Starbucks’s history and competition
Question:
Identify a multinational company operating in Australia. Provide a brief description of the
company including the following
The industry the company operates in
Number of staff in Australia
Number of staff globally
Location of global headquarters
An MNC operating in any country has to adhere to its regional laws and different regulatory framework in which the company is operating. These regulatory frameworks governs how the company would be working in the country, what will be the tax structure, employment governing policies etc., hence it is pertinent for every organization to stick to such laws and do a fair business and ensure transparency in the organization. The frameworks are essential as it brings consistency in the policies across the entire country and any deviation what so ever can be tracked and called for further verification. Thus it can be said that obeying the laws of the state and incorporating the same within the organization is the right thing to do by an organization. For the purpose of the report, Starbucks Australia, which is a an American coffee house is choosen,the report here will focus on the “Starbucks Australia” and analyse its regulatory framework, also the report will focus on the impact of agreements, treaties and conventions over Starbucks’s operations in Australia(Adams, Hayes & Lampe, 2016)
Starbuck’s history can be traced back from Seattle, Washington (1971), where it opened its first coffee house; it was opened by three partners who got in touch while they were studying in San Francisco. The company is known for its coffee beverages, tea, smoothies, baked bread and sandwiches and has created a name for it when it comes to servicing quality coffee and sandwiches. Starbucks is also known for its beautiful stores, the stores have high tech facility and ranks high on ambience. It can be easily said that Starbucks is a market leader when it comes to coffee chains. Revenue of Starbucks in the year 2016 was 21.32 US billion dollars which further rose to 22.39 billion dollars in the year 2017(Busch,Moreno & J.P, 2014). Howard Schultz was a key person in positioning Starbucks in the heart of billions, current the company is run by Kevin Johnson and he too is doing a great job by living up to the expectation of the stakeholders (Wong, 2014)
Starbucks for the first time opened its door for Australia in the year 2000 in Sydney, ever since there are a total of 27 stores which are operating in the heartland of Sydney, Brisbane, Gold cost & Melbourne, with Chris Garlick leading the chain. Starbucks coffee houses are offer more than just the finest coffee across the globe, friendly people and an extremely comfortable meeting place creates finest of the Starbuck’s coffee houses. The chain works effortlessly towards keeping its employees happy so that in turn they can create an aura of happiness around their customers. The chain suffered a major blow back in 2008, when it had to shut down 61 of its 84 chains in Australia, as much as 700 people lost their job. Since then the company is taking calculative steps in its expansion in Australia. Gloria jeans and coffee club are major competitors of Starbucks Australia (Alliance, 2016)
Starbucks Australia’s presence in the market
Starbucks operate in the coffee industry and has almost 26,686 stores across the globe. The company faces strong competition from fast food chains like Mc Donald, Burger king, Dunkin Donuts and coffee chains like Costa coffee and Gloria Jeans. Fortune 500 has listed Starbucks as the third most admired company in the world and is also the third largest fast food chain in the world by location (Nair & Weber, 2015)
Australia was not a favourable market for Starbucks and the company had to go through many difficulties since its opened its first store in the year 2000 in Australia, the store came with a bang, but eventually in 2008 it had to shut down 61 of its 84 outlets in Australia owing to competition and not able to penetrate the market. Currently the company has 27 stores located in and around Sydney, Melbourne, Gold cost and employs over than 650 people. Globally the company has almost 26,696 stores with an employee base of 238000(2016) and is operating in more than 70 countries (Jianfei, 2014)
The Starbucks centre (SODO centre) is the world’s headquarters for the global coffee chain Starbucks and has the largest multitenant building by floor space in Seattle. The store is spread across an area of 1800,000 sq. ft. It is also one of the oldest and the largest building in the country which has earned a national green certification for itself (Rizqiyanto, 2017)
Regulatory framework can be understood as the existence of the necessary infrastructure which supports the control, direction and implementation of a proposed or adopted course of action, principle, rule or a law. Every MNC has to comply with the laws and policies of the state in which it is functioning, this is important because the law has to be fair and transparent to one and all.
Starbucks name and reputation are built on the foundation of trust and is registered under the name of Starbucks Coffee Australia PtyLtd, ACN 169062926 and is committed to retaining the trust its consumers put in them. Starbucks is really sensitive to the issues of privacy and are fully committed to ensuring and complying with the privacy and hence follow the Privacy act of Australia.
