Impacts of Economic Factors on Starbucks

The ongoing global economic recession is the prime external economic

driver for Starbucks. As I already mentioned, this factor dented the
profitability of Starbucks. This has convinced buyers to shift to cheaper

alternatives. As they did not quit buying coffee, Starbucks should seek an
opportunity here.

The company has to deal with rising labor and operational costs. The
inflationary environment and falling profitability is causing a lot of stress.

Some other economic factors which can affect Starbucks are:

 Local currency exchange rates

 Local economic environment in different markets
 Taxation level ( 2015: 8.1m at the rate of 24% in UK )
Impacts of Socio-Cultural Factors on Starbucks
As already stated, Starbucks can offer cheaper products but it might have
to sacrifice the quality. This is the main socio-cultural challenge that the
start-up faces. It will expand consumer base to include the buyers from
the lower and the middle-income tiers.

The “green” and “ethical chic” consumers are also concerning. They fret
about social and environmental costs of the brands. Starbucks has to be
aware of this trend.

The baby boomer generation is retiring. This means spending by older

consumers will decrease. Now, Starbucks will have to tap the Gen X and the
Millennials as customers.
Other socio-cultural factors to focus on are:

 Changing family patterns in USA and Europe

 Consumer preferences
 Changing work patterns
 Changes in lifestyles of population
 The level of education of the population in local markets
 Changing values among population
 Economic Factors Important to McDonald’s
Corporation
Economic changes directly and indirectly influence business performance. The global
economy, regional economies, and local economies influence McDonald’s industry
environment through the following economic external factors:

1. Slow but stable growth of developed countries ( 3.2 percent in high-income countries,
on average slower than developing countries ) ( World Bank ) (opportunity)
2. Slowdown of the Chinese economy (threat)
3. Rapid growth of developing countries (Over the 1965-99 period, the average annual
growth rate was 4.1 percent in low-income countries, 4.2 percent in middle-income
countries) (opportunity) ( In 2017, McDonald's revenue reached 22.82
billion U.S. dollars. Over the last nine fiscal years, McDonald's revenue
achieved its peak in 2013 at 28.11 billion U.S. dollars)

The slow but stable economic growth of developed countries is an opportunity for
McDonald’s to grow and increase the stability of its restaurant chain business. The U.S.
market remains the biggest contributor to the company’s revenues, but the business
also benefits from the stable recovery and growth of European markets. On the other
hand, the slowdown of the Chinese economy is considered a threat in this PESTEL
analysis. This external factor is a strategic issue because the Chinese market is a major
contributor to McDonald’s revenues. Nonetheless, the company has the opportunity to
grow through expansion in high-growth developing markets, such as in Asia. In this
aspect of the PESTEL analysis of McDonald’s, economic external factors mainly
provide opportunities for business growth.

Social/Sociocultural Factors Influencing McDonald’s

Business Environment
In this case of McDonald’s Corporation, the most significant sociocultural external
factors are as follows:

1. Rising disposable incomes (opportunity) ( tìm số liệu )

2. Busy lifestyles in urban environments (opportunity) ( tìm bn tgian mn dành cho ăn uống,
bn tgian để làm việc, eating habit..)

Based on the external factor of rising disposable incomes, McDonald’s has the
opportunity to grow based on the increasing tendency of consumers to buy fast food
instead of cooking at home. This tendency is also linked to busy lifestyles in urban
environments. These lifestyles increase consumers’ likelihood of dining in restaurants
like McDonald’s instead of cooking food at home. On the other hand, the increasing
cultural diversity is perceived a threat and an opportunity in this context. For example,
this sociocultural external factor creates a diverse set of consumer preferences based
on various local and regional markets that McDonald’s must account for in product
development. Inability to do so can reduce the company profits. The fast food business
has the opportunity to increase its flexibility in product design to satisfy consumers’
preferences in different markets around the world. Furthermore, the healthy lifestyles
trend is a threat against McDonald’s, based on criticisms about the adverse health
effects of many of the company’s products. The company has the opportunity to
increase the healthfulness of its menu items. Thus, the social external factors in this
aspect of the PESTEL analysis of McDonald’s Corporation create major opportunities
for business development. These effects of external factors influence consumers’
perception about the company. McDonald’s CSR strategy and stakeholder management
initiatives partially counteract the negative effects of such social trends on the business.

Notes:
- Business actions activities in the current ( 2017 -
2018)
=> aim: estimate influence, challenges have in the
moment -> what should do to response
 Index, current problems => pros and cons
- Index: + stable ( evidence )
+ grow ( GDP in 3 yrs )
Reliable sources ( world bank )
- Location: 1 market => opportunities to expand