RISK AND CRISIS MANAGEMENT STARBUCKS FACED SOCIAL BOYCOTT IN PHILADELPHIA

DIPLOMATIC ACADEMY OF VIETNAM FACULTY OF INTERNATIONAL COMMUNICATION & CULTURE RISK AND CRISIS MANAGEMENT CASE STUDY: STARBUCKS FACED SOCIAL BOYCOTT IN PHILADELPHIA AFTER HAVING POLICE

DIPLOMATIC ACADEMY OF VIETNAM FACULTY OF INTERNATIONAL COMMUNICATION & CULTURE

RISK AND CRISIS MANAGEMENT

CASE STUDY: STARBUCKS FACED SOCIAL BOYCOTT IN

PHILADELPHIA AFTER HAVING POLICE ARREST TWO BLACK

CUSTOMER

The spokesperson of the crisis: Starbucks’ CEO Kevin Johnson 27

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

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 employee 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 opportunities “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 handcuffs 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

● 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 loyalty and brand recognition

● With more than 29,000 locations worldwide, Starbucks customers come fromdifferent 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 otherindividual incidents in locations across the country This affects customers and employee perceptions on the company

Opportunities

● The company has strong international presence, but expanding into developingmarkets 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 priceswhich 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 Starbuckssuperficial, “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 movement

SWOT MATRIX

STRENGTHS

● Have a strong financial position

due to steady revenue growth

● A rewards program as an

WEAKNESSES

● Through quick, impersonalinteractions with consumers, thecompany may neglect and

cultures to amalgamate a diverse

customer base

relatively lower disposableincomes”

OPPORTUNITIES

● Expanding into developing

markets to help raise the annual

revenue growth

● Develop inclusive campaigns

targeting minority groups to

further expand their customer

base

● 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 offer more affordable prices whichmight appeal to the public

● Imitation of products and their business model is another threat

● Racial matters in America are very sensitive A large number of campaigns and movements havetaken place to take the rights for the colored people in USA

C TIMELINE EVENTS

Thursday, April 12

Twitter user Melissa DePino posted the video of the two men being taken away in handcuffs

"@Starbucks The police were called because these men hadn't ordered anything," she wrote

"They were waiting for a friend to show up, who did as they were taken out in handcuffs for doing nothing All the other white people are wondering why it's never happened to us when

we do the same thing.""

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 @boycottStarbucks and #StarbucksWhileBlack 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 to 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 April 14, the Starbucks Twitter account uploaded an official apology, saying that

they are “disappointed this led to an arrest” and “take these matters seriously” Sunday, April 15 ● Black Lives Matter protester Asa Khalif led a protest at the Starbucks at 18th and

Spruce Streets where many demanded the firing of the employee who called police

About 75 people attended ● A photo of Khalif armed with a bullhorn inside of the store, taken by Inquirer photographer Michael Bryant, would later be widely used on Twitter as a meme

(Source: Michael Bryant)

Monday, April 16

● Protests at the store on 18th and Market Streets continued

Tuesday, April 17

● The Philadelphia Police Department released recordings of the original 20-second call

to 911 from Starbucks and radio traffic between officers who responded anddispatchers In the 911 call, a woman said there were "two gentlemen" in the "cafe who are refusing to make a purchase or leave." In the subsequent radio traffic, a man reported a "group of males" was "causing a disturbance" before calling for backup and

a supervisor

The video showing record of the call to 911 by the store manager (Source: Youtube.com)

● The police incident report, obtained Tuesday by the Inquirer and Daily News, notes that the two men cursed at the store manager and refused to leave even though officers asked "multiple times." It also accused the men of insulting police by saying,

"Cops don't know the laws," and "Y'all make 45G a year," remarks to which Police Commissioner Richard Ross alluded in his explanation of the events, released in a Facebook video Saturday

● After the recordings were published, the boycotts began to reach its peak, as oppositions both online and offline have more contradictory narrative to this problem

D SCOPE OF INFLUENCE

Spread of crisis:

