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Several multinational organizations, including Wal-Mart, BP, Volkswagen, and NIKE, among others, have been charged with unethical behaviors. However, this study focuses on Starbucks. This international corporation, which operates in the fast-food industry, was linked to a diversity-related ethical issue that adversely affected its image and performance. As it will be revealed in this paper, Starbucks was accused of racially discriminating against its customers amid the existence of legal provisions requiring companies to treat stakeholders equally, regardless of their backgrounds. Hence, it is crucial to identify Starbucks’ practices that led to such allegations of unethical behaviors.
Starbucks’ Unethical Practices
Diversity in the contemporary business world is one of the key factors that contribute to the success of many industry participants. According to an article by Byrne (2018), Starbucks allegedly engaged in unethical practices that negatively interfered with its image and performance. In particular, it was accused of improperly treating customers from the African-American background among other minorities in the U.S. (Byrne, 2018). The extension of such unethical practices in other stores beyond America has the potential of significantly harming the image of the entire company. Disreputable engagements such as racial discrimination considerably undermine the realization of equality in the business setting. This situation affects the performance of an organization on a global scale. In the current context, the observed racist occurrences challenged Starbucks’ values and profitability because customers ended up seeking services and products of other companies.
The racial bias incident against two innocent businesspersons damaged Starbucks’ reputation following the intensified accusations against this coffee company. According to Morais et al. (2014), remarkable customer service is one of the factors that not only reinforce a company’s brand image but also foster its ethical operations. In particular, customer service excellence requires an organization to provide products and services that meet customers’ needs and expectations. However, Shamah, Mason, Moretti, and Raggiotto (2018) argue that showing favoritism to clients based on their racial grounds is unethical and counterproductive because it undermines the realization of quality customer experiences. In the current case, Starbucks faced public criticism that indicated the degree to which tribal bigotry influenced clients’ perceptions of its services in the U.S. and beyond. According to Byrne (2018), Starbucks recorded its lowest customer perception score since November 2015 after the racial bias instance. Therefore, this company compromised the need for promoting equality and diversity in the workplace setting. Treating clients fairly is crucial toward creating positive perceptions among customers with a view to boosting an organization’s success.
Unethical practices, including racism and the lack of diversity in an organization, may affect a company’s market share. As Byrne (2018) reveals, the Philadelphia incident may have influenced some of Starbucks’ customers to skip their regular cup of coffee to protest against this injustice. The racial bias incident may have undermined the competitiveness of this coffee chain giant, hence portraying the extent to which diversity influences the global performance of a company. As Morais et al. (2014) underline, customers who encounter poor experiences such as racial biases may consider shifting to other companies that uphold ethical behaviors characterized by the embracement of diversity and equality. Consequently, the potential loss of customers arising from racial prejudices may challenge Starbucks’ market share in the world, thereby providing an opportunity for rivals such as McDonald’s to expand their customer base.
Incident Leading to the Accusations against Starbucks
In April 2018, employees at a Philadelphia-based Starbucks outlet facilitated the arrest of two innocent black businesspersons. This situation led to a public outcry. These two victims of the unethical behavior committed by Starbucks’ employees considered filing a legal suit against the company. Furthermore, protests in the streets of Philadelphia following the incident highlighted not only the seriousness of such an unprincipled practice but also its impact on Starbucks’ competitiveness. The public protest had a global impact since this company’s image is recognized internationally. This race-based discrimination influenced the behavior of Starbucks’ key stakeholders, including customers, producers, the company’s management, and employees, since ethical standards guide contemporary businesses’ interactions.
Starbucks lost considerable revenue due to the racist occurrence at its Philadelphia-based store. Estimates reveal that each outlet achieves sales that generate average returns of $3,750 (Byrne, 2018). This amount is bound to decline in case instances of racial bias reoccur at the company. In this respect, retaining a diverse pool of employees at Starbucks has been a challenge that is currently ruining the company’s profitability. This company targets customers from different backgrounds to realize competitiveness in the global fast-food industry. Therefore, it is important for it to continually encourage its employees to observe values that support diversity as well as equality for the sake of bolstering its performance in the industry.
