Starbucks coffee company is one of the leading coffee stores across the globe. The company has specialised in the sale of cold and hot beverages, whole beans coffee and the sale of other range of foods. Starbucks is headquartered at Seattle in the U.S. but has a wide expanse of stores across the globe. The company has unique corporate governance structures in place, and has over the years been lauded for being the best ethically run corporate body in the U.S. Ethiopia, on the other hand, is one of the leading coffee producers in Africa. The country generates a lot of revenue from the sale of coffee to various internal and external markets. The state policies that govern the production and the supply of the produce have led increased coffee productivity in the country. Starbucks and Ethiopia have in the past gotten into a joint partnership on the supply of the coffee produce. However, it did not take long before a conflict ensued over the certification policies set by the state of Ethiopia. This essay offers a comparative analysis of Starbucks and Ethiopia in relation to ethical sourcing and corporate strategy as is in the coffee industry.
Partnership between Ethiopia and Starbucks
As a result of the Starbuck’s ethical sourcing strategy, it has plans to come up with a fair trade certification. This strategy essentially validates its operations to countries that have in the past partnered with Starbucks and consider its operations to be invaluable. The stated goal is to have 100% of its coffee verified by an independent third party such as the TransFiar in the USA. The company has come up with a proposition that will see to it that there is a partnership with Ethiopia which is one of the major coffee producers in Africa (Arslan&Reicher, 2011). The Ethiopian government believes that this proposal that has been set up by Starbucks Inc. will help in ensuring that there is fairness in the sale of coffee in the world markets. In the past, there have been several cases related to collusions in the coffee markets. The verification of the coffee products by instituted third party agencies will help in instilling integrity and ethics in the markets.
Sources of Strategic Conflicts between the Ethiopian and Starbucks
The Ethiopian government estimated that the country would increase its coffee sales by over $80 million per year by trade marking speciality coffee names. As a result of the strategic growth processes, the country came up with various policies. First, the government asked local companies to enter into a licensing agreement with the hope of ensuring that there will be an increase in revenue collection. The agreement was not received well with Starbucks Inc. Starbucks argued that the licensing agreement will not be beneficial to the growers, but will only benefit the government since it would lead to price fluctuations in the world market (Arslan&Reicher, 2011).
Additionally, the organization felt that the government was only guided by selfish interests to ensure that it siphons money from the pockets of the growers. In 2005, the government implemented the second phase of the strategic plan that entailed the setting up of trademark names of three coffee producing regions including Yirgacheffe, Harrar and Sidamo. However, the company’s efforts were only successful in Europe, Canada and Japan. The plan got a lot of resistance in the U.S. especially from Starbucks. Starbucks Inc. had in the previous year applied for a patent to trademark the name of Shirkina Sun-Dried Sidamo, and this gave it a competitive advantage over the rival coffee retailers in the U.S. Clearly, this hampered the penetration of the Ethiopian coffee sales into the U.S. markets. The Ethiopian government had to apply to Starbucks to withdraw the claim. However, the application was disregarded as Starbucks sought to protect its interests.
Starbucks was quick to express the gaps that lay in the Ethiopian trademarks in an attempt to hit back at the Ethiopian government. The company argued that the government of Ethiopia had introduced complex regularities in the sale of coffee by coming up with the trademark agreement. Starbucks also believed that the legal complexities could end up denying companies the freedom to purchase the Fair Trade Coffee, and in the end, this would end up affecting the farmers (Grain.org, 2015). However, those in the support of the Ethiopian government argued that the government was simply trying to profit-off the situation.
Market Position of the Ethiopian Farmers Using the Porter’s Five Forces
There are several coffee producing countries across the globe. The Ethiopian farmers, for instance, face a lot of competition from the coffee produced in the neighbouring country, Kenya.