...Critique of: The Coffee Crisis Abstract For years, coffee has been considered one of the most important crops widely grown in the developing world. Several countries’ economies, specifically countries in Central America and parts of Africa, are highly dependent on this crop as a source of both national income and export earnings. About 25 million people, most of whom are small-scale farmers, rely on coffee as their main source of income. For the past 15 years the coffee industry has experienced severe declines in prices that have impacted economic development in several international markets. This critique explores a case study released by the Kennedy School of Government at Harvard University written on the events and contributing factors leading up to the crisis. The Coffee Crisis Quinlan, Gomez-Ibanez, and Bok provided an in depth depiction of the coffee crisis that hit the nation in the early 2000s that covered the background of coffee production, the origins of the crisis, and alternative remedies (Quinlan, Gomez-Ibanez, & Bok, 2004). The crisis led to severe hardships for coffee growers living in poor countries already struggling with poverty. A reported 25 million farmers in Latin America, Africa and Asia rely on coffee as their main source of income (Quinlan, Gomez-Ibanez, & Bok, 2004). These farmers were forced to resort to extreme measures in attempts to overcome this crisis. Some had to remove their children from school and use them as...
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...Paper received 100% grade. The Coffee Crisis “In 2004, the governments of coffee producing countries were considering how to respond to the dramatic decline in coffee prices” known as the coffee crisis (Capella University, 2011, p. 1). This coffee crisis was a result of four main factors: (1) the breakdown of the International Coffee Agreement (ICA); (2) the increased supply of coffee resulting from Vietnam’s entry into the market and Brazil’s technological advancements; (3) inelasticity of demand for coffee; and (4) movement from an oligopoly to a competitive market. The result, unfortunately, was a gap between the product market and resource market that needed—and still needs—to be addressed. Economic Implications of Operating in Different Market and Industry Structures In 1989, “roasters in the United States faced declining demand with the exception of gourmet coffees, but the ICA quotas required them to buy large quantities of relatively lower quality Brazilian beans” (Capella University, 2011, p. 3). As a result, “consuming nations, let by the United States, and high-quality producers, led by Costa Rica, demanded new quotas, and the negotiations over a new agreement deadlocked” (Capella University, 2011, p. 3) and the agreement ultimately broke down. Prior to the breakdown of the ICA, the coffee market resembled that of an oligopoly, which is defined as “a market dominated by a few large producers of homogeneous or differentiated product. Because of their...
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...Back in 2004, there was a significant decline in the price of coffee. This called for the gathering of the coffee producing nations to get together to determine their best course of action on how to handle this decline. A 40 year low hit the coffee industry in 2001 and continued to remain low since. That resulted in hardships for the farmers and their families, as most children were pulled from school so that they could help on the family farm. Some of the countries that were hit extremely hard created financial programs to help their farmers. Most coffee producing countries are not rich, as a result the financial programs were not able to be sustained for long. Basically there are two types of coffee, robusta and arabica. The difference is the type of flavor they have. According to the data, arabica coffee makes up about two-thirds of the total coffee produced. The coffee bean life cycle is quite long. It takes two years before a seedlings will produce fruit and then several more years before it reaches full maturity. Like most farming professions, the crop depends on that particular weather that year. The cause of the crisis is a long and distinguished list. There has been a steady price decline for the past 15 years. The consumption of coffee is barely keeping up with the growing world population. Over the last 15 years the average coffee consumption was around 4.6 kilos per person per year and in the US alone the 20% consumption saw a decline due to the...
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...Anthony Schreiber Capella University August 11th, 2013 Unit 5- Assignment 1 Chapter 24: Problem 4, a through d on pages 503-504. Chapter 26: Problem 4, on page 545. Chapter 28: Problem 8, advanced analysis, a and b on page 588. Chapter 29: Problem 3, on page 608-609 Chapter 24: Problem 4, a through d on pages 503-504. Personal Consumption Expenditures | $245 | Net Foreign Factor Income | 4 | Transfer Payments | 12 | Rents | 14 | Statistical discrepancy | 8 | Consumption of fixed capital | 27 | Social Security Contribution | 20 | Interest | 13 | Proprietor’s income | 33 | Net exports | 11 | Dividends | 16 | Compensation of employees | 223 | Taxes on production and imports | 18 | Undistributed corporate profits | 21 | Personal Taxes | 26 | Corporate Income Taxes | 19 | Corporate Profits | 56 | Government Purchases | 72 | Net Private domestic investment | 33 | Personal Saving | 20 | A.) Gross Domestic Product (GPD) by expenditures: Personal Consumption ($245) + Gross Private Domestic Investment ($33+$27= $60) + Government Purchases ($72) + Net Exports ($11). $245+$60+$72+$11=$388 Billion GPD by Income: Rents ($14) + Statistical Discrepancy ($8) +Consumption of Fixed capital ($27) + Interest ($13) + Proprietor’s Income ($33) + Compensation of employees ($223) +Taxes on productions and imports ($18) + Corporate Profits ($56) – Net foreign factor income ($4) $14+$8+$27+$13+$33+$223+$18+$56-$4= $355 billion NDP= GPD-Consumption...
