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Would you like room for American jobs in your coffee?
Starbucks is being hailed for helping American small businesses with its new “Create Jobs for USA” campaign. But is Starbucks a real hero, promoting an important and worthy cause, or is it just a PR stunt? Or maybe it’s both – a good philanthropy initiative that at the same time benefits the Starbucks brand and maybe even its sales? If so, is it an example of strategic philanthropy?
At first glance it might look a bit strange that Starbucks is promoting small businesses. After all, this is the same company that was criticized in the past for using aggressive tactics that put many small local coffee shops out of business. So why did Starbucks think about such a campaign in the first place? In an interview with AOL/Huffington Post, Starbucks CEO Howard Schultz cited his concerns about government gridlock and the unemployment crisis as his reasons for creating the program.
Apparently Schultz believes that corporate leaders should help solve the jobs crisis and wanted to set up an example for others. Therefore Starbucks teamed up with the Opportunity Finance Network (OFN), a national network of community lending institutions that work in underserved communities where credit is often hard to get, and launched the Create Jobs for USA campaign “to help create and sustain jobs.” Starbucks announced it was donating $5 million to an OFN fund that would provide low-cost loans to community businesses and is encouraging consumers to show their support by purchasing a $5 bracelet at Starbucks with all funds going to the loan fund.
The idea is very simple and actually looks very compelling – Starbucks donates money and asks its customers to do the same to create more businesses and jobs, thus helping to solve America’s job crisis. Still, it’s not clear why Starbucks chose this path. First, Starbucks decided to focus on providing credit to new businesses, when the main problem of the economy now seems to be lack of demand and not access to capital. Paul Krugman writes about it extensively (“this is a demand-side slump; all we need to do is create more demand”) and Cynthia Magnuson of the National Federation of Independent Business told DailyFinance similar things: “According to our latest small-business optimism index, in September, only 3% of owners reported financing as their No. 1 business problem. The No. 1 business problem for more than a quarter of our membership is weak sales.”
It’s not clear why Starbucks ignores the demand issue, especially when it could focus its campaign on buying local goods and services. One critique on this campaign, for example, was that while Starbucks claims to support American small business, most of what you can find for sale at Starbucks stores is not made in America.
Wouldn’t Starbucks be doing a better job in supporting the US economy by offering only cups, mugs, coffee machines and other coffee equipment and accessories that are made in America? And what about collaborating with local small businesses, offering customers a $5 gift card to spend in these businesses? This way, not only do customers know they support the American economy, but also their own community, instead of making a donation to some anonymous new business somewhere in America.
Strategically speaking, this campaign does not correspond with any of Starbucks goals. Starbucks is well-know supporter of ethically sourced coffee, coffee farmers and is even considered a green business leader due to its efforts to reduce its environmental impacts. Yet, it doesn’t have a goal of minimum purchasing from US businesses. And although it addresses a fundamental societal issue, it does so using an old traditional charitable model rather than in a more advanced, strategic manner, where “societal issues are addresses not as charity alone, but instead as the seeds of innovation and growth.” (Accenture/CECP, 2011).
The fact that Schultz, a savvy and successful businessman, is taking this approach opens him up to criticism that this is, indeed, a PR stunt. Yet, Schultz forcefully denies it. PRNewser reported that during the Today show appearance, Matt Lauer asked Schultz to address any “cynicism” out there about this being a PR project. “I can assure you, this is nothing about marketing,” Schultz replied. He continued, in response to another question, “This is not about PR.”
I have to say I believe that Schultz is passionate about the state of the economy and sincerely wants to help. Yet, he shouldn’t be naïve thinking that such a campaign does not have PR implications, whether he likes it or not. I guess Starbucks wouldn’t mind the chance to be seen as a positive economic force and a friend of small businesses (and not just a copycat). At the same time, there’s always the risk of being considered a hypocrite, when you are a large chain with a history of putting local businesses out of business.
The best way to avoid this kind of criticism is by launching a program that creates a real sustainable value that benefits your business and society at the same time. Starbucks could do it here by collaborating with local businesses and encouraging customers to buy local goods, announcing the addition of a local purchasing minimum goal, and so on. Instead, it chose a program that at best is an add-on, but does not create a real sustainable value.
Raz Godelnik is the co-founder of Eco-Libris, a green company working to green up the book industry in the digital age. He is also an adjunct professor in the University of Delaware’s Alfred Lerner College of Business and Economics.