Anudan Limbu

PESTLE Analysis of Eurotunnel and Starbucks

P6 - Describe how political, legal and social factors are impacting upon the business
activities of the selected organisations and stakeholders.

M3 - Analyse how political, legal and social factors have impacted on the two contrasting
organisations.

D2 - Evaluate how future changes in economic political, legal and social factors may impact
on the strategy of a selected organisation.

Introduction

In this task I will be describing how certain factors affect business activities of Starbucks and
Eurotunnel and their stakeholders. In addition to this I will be analysing how the listed factors have
impacted two contrasting organisations which as stated are Starbucks and Eurotunnel. Finally I will
be evaluating the long term impacts of the listed factors by stating how they could affect Starbucks
and Eurotunnel positively or negatively.

Political Factors Affecting Starbucks

There are various political factors that affect Starbucks. These factors play a role in how Starbucks
operates and conducts their business. One of the factors affecting Starbucks is that the
governments in the western countries have raised concerns over how Starbucks source their
materials. The governments of different countries want Starbucks to follow fair trade practises that
have been agreed upon by Multinational Corporations and the governments of developing and
developed countries. As a result of governments raising concerns about their trade practises this
issue could result in Starbucks having to make sure that they follow fair trade practises more strictly
which could result in the business having to spend more money on making sure that the practises
are being implemented and due to this in the long term Starbucks might lose their levels of profit
because more of their revenue is being spent on implementing fair trade practises to comply with
governments.

Another factor which affects Starbucks is the stability of a country’s government. This means that if a
country from which Starbucks sources their material is unstable meaning the country is filled with
violence or social unrest then this could affect how Starbucks sources their materials meaning it the
political instability could become a problem for Starbucks. The stability of a government can affect
whether it is safe and profitable for the business to run in countries. For example if a country that
Starbucks is operating in has an unstable government then it might not be suitable for Starbucks to
operate there anymore because there might be violence or unrest among the people and the
government which might result in it negatively affecting Starbucks such having their store broken
into and vandalised or losing their levels of profit because people are less and less interested in
drinking coffee during times of unrest. As a result in the long run operating in a country with an
unstable government might affect their stores negatively in terms of revenue and profits.

1
Anudan Limbu

Economic Factors Affecting Starbucks

Most developing countries have a high economic growth rate meaning that this provides Starbucks
with a great opportunity to penetrate new markets and as a result increase their revenues. The
declining unemployment rates of developing countries also mean that there are more people with
disposable income which will mean more potential revenue. Although the unemployment rates are
falling the labour costs in each country are rising due to competition from other companies who also
seek the same opportunities as Starbucks. This has resulted in Starbucks exploring new countries in
order to help manufacture the items that they use such as cups. Because the labour costs are rising
in countries that Starbucks operates they have taken measure to enter new markets that have a
lower labour costs. But even these new countries will eventually have their labour costs rise as they
develop which means Starbucks will have to look for new countries again. This practise is not
sustainable as there is a limited amount of countries so in the long term it is not possible for
Starbucks to continue to look to penetrate new countries as they will eventually run out of new
countries. So Starbucks will have to look to create new measures to make sure that they profit levels
do not fall with the rising labour costs as they will not be able to use their current strategy.

Social Factors Affecting Starbucks

The lifestyle factors of countries especially developing countries mean that Starbucks needs to
handle countries differently depending on the lifestyle choices. For example, coffee is mainly grown
in developing countries but a majority of coffee is drunk in developed countries as opposed to the
countries they are grown in. This is because the price of coffee means that people living in
developing countries who have low income will not be able to feasibly drink coffee. This means in
order to penetrate the markets in developing countries Starbucks will need to offer cheaper
alternatives or risk other companies from taking the customers away by offering cheap and
affordable prices. The strategy to offer cheaper alternatives in developing can be extremely
beneficial to Starbucks because these countries represent a huge opportunity to increase the global
market share of Starbucks as the majority of the developing countries in the world have a huge
population size for example the likes of India, Indonesia, Bangladesh all have population of over 100
million people. This means there is a huge market size for Starbucks to potentially target. In the long
term this strategy can allow Starbucks to grow exponentially as the market size of developing
countries is huge and this can potentially allow a huge increase in revenue and profits of the
business as their customer base grows.

Another factor that affects Starbucks is the size of the population of a country. The larger the
population of a country the better the opportunity for Starbucks because more people means more
potential customers which means more revenue. For example a China has a population of over 1
billion people. This means that Starbucks has more than a billion potential customers which would
mean it is a huge opportunity for Starbucks. As stated above the population size of a country can
have a potentially huge impact on Starbucks and this means that countries where Starbucks does
not have a huge presence can present an opportunity for Starbucks to try and penetrate the market.
This factor can allow the business to establish dominance in new markets due to fame of the
Starbucks brand. As stated above for example if Starbucks is able to establish market dominance in
China which has a population of over 1 billion then it can significantly increase their revenue due to
the sheer amount of customer base in China.