The hashtag boycott of Starbucks #BoycottStarbucks from Saturday to Monday has been used 106,920 times on social networking platforms Facebook, Twitter and Instagram (Digimind, an analytics firm) The first video posted on Twitter reached ​10 million views in 3 days, showing the level of public interest in this incident Other 1

1 https://www.inquirer.com/philly/news/starbucks-philadelphia-arrests-black-men-video-viral-protests-backgroun d-20180416.html

countries around the United States such as Canada, or European countries, have shown widespread use of this hashtag These are developed countries with multiethnic populations and certainly with Starbucks stores

Since then many news outlets (6abc.com, etc) and television channels (ABC, etc) havestarted spreading news about the incident, the protests happening, brand value of Starbucks and also began to be concerned about the press and dig deeper to seek attention

The keyword “Starbucks incident in Philadelphia” has 1,260,000 results in 0.49 seconds on Google from 12/4/2018 - 12/5/2018

a Reputation

This incident has adversely affected Starbucks' reputation, not only in the US but also

in other parts of the world

Starbucks is on the verge of becoming a brand that is recognized by the public as being racist There was a lot of strong reaction to this incident, with tweets like “Nice going @Starbucks I hope you do something about this incident This was a very disgusting thing that your employee did ”Or“ Would you like some racism with yourlatte today? ”, Expressing anger and sarcasm towards Starbucks

Also on social networks, high-profile public figures have also spoken While many argue that the incident has exposed racist policies in store chains, some argue that Starbucks as a whole should not be blamed for the actions of just one employee, like comedian Kevin Hart

Black Lives Matter leaders, Asa Khalif called it the "People's Protest," according to CNN "Black and brown people deserve to have a safe space without being profiled Shoutout to the white allies who stood up and saw injustice and fought against it challenging the police That's what this is about," Khalif said

Public awareness on social networks has strongly demonstrated that Starbucks'reputation is now tied to racial discrimination, which is a very downturn in the perception of people especially the brand serve to customers globally As the customers and public’s perception to the brand is getting negative and skeptical, measures must be done to fix the influence to reputation, regain positive and ensuring attitude, then confident and supporting action from customers

b Image

This incident has badly affected the image of Starbucks, which has always had a very good and well-behaved image for customers and the public

erupted following the police shooting of Michael Brown, one of several such killings that moved Schultz to launch the Race Together campaign

Those efforts are in stark contrast to the video that went viral now The company’s image is now in vulnerable place as its customers’ perception is skeptical, negative and dividing

c Relationship

- Black community:

The relationship between the brand and its customers is now affected on a moderate level, but between the brand and the black community, it is very significant The local community has been angry and had negative reactions to the incident Only one day after the incident occured, they have carried out protests outside of the store, and later after the CEO’s apologize video was uploaded, they remained unsatisfied and by time the protest even get more aggressive

(Source: Google Image)

The position of black people in the United States in recent years has been highly questioned as a series of racial allegations have occurred, especially between the African American community and American police The "Black Lives Matter"movement is one of the efforts to achieve color equality for them, attended by not only this community but also by supporters of any color across the United States Since

2015, it has been taking place across the country and its goal has also become one of America's political goals

With this incident happening, the black community felt that this was proof that racism still existed If what they get when they buy at Starbucks is the same as the result of this case, there's no reason these people will want to use Starbucks

Also in this case, their rebellion protests as a way to alert the situation is happening, as well as to attract attention and gain rights when associated with a global brand like Starbucks

Protesters' opinion is that the police system needs to change its attitude toward black people As for Starbucks, they required the company to end its policy of calling the police Also, the protestors demanded the employee who called the police be fired

- Press and Communication Agencies:

During the incident, the press and media centers continuously reported and updated on the latest developments, continuous moves, such as The Guardian, National Public Radio, Forbes, and Vox .com, CBS, CNN The Philadelphia Inquirer newspaper is one of those sites that cover negative news stories like

- "What happened at Starbuck in Philadelphia?"

- "Philadelphia Starbucks case: What we've learned since the arrests",

They included bias and negative perspectives, focusing on the negative feedbacks of netizens and locals, because the newspaper bias reflects the views of Philadelphia residents at At that time, he was very opposed to the case

- Governments:

They have direct authority to the company and the problems, and can contribute