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...The crisis took the form of a decline in coffee prices at world wide levels since 2001.All farmers who grew coffee suffered income losses; especially small farmers in poor and low developed economies like latin America, Asia and Africa. Almost 25 million farmers were hit financially leading to more urgent, negative social consequence. Prices of coffee are based on the composite price index of the International Coffee Organization. It uses prices of two main types of coffee-arabica and robusta. This shows a decline from 141 cents to 52 cents per pound between 1984 to 2003. EQUILIBRIUM / MARKET PRICE FOR COFFEE This is found where the demand curve intersects the supply curve. The equilibrium price occurs at P* and the quantity traded is Q*. What happened in early part of the decade of 2000 was that supply was high but demand was falling. We illustate this on the diagram below CAUSES FOR DEREASE IN DEMAND The main reason for a fall in demand for coffee was the decline in cosumption in USA. This nation consumes 20% ofthe total world coffee. Its per capita consumption of coffee fell from 36 gallons to 17 gallons per person between 1970 and 1990. The rise of alternatives like soft drinks and others like tea can be the cause. However demand was somewhat rescued bythe rise in consumption from UK and other developed nations. CAUSES FOR RISE IN SUPPLY • Brazil and Vietnam are major coffee producers. After the frost years of 1990s Brazilians developed new techniques...
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...Overcoming the Coffee Crisis Coffee is one of the most widely traded, produced, and consumed commodities in the world today, while globally, 2.5 billion cups of coffee are consumed daily (Ponte 2002, 1099) The drink itself is thoroughly enjoyed by many people, however the process of obtaining this desired commodity is economically and socially costly for many small or individual coffee farms. Many farmers and farm workers struggle to provide for themselves and their families due to the low prices paid by exporters, importers, and middlemen for their raw coffee beans. Some countries, however, have begun to implement regulations and guidelines in order to divert the uneven economical effects on the livelihoods of small farm owners and workers. We will discover that fair trade is the most vital system for small farm owners and workers who are looking to prosper in the coffee industry. Additionally, we will explore the façade that fair trade imposes to mainstream society and how the reality of fair trade is being obstructed by said façade. From raw coffee beans to the liquid cup of coffee we know and love, let’s now set out on a voyage to uncover the strains that are evoked on the people involved in the production process of this highly sought after commodity and ways in which the industry is evolving to facilitate small farm employees needs for sustainable livelihoods. Fair trade can provide peripheral economies with a sustainable coffee industry. Our journey begins in the southern...
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...report evaluates major internal and external factors affecting Starbucks using various analytical techniques. Based on the Starbucks brand in UK, it identifies suitable marketing strategies for Starbucks to expand its business in the UK market within the next two years. In line with the chosen marketing strategies, recommendations for the marketing mix are discussed. Founded in 1985, Starbucks is one of the largest coffeehouse companies in the world, with over 16,000 stores in 50 countries (Starbucks Annual Report, 2009, p. 1). Starbucks sells high-quality whole coffee beans along with fresh, rich-brewed coffees, cold blended beverages, a variety of complimentary foods, coffee related accessories and a selection of premium teas primarily through Company-operated retail stores (Starbucks Annual Report, 2009, p. 1). In May 1998, Starbucks successfully entered the European market through its acquisition of 65 Seattle Coffee Company stores in the UK (Starbucks, 2009). In 1998, since opening its first UK store in London, Starbucks has been growing rapidly at a steady rate with over 660 stores opened by the end of 2009 (Starbucks Annual Report, 2009, p. 3). This report aims to evaluate major internal and external factors affecting Starbucks using different environmental analysis methods such as SWOT analysis, Porters Five Forces and PESTLE Analysis. It will be based on the Starbucks brand in UK, and will identify suitable marketing strategies for Starbucks to expand their business within...