2
Anudan Limbu

Technological Factors Affecting Starbucks

Starbucks is affected by certain technological factors such as the rising trend in mobile purchase
where people use their smartphones in order to pay for the goods that they purchase. Mobile
payment systems such as Apple Pay, Android Pay and Samsung Pay has allowed consumers to pay
for items quicker, and made payments more seamless and has helped make it more convenient for
people as they will not need to carry their credit/debit cards or cash around with them. Also, due to
the increasing use of smartphones in the world this has created an opportunity where mobile
payment could replace credit/debit cards as the alternative payment form for people if they do not
have cash with them. This increasing trend could create an opportunity for Starbucks to exploit as if
they start offering mobile payment to customers then this could result in customers becoming more
attracted to Starbucks since they offer mobile payments which could result in more revenue for the
business. In the long run this issue could provide a positive effect for Starbucks. This is because as
the world grows more technology orientated and reliant mobile payment systems could eventually
become the de-facto alternative payment form and if Starbucks are early adopters of this method
then they will have an advantage over their competitors since they offer mobile payment.

Another technological factor that is affecting Starbucks is the introduction of Wi-Fi at Starbucks. The
internet is very important to the customers of Starbucks because they are an important hotspot for
teenagers, young adults and workers all of whom tend to use the internet very frequently either to
socialise or do work while they drink coffee. This has helped add extra value to the brand as the
introduction of Wi-Fi has allowed customers to access the internet which has helped increase the
overall customer experience of Starbucks. Overall in the long run the introduction of Wi-Fi might
mean more people are likely to visit Starbucks. This is because as the population of the world rises
more and more people are likely to be visiting because the global coffee consumption is rising and
the number of smartphone users is also rising. This dual factors help make Starbucks an attractive
destination for coffee lovers as not only do they offer coffee they also offer free Wi-Fi which makes
Starbucks a great destination for socialisation between people.

Legal Factors Affecting Starbucks

One of the biggest factors that affect Starbucks is the sourcing of raw materials which Starbucks
relies on for their business. In order to source the raw materials that Starbucks needs they will need
to follow the rules and regulations that government has set. This could affect how Starbucks sources
their materials, what materials that they are able to source. As a result of this Starbucks might have
to assess what and from where they source items. Potentially in the long run this could prove to be a
negative issue for Starbucks because the cost of raw materials is rising and due to this the cost of
raw materials. While Starbucks have measure to deal with this increase in cost they will also have to
consider the regulations of the countries that they operate in meaning they might have to expand
their budget to cover the rising material cost as well as assess how regulations affect them and
potentially change how they source materials which might mean more money is spent on importing
and this would cut away Starbucks profits.

3
Anudan Limbu

Another factor includes the introduction of stricter customs and trade regulations. For example the
UK recently voted to leave the European Union. This means that in the future the trade regulation of
the UK will differ from what it currently is because the current customs and regulations have placed
by the EU but once the UK leaves the EU then it will mean that the UK will have to negotiate trade
treaties with other countries in order to trade. This could result in the UK getting a deal which could
be either beneficial to the UK or a deal that isn’t as good as the current deal which would mean that
Starbucks would have to take measures to change how they import their raw materials. This is
another factor that in the long run can potentially have a negative impact on the business. This is
because currently the UK is part of the EU but eventually the UK will leave the EU due to the Brexit
vote meaning the free trade agreement between member of the EU will cease to exist and as a
result the country will have re-negotiate a trade agreement. This new trade agreement could change
how Starbucks operates in the UK which means that they would have to adopt new policies which
can affect their growth and revenue stream which would ultimately hinder their profits.

Environmental Factors Affecting Starbucks

Starbucks business practices have concerned activists and international advocacy groups. Even the
consumers have expressed issues about their environmental concern for example their use of plastic
cups. Plastic is a material that is hard to recycle and if it is burned it releases toxic gases which
presents a threat to people if they breathe it in. Also, plastic does not break down easily and takes a
long time to decompose so its use has causes activists and people to raise awareness about its use
and has caused Starbucks to take measures to make sure that they use cups that are made up of
recyclable items. If Starbucks do not enforce environmentally friendly policies to every single one of
their branches then they risk angering their customers. Due to the advent of social media people
have starting voicing their opinions more frequently and with the amount people using social media
sites the potential for people to start conducting campaigns and demonstrations against Starbucks
due to their environmental policies is high. In the long run this poses a big threat to Starbucks
because due to social media the any bad public relations between a business and people is highly
impactful as bad PR can seriously turn people against a business so in the long run Starbucks will
need to address this issue or they risk braking down their public relations.

