DIPLOMATIC ACADEMY OF VIETNAMFACULTY OF INTERNATIONAL COMMUNICATION & CULTURE

RISK AND CRISIS MANAGEMENT

CASE STUDY: STARBUCKS FACED SOCIAL BOYCOTT INPHILADELPHIA AFTER HAVING POLICE ARREST
TWO BLACKCUSTOMER.

Student:

Nguyen Tung Lam

Student code:

TT44C-086-1721

Teacher in charge:

Ph.D. Do Huyen Trang

Hanoi, 2019

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CONTENTS

FOREWORD4OVERVIEW5COMPANY SWOT ANALYSIS5

SWOT MATRIX7

TIMELINE EVENTS9

Thursday, April 129Friday, April 13 – Saturday, April 1410Sunday, April 1510Monday, April
1611Tuesday, April 1711

SCOPE OF INFLUENCE12

Spread of crisis:12Reputation14Image15Relationship16Black community:16Press and

KEY STAKEHOLDERS MATRIX20

Key stakeholders matrix analysis20

CAUSES22STRATEGIES24GOALS AND OBJECTIVES24

Motto26Message262

The spokesperson of the crisis: Starbucks’ CEO Kevin Johnson27

SOLUTIONS27

Branding: Social Media27a. Immediate (In the first 24 hours)27 b. Short-term (12/4/2018 -
12/6/2018):28c. Long-term (6/2018 - 12/2018)28Relationships:29a. Immediate:29 b. Short-term
 (1/5/2018 - 1/8/2018)29c. Long-term (5/2018 - 11/2018)30Task Management:30a. Immediate:30 b.
Short-term (13/4/2018 - 13/7/2018)30

TIMELINE SOLUTIONS31

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FOREWORD

For every industry, especially businesses, the crisis is inevitable. A scholar also once said: "There are
only two types of businesses. One is that the business has been through a crisis. Secondly,
businesses are about to be in crisis. " Therefore, crisis is an essential factor associated with the
working process of every business, and a driving one for future development. Because with every
crisis, along with a great challenge, there is also a huge opportunity, the opportunity for brand
development, reputation, and public relations if we know how to handle crisis and have an
appropriate management strategy.

Recognizing the characteristics that exist in tandem with such an enterprise, a team with crisis
management expertise and knowledge of crisis management is needed.

Crisis management is a process that always requires learning and continuous improvement, so that
the crisis is reduced in a strategic way, linked to the necessary goals that have been identified to
recover. Crisis management is a process that not only ends when the crisis is extinguished, but also
the process of restoring and repositioning a brand and continuing to develop further after a difficult
period.

As noted above, crisis management is a process that requires continuous learning. In the context of
my essay, I will use the knowledge I have learned to handle a crisis of a well-known global beverage
brand Starbucks, in situation that an African-American customer was arrested at a store in
Philadelphia, USA, caused a wave of boycott of the brand, which led to disturbing consequences.

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A.OVERVIEW

The beverage market is active and has grown for about two centuries now. However, it is also very
competitive and potentially problematic, especially with the brands associated with customer
service.

Starbucks is a major global coffee brand. Since its inception in 1971, it has so far transformed itself
into a brand loved by the public around the world, a symbol of urbanization and urbanization.

In early 2018, with just one incident at a store in the US state of Philadelphia, the brand witnessed a
wave of boycotts because of the inappropriate behaviour of an employce to two customers.
On Thursday, April 12, 2018 two black men, Donte Robinson and Rashon Nelson, went to the Spruce
Street Starbucks location in Philadelphia, Pennsylvania to talk about real estate opportunitics. "They
had asked to use the restroom but because they had not bought anything, an employee refused the
request. They remained seated inside the coffee shop waiting for another friend to arrive before
ordering any items off the menu. The Starbucks manager asked the two men to leave. After refusing
his request, the manager proceeded to call the police. Nelson and Robinson were arrested by the
Philadelphia Police Force and taken out of the store in handcufls. However, Starbucks did not press
charges and the men were released. That same day a video of the event went viral on Twitter and
Starbucks began to receive backlash for racial profiling. This led to a week of protest, accusations of
racial discrimination and Starbucks commitment to do better.