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...I. Strategic Profile and Case Analysis Purpose Starbucks has always been the famous coffee shop in the world. When people smell coffee the first thing that came into their minds is “Starbucks”. Starbucks starts in 1971 in Pike Place Market in Seattle, Washington. It wasn’t always about selling coffee drinks, before Howard Schultz was selling coffee beans and coffee machines not the coffee drink itself. Then for about 10 years he thought of a way of selling coffee since it became famous, with that he came up of opening a store named II Giornale. After a year, Jerry Baldwin, Zel Siegl and Gordon Bowker sell the name Starbucks to Schultz and quickly renamed II Giornale to Starbucks and started to expand across America. Now Starbucks has more than 11,000 stores in the United States alone and more than 17,000 stores around the world. Having so many stores, it became more available to the public. You can buy their coffee almost anywhere. With this kind of availability, the long lines where nowhere to be found. Coffee serving and production was fast. But having so many stores can make a huge impact. The convenience of the costumers was met, but the sales might make a huge loss. That is why the main purpose of this Case Study is to identify how having so many stores can make a huge impact on Starbucks’ demands and to prevent it from happening with making an action plan. Another purpose is to identify the latest perception of consumers that will make Starbucks innovate and focus on other...
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...Globalizations June 2008, Vol. 5, No. 2, pp. 259 –274 Are Sustainable Coffee Certifications Enough to Secure Farmer Livelihoods? The Millenium Development Goals and Nicaragua’s Fair Trade Cooperatives ´ ´ CHRISTOPHER M. BACONÃ , V. ERNESTO MENDEZÃÃ , MARIA ´ EUGENIA FLORES GOMEZÃÃÃ , DOUGLAS STUARTÃÃÃÃ , & SANDRO ´ ´ RAUL DIAZ FLORESÃÃÃÃÃ Ã University of California, Santa Cruz, USA University of Vermont, USA ÃÃÃ ´ Asociacion de Mujeres Contra La Violencia, Oyanka, Jalapa, Nicaragua ÃÃÃÃ Universidad Nacional Autonoma de Nicaragua, Nicaragua ÃÃÃÃÃ ´ ´ CII-ASDENIC, Edificio Casa Estelı, Estelı, Nicaragua ÃÃ ABSTRACT In December 2001, green coffee commodity prices hit a 30-year low. This deepened the livelihood crisis for millions of coffee farmers and rural communities. The specialty coffee industry responded by scaling up several sustainable coffee certification programs, including Fair Trade. This study uses household- and community-level research conducted in Nicaragua from 2000 to 2006 to assess the response to the post-1999 coffee crisis. A participatory action research team surveyed 177 households selling into conventional and Fair Trade markets in 2006. In an effort to dialogue with specialty coffee industry and mainstream development agencies, results are framed within the context of the United Nations Millennium Development Goals. Findings suggest that households connected to Fair Trade cooperatives experienced several positive impacts...
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...Coffee and Global Sustainability Coffee is everywhere. From specialty espresso shops in Italy to the corner convenience store, it is near impossible to go anywhere in the world and not be able to purchase a cup of joe. And it is big business too. Since 1950 coffee production has grown by almost 200 percent, and after oil, coffee is the most important traded commodity in the world.[i] Coffee is so prevalent affluent societies take it for granted as an affordable part to their everyday life. For the growers in developing countries, although they may rarely drink the product they produce, it is their livelihoods. This paper will take a look into the past and present of coffee and evaluate and present solutions, both environmentally and socially, for the continued sustainability of the world’s most influential drink. A History of Exploitation To understand the implications of coffee’s impact on society and the global economy, it is important to start at the beginning. Coffee berries were first eaten by slaves who took it with them as they were taken from what is present day Sudan to Yemen and Arabia. This is where coffee as we know it today was born. It is believed that the first beans were roasted and brewed around 1000 A.D. in Arabia. By the 13th century, coffee was a common drink among Arabs and coffeehouses were opened in Mecca and throughout the Arab world. By the 15th century, coffee was cultivated as a crop throughout Arabia. However, the Arabs banned the exportation...
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...Introduction The case study refers to Hoskins and Rogers PLC Company, which has 3 shareholders (Mike Williams with 60% of the shares, John Holmes with 30% of the shares and Patrick Anderson with 10% of the shares). John being in his 60's still has an old-fashioned way of management. The company activities include the trading and distribution of : high and medium concentration tomato juice in a variety of container sizes, both for restaurants as well as retail outlets, Sugar-free low concentration fruit juices, and the overall UK distribution of “Luciano” series of coffee and tea products, imported straight from Italy Here we will analyze the status of this company according to the meaning and the concept of sustainable enterprise. Also, we will analyze what should be done in order the Hoskins and Rogers PLC to get a bigger piece of the market share by being an innovative company. Finally, we will see what strategic issues the company will face in order to keep its sustainability according to the current economic conditions. Sustainable Enterprise Sustainable Enterprise is an enterprise that promotes sustainable living through sustainable production of goods and services, to provide solutions for fulfilling elementary needs to improve the lives of people, now and in the future with least possible environmental impact and the highest possible economic and social yield. This case shows that the company is not as healthy and sustainable as the 3 shareholders wanted to be. As...