Political Factors Affecting Eurotunnel

One of the factors affecting Eurotunnel is the Brexit vote which has resulted in the pound sterling to
fall. This has caused the amount of debt the pound has to reduce. This has resulted in an increase in
cost for its maritime competitors and has helped support British exports and Eurotunnel has stated
that this will compensate for any potential negative effects as a result of the Brexit vote.

In contrast another factor affecting Eurotunnel is that as a result of the Brexit vote Eurotunnel has
cut its annual earnings factor by £21million this is due to the collapse in the value of the pound after
the Brexit Vote. Due to the outcome of the vote Eurotunnel has warned there could be further
effects to its finances if the pound falls any further. As a result of this negative outcome the value of
Eurotunnel’s shares have fallen which has meant that the Brexit vote has impacted the business
negatively as their revenues have fallen and the value of the business has also fallen. Although the
effects of both factors are still yet to be determined because the UK still has not left the European
Union and as a result the effects of leaving the Union has yet to be felt.

4
Anudan Limbu

The combination of these factors has raised a real issue on the future of Eurotunnel because if the
revenues of the business keep falling then its value will also fall which would scare off any potential
investors and as a result it could lead to the business going bankrupt due to their falling revenues.

In the long run this issue can have huge consequences since Eurotunnel operates between the UK
and France. While the UK will be leaving the EU and France will still be a member of the EU there is a
potential for frosty relations between the two countries and this could result the business being
stuck in a bad situation since Eurotunnel relies in the cooperation between the two countries and if
both of the countries have a hostile relation then making sure that the businesses’ operations run
smoothly could become a problem due to the hostile relations.

Economic Factors Affecting Eurotunnel

Due to the ongoing European Migrant Crisis Eurotunnel, has had to increase their security and
border control due the huge increase in migrants trying to illegally cross the Channel Tunnel. As a
result of having to increase their security and border control due to the crisis they have had to hire
more security personnel and staff for border control. Due to the extra staff their costs have
increased because of the increasing overheads having to pay wages/salary to the extra staff that
they have hired. This has affected Eurotunnel negatively because their revenue is already falling due
as a result of the Brexit vote and the still ongoing migrant crisis has forced the business to hire more
staff in order to enforce better border control and help stop any migrants to illegally cross the
tunnel.

Maintaining this level of cost in the future is going to be extremely expensive for Eurotunnel since
staff wages/salary will form a large part of the businesses overheads so in the long run the business
will have to make cuts to make sure that they keep on maintaining this level of cost to help maintain
the border control and as a result of the cuts the profit margin of the business will take a hit.

Social Factors Affecting Eurotunnel

One of the social factors affecting Eurotunnel is the growing population of the UK which has resulted
in more people using the tunnel in order to cross the channel over into mainland Europe. This
growing population has helped provide more traffic for Eurotunnel and has helped Eurotunnel
overcome the traffic slump that it fell into after the Paris terror attacks. This rise in population has
resulted in Eurotunnel having more traffic and as a result increasing its revenue and helping it
recover from a usage dip it experienced because of outside factors such as the terror attacks.

In the long run this factor could affect Eurotunnel positively since the increasing population of
countries will result in a higher demand in the services that the business provides. If the demand of
Eurotunnel’s services increases in the future then the business will experience growth in the
revenue, profits and the size of the business as they will have to expand in order to meet the rising
demands of customers. So Eurotunnel will have to take measures to slowly prepare themselves for
rising increases in their services. So, as a result of the growing population Eurotunnel stands to
experience a growth in demand and revenue.

5
Anudan Limbu

Another social factor affecting is the growing use of online shopping which has led to an increase in
demand for vehicles to transport goods. This has led to business having to hire more vehicles such as
trucks and Lorries to help transport the goods that they need to deliver to their customers due to
this increased demand.

Due to the increase in online shopping there has been an increase in demand for vehicles to
transport goods for delivery. In the long run this factor can result also result in an increase in
Eurotunnel’s services. This is because transporting goods across Europe though lorry’s and trucks is
the cheapest way because shipping is not cost effective in short distances so these factors could
result in higher demand of Eurotunnel’s services which would result in increased revenue in the long
run.

Technological Factors Affecting Eurotunnel

One of the technological factors that are affecting Eurotunnel is the growing use of social media sites
such as Facebook and Twitter by people in order to communicate problems that they encounter
while they use Eurotunnel’s services or voice complaints. The growing use of social media has led to
Eurotunnel having to create social media accounts in sites such as Facebook and Twitter so that they
are able to communicate with their customers. This factor has allowed easier communication and
support to Eurotunnel customers which have led to an increase in the reputation of Eurotunnel in
the eyes of the customers.