Australian government levies a flat tax rate of 10% (GST) on consumer products and food services (Australian Taxation Office, 2017); the government also refunds the tax to the parties which have the products in chain of production. Starbucks has to comply with the GST of 10% in order to work in Australia. In the year 1999, Biodiversity and conservation act came in force in Australia and it was a mandate for each company, foreign or domestic to enforce and maintain appropriate standards for the protection of the environment and effort to reduce the carbon footprints. The signing of the Paris agreement in 2017 has also put pressure on the companies to work towards decreasing the carbon footprint and take ownership and responsibilities towards safeguarding the environment. Starbucks deal in food products and coffee which yields a lot of waste disposal and hence it has to take preventive measures to save the environment from not getting polluted. Starbucks hence operates on a high quality of cleanliness and safety and thus the acts laid down by the Australian federal parliament are followed with absolute strictness.
Compliance with Australian laws and policies
The company also has to comply with the production of product liability regulations which provision for proper handling of tangible product. In case of Starbucks’s its entire product line is tangible and hence they have to ensure proper handling of its product. This regulation is enforced by the Australian competition and consumer commission (Richards, Larence, Loong & Burch, 2012). The corporation can be held liable for its quality of food products and any harm caused to the consumers and can lead to a serious implication. Every food item has to be approved and have to be tested according to the health and safety standards as provided by the law, the food and safety regulation applies to the fast food and the coffee shop industry to safeguard the health of its consumers. Hence, organizations like Starbucks have to strongly adhere and comply with such several food compliances and requirement because the health of the citizens is at hand, hence the company has to do a formidable chance to ensure the food safety standards (Australian Institute of Food Safety, 2017).
Until now it is established that every company has to comply with the legislative and regulatory feedbacks of a state judiciously in order to prevent itself from getting shut down. The importance of following the guidelines is to ensure transparency in the system and to safeguard the interests of its consumers. Starbucks had a negative public view, owing to shutting of its 61 stores back in 2008 and hence the company is all time in public scrutiny. Starbucks is a global coffee chain and hence the managers have to ensure diversity and create an environment which is free from any kind of discrimination against its new or old employee. The evils of nepotism and favouritism have to be totally done away with, and any other unfair discrimination being done in a company can be seriously dealt with. Equal opportunity is what an employee deserves and the law enforces the same to safeguard their interests. Disability Discrimination act 1992 (Australian Government, 2017) states that no discrimination has to be done against people from different race, culture, religion, ethnicity and so on, failing of which could lead to serious consequences for the company.
Australian taxation office says that Starbucks has to first pay corporation tax of 30% before distributing any to its shareholders(Australian Taxation Office, 2017), as the first responsibility is towards the state and not towards the stakeholders. Starbucks complies with it in utmost honesty and ensure that they ethically and responsibly pay their dues on time. The corporate tax works as a source of revenue for the Australian government but at the same time companies have to bear it as a cost, which is expensive. Starbucks comply with the fair trade act to ensure equal opportunity to practise effectively in the industry and prevent creation of large monopoly firms. A lot of companies have been sued for billions of dollars for not complying with this law (Nottage, 2009)
A treaty can be understood as an agreement under the international law which is entered into by the actors in the international law, primarily the sovereign states and international organizations. A treat can also be called an agreement, protocol, covenant or a pact. Treaties help in improving the trade, social and political relations and also help in enhancing the GDP of the country. Starbuck’s is governed by Australia Enterprise Agreement Act 2013 and is the original contract which drives the operation of Starbucks in Australia (SDA, 2016); the agreement is a detailed framework which provides methods of functionality and procedure of services which are necessary for compliance by the company. The agreement is approved by the Fair work act and is then divided into 5 subparts. The parts are broken down into providing provision for shift timing, supervisor, employer and other related condition, also the act provides provision for the classification for wage, minimum wage, working hours, leaves, termination policies etc.
Impact of agreements, treaties, and conventions
Australia provides aide to MNC’s to setup businesses in the country, they provide benefits such as taxation relief, business profit attribution and so on, and this is solely done to promote Australia as a favourable country to do business. Another such act, the comprehensive economic cooperation agreement which is conducted between Australia and New Zealand helps the firms to provide the service in both Australia and New Zealand. It has a dual advantage, on one hand it provides business opportunities to different firms and on the other increases the quality and product and services in order to gain a competitive edge. Starbucks is supposed to pay dividends to Australia out of its profits, but a taxation treaty saves it to pay the dividends.