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...automatically think of strong coffee; Starbucks is more than just coffee. This company offers an appealing atmosphere and friendly helpful staff to assist customers with various services. Not only does Starbucks offer exceptional customer service they also pride themselves in offering an excellent working environment and benefits to their employees. Starbucks’ mission statement states: “Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow. The following six guiding principles will help us measure the appropriateness of our decisions: - Provide a great work environment and treat each other with respect and dignity. - Embrace diversity as an essential component in the way we do business. - Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee. - Develop enthusiastically satisfied customers all of the time. - Contribute positively to our communities and our environment. - Recognize that profitability is essential to our future success.” In order to maintain this mission many steps are taken to enhance each store within the vast company.” (Starbuck Corporation, Fiscal 2011 Annual report) Starbuck’s main competition is McDonald’s McCafe and then Dunkin Donuts Coffee. McDonald’s McCafe is marketing its low price strategy, while Dunkin Donuts, is offering that it simply has a better coffee and more on its menu to go with its coffee. Starbuck’s known...
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...Threats 17 Customer Value, Satisfaction and Loyalty 18 Generic strategies from Starbucks’s point of view 18 Conclusions 20 References 21 Introduction In the year 2000, Howard Schultz, a long term director of Starbucks left his position as the CEO. Starbucks was on a steady course and had its stock price on the rise until the year 2006. (lähde haastattelu) The global financial crisis hit the coffee giant relatively harder than other companies in the business sector (lähde annual report 2010). In early 2008, due to the poor performance of Starbucks, Howard Schultz felt compelled to return in to the CEO’s position, as Schultz mentioned in his interview for Harvard Business Report in 2010 “The leadership had failed the 180,000 Starbucks people and their families.” (lähde haastattelu). The global financial crisis in itself does not explain the poor performance of Starbucks, stock prices dropped below the NASDAQ index. Poor decision making in strategy and management caused the company to fall into a deeper crisis. Changes in consumer behavior that were caused by the global financial crisis came suddenly, and Starbucks did not adjust in such manners...
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...Seattle. It had pride itself for roasting high quality whole-bean coffee, and producing one of the best coffees in the neighborhood. Today, more than forty years later, Starbucks had become one of the major coffee chains in the world with more than 18,000 storewide in 62 countries. Starbucks main core operations derive from the sale of their beverages, retail and franchise operation; it also aims to provide the Starbuck’s experience. As stated on Starbuck’s mission statement, “Our mission: to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time”. This statement shows that Starbucks is not just creating a business based on its product and services, it also aim to build a closer connection with their customers through a “people to people” approach. By creating the Starbucks experience with the customers, it enables them to provide an even better service to attract and retain its customer’s loyalty. Economic/Global impact Coffee beans and coffee beverage is made up the main core business that Starbucks operates on, with coffee bean as the second highest valuable commodity in market, it means that any economic factors might affect the costing of the coffee beans, which might result in price hike for their beverages. External Opportunities and Threats Threats Currency Fluctuation. The U.S., being one of the world’s biggest economies was badly hit during the 2008 financial crisis; it had caused great shift and movement in other countries’ economy...
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...Starbucks Coffee Company Teaching Note Overview The Starbucks Coffee Company case offers students an opportunity to explore the tradeoffs between a successful business strategy (in this case, its focus on the purchase of the highest quality coffee, which is at the heart of this business) and the company’s interest in maintaining and enhancing its reputation as a socially responsible company. The case focuses on the CEO, Orin Smith and his decision whether to purchase and offer fair trade coffee after being pressured by the Global Exchange, an NGO responsible in the 1990s for Nike’s difficulties in relation to unfair labor practices in developing nations. Questions to Begin the Case Discussion Students can approach this complicated case from many different angles, so questions should be tailored to the individual needs of the course you are teaching. Possible successful approaches include the following: 1. Focus on the factors in the environment affecting Starbuck’s decision. This allows you to explore comparison between Nike in the 1990s and Starbucks today. The company faces the risk of overexposure because of its incredible rate of growth. And, like WalMart, the company has been seen as a destroyer of smaller main street type businesses. It also represents American culture in distant lands in the same way that McDonalds did in the 1970s and 1980s. Its interest in presenting itself as a socially responsible company also makes it an easy target for antagonists like the Global...
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