As the use of social media sites increases the effect this factor has on the business will increase. For
example if Eurotunnel damages their public relations with people this effect would be amplified due
to the huge user base of social media sites and in the long run as more and more people use social
sites the leeway for any bad public relations will decrease since social media will amplify any public
relation effects.

Another factor that is affecting Eurotunnel is the increasing use of the internet in order to purchase
tickets. Instead of purchasing tickets at the ticket counter at the Eurotunnel terminal more and more
customers are purchasing tickets online. Due to this increasing trend Eurotunnel has had to upgrade
their website in order to handle more customer traffic.

This is another factor in the long run could benefit Eurotunnel as using the internet in order to
purchases tickets helps make it more convenient for people as having to carry different currency
such as the Euro will make it a hassle for the customers and by allowing customers to pay using the
internet this will also help decrease the staff required to man ticket booths where customers will
need to purchase tickets. This will result in the business having less overheads because they have to
pay fewer wages due to them having a lower amount of staff.

6
Anudan Limbu

Legal Factors Affecting Eurotunnel

One of the main factors affecting Eurotunnel is the ongoing European Migrant Crisis. This crisis has
resulted in thousands of migrants camping at Calais looking to get across the channel illegally to the
UK. This crisis has resulted in a diplomatic disagreement between France and the UK government
due to the refugee camps located in France. This affects Eurotunnel because they operate the
Channel Tunnel and are responsible for enforcing security and border control which means that
migrants that are looking to illegally cross the tunnel into the UK must be handled by Eurotunnel as
not only is crossing the Channel tunnel illegal but it is also dangerous. More than a hundred migrants
have died while trying to illegally cross the tunnel so Eurotunnel has had to increase their security
and border control.

This crisis can have long term implications of Eurotunnel such as increased spending in order to meet
the requirements set by the British and French government to manage the crisis. This increased
spending will result in lower profits as more money is used to enforce polices to appease the British
and French government. Another effect it can have is the damage in Public Relation as due to the
crisis as there has been multiple incidents of disruptions to the Eurotunnel service. This has resulted
in disgruntled customers and this can lead to bad PR and damage to Eurotunnel’s brand in the long
run.

Environmental Factors Affecting Eurotunnel

Eurotunnel has shown commitment towards the environment and as a result of this commitment
Eurotunnel has been labelled as most environmentally friendly cross-Channel operator. One of the
factors affecting Eurotunnel is the development of renewable energy by the company. This has led
to the business to focus on creating a green plan and this is evidenced by the creation of a 3 turbine
wind farm in France where it is producing enough energy to power 2000 homes.

Also in accordance to their pro-environment stance they have created an environmentally friendly
site called Samphire Hoe using the reclaimed materials that was acquired while the Channel Tunnel
was being dug. This site has won many environmental awards such as the Green Flag, Gold Medal in
the “country park” category at the South and South East in Bloom Awards. Also in January 2017, the
site won the UK-wide Special Award for Innovation from the Green Flag Award Scheme for its high
environmental quality and its contribution to local communities and school groups.

The environmental concern Eurotunnel has shown is a positive factor which in the long run can
benefit them with various effects such as increased customer base along with positive Public
Relations and brand building. This is due to the increasing pro-environment stance and the pressure
from governments to ensure environmentally friendly services which has caused Eurotunnel’s rival
the ferry to become more affected as the poor track record of waste water treatment and waste
disposal has hampered them.

7
Anudan Limbu

Conclusion

In this task I have described how certain factors such as political and social factors have affected the
business activities of Starbucks and Eurotunnel along with their stakeholders. In addition to this I
have analysed how the listed factors have impacted two contrasting organisations which as stated
are Starbucks and Eurotunnel to add to this I have also referenced how climate change and the
Brexit vote have had additional impact on Starbucks and Eurotunnel respectively. Finally I have
evaluated the long term impacts of the listed factors by stating how they could affect Starbucks and
Eurotunnel positively or negatively.

Bibliography

https://www.theguardian.com/business/2016/jul/20/eurotunnel-earnings-target-brexit-
vote-eurostar-referendum

http://www.railwaygazette.com/news/policy/single-view/view/brexit-will-not-affect-
channel-tunnel-says-eurotunnel.html

https://www.eurotunnel.com/uk/build/

http://panmore.com/starbucks-coffee-pestel-pestle-analysis-recommendations

http://fortune.com/2016/07/01/americans-coffee-prices/

https://www.statista.com/statistics/201182/forecast-of-smartphone-users-in-the-us/

https://qualityinspection.org/raw-material-cost-china-factory/

https://en.wikipedia.org/wiki/European_migrant_crisis

https://www.theguardian.com/travel/2006/dec/20/cruises.green

8
Anudan Limbu