited to food and beverage businesses, especially on one of the most well-known corporations in the world: Starbucks (D et al., 2021). They developed from a little coffee shop to a multi-million-dollar company in a few years by buying only the best coffee and giving their customers an unmatched store experience. Starbucks presently has over 12,000 outlets in over 35 countries, making it the world's largest specialty coffee chain.

Specific Solution

In this research, it is clear that Starbucks is not only operating autonomously but is taking care of every position inside the organization as well. Starbucks needs to grow its present foreign markets to diversify its revenue stream and increase its profitability. Even though Starbucks has a strong presence in the United States, its presence in other parts of the globe much surpasses its presence in the United States. Starbucks must put up more effort to grow its economic empire to include new nations and areas. It may also expand its presence in nations where it already has a presence by opening more outlets. In order to enhance their company performance during the crisis and avoid financial losses in the future, the firm may also establish a new strategy for planning future programs in the future (Shim et al., 2021).

Conclusion

In general, Starbucks is a powerful firm operating in a rapidly expanding sector. As a result of the investigation, it was determined that Starbucks is adopting an aggressive position in the coffee business and has set out potential strategic and environmental objectives. Starbucks has a successful worldwide business strategy, but it must continue to raise the bar on its objectives and customer expectations. Starbucks will never reach the pinnacle of its growth as a company; as a result, it is vital for the organization in achieving its goals and its strategies in place to overcome any difficulties that might develop in the course of its operations.

References 

Baladjay, M., Kharla, B., Cabrera, Leslie, M., De Leon, Lara, M., Jimenez, K., & Bianca, F. (2021). STARBUCKS CORPORATION A Business Case Study Analysis Presented to the Faculty of College of Business Education Technological Institute of the Philippines - Quezon City. https://outwiths.com/uploads/user/kbf-jimenez/portfolio_attachments/case-study-starbucks-corporation-2009-kbf-jimenez-Outwiths-1628769806.pdf

D, D., Sinha, R., Wen, C. P., Kee, D. M. H., Ching, C. S., Er, L. K., Agarwal, S., Pandey, R., Putra, T. W., Sin, L. G., & Yan, Y. W. (2021). The Influence of Brand Equity on Consumer Purchase Decisions at Starbucks. International Journal of Accounting & Finance in Asia Pasific, 4(1), 37–50. https://doi.org/10.32535/ijafap.v4i1.1031

Nair, R. K., Sinha, R., Crasto, S. G., Kian, K. W., Kee, D. M. H., Abdullah, S. A. B., Zaidi, S. N. N., En, T. S., Jain, A. K., Valecha, P. M., & Ganatra, V. (2021). The effect of Starbucks Marketing Campaigns on Consumer Buying Behaviour. Asia Pacific Journal of Management and Education(APJME), 4(1), 72–81. https://doi.org/10.32535/apjme.v4i1.1052

Shim, J., Moon, J., Song, M., & Lee, W. S. (2021). Antecedents of Purchase Intention at Starbucks in the Context of Covid-19 Pandemic. Managerial economics assignment Sustainability, 13(4), 1758. https://doi.org/10.3390/su13041758

Sinha, R., Ganatra, V., Pandey, P., Arumugan, D. D. L. A., Kee, D. M. H., Lekha, G. S., Kumar, N., Kew, S. D., Dhupad, A., Nair, R. K., Tenh, Y. Y., & Yue, H. (2021). Impact of Covid-19 on Business Performance: A Case Study of Starbucks. International Journal of Tourism and Hospitality in Asia Pasific, 4(2), 13–27. https://doi.org/10.32535/ijthap.v4i2.1054

Lombardi, C., T. Chidiac, N., & C. Record, B. (2021). Starbucks coffee corporation’s marketing response to the COVID-19 pandemic. Innovative Marketing, 17(2), 177–188. https://doi.org/10.21511/im.17(2).2021.16

Walton, C. (2020, April 3). 3 Ways Starbucks Will Emerge From COVID-19 Stronger Than Before. Forbes. https://www.forbes.com/sites/christopherwalton/2020/04/03/3-ways-starbucks-will-emerge-from-covid-19-stronger-than-before/?sh=840888218440