Australia, Japan, USA, China, Malaysia Indonesia and Singapore are some of the countries with a free trade agreement amongst themselves, this allows Starbuck’s in providing services without much disturbance and incurring less expenses. ChAFTA is the Australian and China’s free trade agreement and it helps the company in operating and assisting business in both the countries. Another tax treaty between Australia and the USA helps US based MNC to reduce tax liabilities in Australia and Starbucks uses this treaty to avoid double tax (Australian Taxation Office, 2017).
Another treaty by the name of FSANZ (Food standards Australia and new Zealand act 1991) provides provisioning for standardizing the quality of food offered in both the corporations (Tapsell, 2008) This treaty allows the company to sell products without any trouble which helps the company to strengthen its market position and also helps in keeping a check on the quality of the food in accordance to the health requirements (Henderson, Coveney, Ward & Taylor, 2009)
Recently India and Australia have started their further negotiations on its Comprehensive Economic Cooperation Agreements, this treaty will strengthen the ties between both the countries and help in bilateral trade exercise and provide an ease of business to Starbucks which is operating in both Australia and India.
Conclusion
Starbucks is one of the largest fast food chains of the world and is the third largest fast food chain in the world by location. The coffee chain employs more than 200,000 employees across the globe. The report here shows the laws which multinational companies have to comply with while working in a foreign country. Laws like fair work act, anti-discrimination act etc. is extremely important for a company like Starbucks to comply with, the laws act in a way to ensure transparency and justice in the system. Similarly, treaties and agreements come in handy for an organization, when two countries get into an agreement or treaty with each other, the companies operating in both the regions flourish and grow, they also get some concession in tax, which is good for the organizations as well. Starbucks Australia has a long way to go in order to beat its competition and gain a positive sentiment from the Australian population
References
Australian Government, 2017. Disability Discrimination Act 1992. [Online] Australian Government. Available at: https://www.legislation.gov.au/Details/C2016C00763 [Accessed on 6/12/2017]
Australian Institute of Food Safety., 2017. Food Safety Laws. [Online] Australian Institute of Food Safety. Available at: https://www.foodsafety.com.au/resources/videos/food-safety-laws [Accessed on 6/12/2017]
Australian Taxation Office., 2017. Company tax rates. [Online] Australian Taxation Office. Available at: https://www.ato.gov.au/Rates/Company-tax/ [Accessed on 6/12/2017]
Australian Taxation Office., 2017. GST. [Online] Australian Taxation Office. Available at: https://www.ato.gov.au/Business/GST/ [Accessed on 6/12/2017]
Australian Taxation Office., 2017. What are tax treaties. [Online] Australian Taxation Office. Available at: https://www.ato.gov.au/General/International-tax-agreements/In-detail/What-are-tax-treaties-/ [Accessed on 6/12/2017]
Henderson, J., Coveney, J., Ward, P. and Taylor, A., 2009. Governing childhood obesity: Framing regulation of fast food advertising in the Australian print media. Social Science & Medicine, 69(9), pp.1402-1408
Nottage, L., 2009. Consumer law reform in Australia: Contemporary and comparative constructive criticism. Queensland U. Tech. L. & Just. J., 9, p.111.
Richards, C., Lawrence, G., Loong, M. and Burch, D., 2012. A toothless chihuahua? The Australian Competition and Consumer Commission, neoliberalism and supermarket power in Australia. Rural Society, 21(3), pp.250-263.
Tapsell, L.C., 2008. Evidence for health claims: A perspective from the Australia–New Zealand region. The Journal of nutrition, 138(6), pp.1206S-1209S.
Adams, B., Hayes, R. and Lampe, R., 2016. Unmoved by Chains: Entry and Exit of Australian Coffee Shops.
Nair, A. and Weber, T., 2015. borjo coffeehouse: Franchise, Independence, and Starbucks. Entrepreneurship Theory and Practice.
Wong, V., 2014. Starbucks Has An Australia Problem’. Businessweek. com.
Busch, W. and Moreno, J.P., 2014. Banks’ new competitors: Starbucks, google, and alibaba. Harvard Business Review, 2, pp.1-3.
Alliance, F., 2016. Guiding principles. Retrieved from Food Alliance: https://foodalliance. org/about/excellence.
Jianfei, X., 2014. Analysis of Starbucks Employees Operating Philosophy. International Journal of Business and Social Science, 5(6).
Rizqiyanto, S., 2017. Starbucks’s Fair Trade in the Edge of Globalization. Etikonomi, 16(2), pp.231-248.
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