With the "Black Lives Matter" movement sweeping the nation in 2015 and ongoing police brutality in
the United States, many Americans took offense to Starbucks racial bias discrimination that elevated
the already tense social justice climate.

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B. COMPANY SWOT ANALYSIS

Strengths

• The company has experienced a steady revenue growth over the course of multiple years, resulting
in the strong financial position they encounter today.

"The company's revenues increased at a compound annual growth rate (CAGR) of 10.8% from
US$14,866.8 million in FY 2013 to US$22,386.8 million in FY

2017" (Starbucks Corporation SWOT Analysis, 2018).

• Starbucks also offers a rewards program as an incentive for their customers to return with the
promise of free products in the future. Their financial position and loyalty program both contribute
partially to Starbucks strong customer lovalty and brand recognition.

• With more than 29,000 locations worldwide, Starbucks customers come from different countries
and cultures to amalgamate a diverse customer base (Statista, 2018).

Weaknesses

• Starbucks can credit their success to the fast-paced work environment.

However, through quick, impersonal interactions with consumers, the company may neglect and
undermine the customer experience. This can translate to the company valuing quantity over
quality. Considering racial bias, this immediate, distracting environment could allot for name
misspellings or misunderstandings on coffee cups, or hasty responses when talking to a customer.

• Another weakness Starbucks encounters is its high prices which reduce the affordability of their
products. It's "a weakness because it limits the company's market share, especially in areas with
relatively lower disposable incomes" (Lombardo, 2018). It also encourages customers to try products
from their more affordable competitors.

• There have been previous incidents of racial insensitivity within the company which were sparked
by Starbucks "Race Together* campaign and other individual incidents in locations across the
country. This affects customers and employce perceptions on the company.
Opportunities

• The company has strong international presence, but expanding into developing markets could help
raise the annual revenue growth to maintain a strong financial position.

• Another opportunity is to develop inclusive campaigns targeting minority groups to further expand
their customer base. Considering unconscious bias, Starbucks has the opportunity to impact
different cultures and races through their international presence.

• With tasteful campaigns or thoughtful corporate social responsibility motives,

Starbucks has the global power to change a community through their financial resources, large
customer and employee base. or vast range of products.

• The company launched Starbucks Reserve Roastery and Tasting Room a series of upscale stores
that offer unique coffees and a premium experience.

These stores can be found in select cities, and have quickly gained popularity.

The expansion of Starbucks Reserve Roastery and Tasting Room is an opportunity for the company
to target a different segment of customers.

Threats

• Competitors to the company, such as Dunkin Donuts, The Coffee Bean, fast food restaurants and
smaller independent stores offer more affordable prices which might appeal to the public. Imitation
of products and their business model is another threat that the company must be aware of.

• Protests and boycotts from activist have been, and continue to be, a threat to the company's
reputation.

In 2015, activists were outraged by Starbucks

superficial, "Race Together," campaign, in which, baristas were encouraged to spark conversations of
race with customers and write "race together" on cups (Shah, 2015).

• When it comes to races in America, it is very sensitive and it requires careful attention and
behaviour, from the citizens and officials (the police). Numbers of campaign provoking for the rights
of different ethnicities other than white have been carried out in the last decades, one significant is
the Black Lives Matter
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Friday, April 13 - Saturday, April 14

• National outrage over the viral video began to mount. Many took to social media to call the
incident racist, while the hashtags (alboycottStarbucks and #Starbucks WhileBlack become widely
used.

Police Commissioner Richard Ross took to Facebook, expressing his points that the arresting officers
did nothing wrong.

Philadelphia's Mayor Jim Kenney on the other hand released a statement that said the incident
"appears to exemplify what racial discrimination looks like in 2018." He said: "For many. Starbucks is
not just a place so buy a cup of coffee, but a place to meet up with friends or family members. or to
get some work done. Like all retail establishments in our city, Starbucks should be a place where
everyone is treated the same, no matter the color of their skin.

• On Apeil 14, the Starbucks Twitter account uploaded an official pology. saying that they are
"disappointed this led to an arrest" and "take these matteS seriously