According to Byrne (2018), the racial discrimination incident prompted Starbucks to close at least 8,000 coffee shops in the United States to carry out anti-racial bias training for more than 175,000 employees. It is crucial to point out that the observed racial predisposition incident affected Starbucks’ business significantly. The resulting decline in sales prompted the company to plan and implement a costly training program that aimed at ensuring that all workers, among other stakeholders, understand the contribution of a diverse workforce to a company’s productivity and performance levels. Starbucks had to forego its business days to carry out this exercise, implying that it recorded a significant decline in sales. As Byrne (2018) reveals, Starbucks chains incurred losses ranging from $6 million to $30 million due to the closure of its stores to facilitate this training program. These losses could be higher because protests and the shift of customers to other competitors may have caused a further drop in sales.
Indeed, conducting racial bias training programs is one of the appropriate responses initiated by Starbucks’ management to address this diversity-related issue. Such initiatives foster the installation of necessary skills as well as knowledge regarding key issues in the workplace setting. In the current context, the anti-racial bias classroom instruction offered to at least 175,000 workers played an important role in reinforcing values that represented Starbucks’ organizational culture (Morais et al., 2014). As Sharma and Wu (2015) assert, training sessions that emphasize cultural differences allow employees to understand their implicit biases, thus encouraging them to uphold values, which promote equality and diversity in the workplace setting. Therefore, for Starbucks, such interventions can provide an opportunity for employees to comprehend their role in mitigating diversity biases such as racial discrimination.
Starbucks needs to observe ethical standards in its workplace environment. In particular, this company should reinforce its code of ethics to ensure that employees treat customers without any form of discrimination based on their race, sexual orientations, and religions, among other factors. This approach is crucial in not only enhancing workers’ professionalism but also boosting their productivity. Adhering to the laid-down moral standards is a critical step toward safeguarding Starbucks from engaging in unethical practices that may negatively affect its global reputation.
Starbucks should consider implementing continuous training programs that address the importance of diversity among its employees. The intervention is appropriate since it ensures that workers constantly serve customers fairly to enhance their experiences. Maintaining customers’ positive perceptions of a company’s products and services is an ethical practice that boosts performance and productivity levels. Clients who are contented with a particular organization’s manner of doing business are likely to write positive reviews that end up attracting new and diverse customers, hence boosting the overall sales volume (Richard, Stewart, McKay, & Sackett, 2017). The suggested training initiative allows employees to understand the extent to which implicit biases amount to unethical behaviors. Furthermore, Starbucks should create a workplace environment that motivates workers to embrace diversity since training is not the only intervention for mitigating racial favoritism. This enthusiasm should also develop a sense of psychological safety that encourages employees to learn and reflect on diversity in the workplace environment, hence promoting ethical operations.
Building trust in organizational settings requires companies to observe the laid-down ethical standards. Nonetheless, moral dilemmas arise in the business environment because different organizations have varying perceptions of what is ethical or unprincipled. As a result, the corporate world uses contractual agreements to facilitate institutions’ adherence to ethical standards. However, amid the existence of such contractual accords, companies may fail to honor various established binding arrangements, a situation that results in legal suits challenging particular unethical practices of a given party. This paper has focused on Starbucks that was accused of discriminating against customers based on their racial orientations. To avoid such instances, this company should create an atmosphere whereby employees handle all clients fairly to not only retain them but also attract new others.
Byrne, J. (2018). Starbucks revenue takes hit over racial bias backlash. New York Post. Web.
Morais, U. P., Pena, J., Shacket, K., Sintilus, L., Ruiz, R., Rivera, Y., & Mujtaba, B. G. (2014). Managing diverse employees at Starbucks: Focusing on ethics and inclusion. International Journal of Learning and Development, 4(3), 35-50.
Richard, O. C., Stewart, M. M., McKay, P. F., & Sackett, T. W. (2017). The impact of store-unit–community racial diversity congruence on store-unit sales performance. Journal of Management, 43(7), 2386-2403.
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Shamah, R. A., Mason, M. C., Moretti, A., & Raggiotto, F. (2018). Investigating the antecedents of African fast food customers’ loyalty: A self-congruity perspective. Journal of Business Research, 86, 446-456.
Sharma, P., & Wu, Z. (2015). Consumer ethnocentrism vs. intercultural competence as moderators in intercultural service encounters. Journal of Services Marketing, 29(2), 93-102.