Skubrats Value Chain Analysis

SKUBRATS is a vertically-integrated coffee shop, owning both the upstream and downstream activities.

■ Upstream activities = Research and development, procurement, and manufacturing.

■ Downstream activities = Marketing, distribution, and sales and service.

SKUBRATS Value Chain: Globalization and Technological Effects

Stages in Value Chain

Descriptions

Research & Development

Research on coffee bean varieties: quality, taste, consistency, availability, cost, partnership possibilities, and plantations where pesticide regulations are strictly enforced. Research on sourcing the value chain from global locations that offer the most efficient and highest quality factors of production. Procurement (Sourcing)

Skubrats, our coffee shop, will

Commensurate with their global strategy, pricing is consistent worldwide. A premium price is demanded, in line with Skubrats top-quality coffee beans and resulting coffee. For their target market of conscientious coffee drinkers, their Transfair Social-Justice label is key. Customer feedback is always welcome either directly or indirectly via feedback cards.

What is the likely effect of market globalization on coffee shops?

■Globalization affects coffee shops in much the same way as other firms might be impacted, i.e. sourcing of the value chain and a global strategy to capitalize upon global efficiencies.

■ Globalization of markets compels companies to pursue cross-border business.

Do technological advances play any role in the shop’s value chain?

(a) In the 1970s, a high-yield coffee tree was developed that flourishes in full sunlight, but requires chemical protection from diseases. The issue is the ecological degradation of normally rich habitats for a diversity of species, including beneficial micro-organisms, in order to provide full sun, pesticides and fertilizers for the technified coffee farms. Where typically 140 bird species thrived, only five or six species remain in full-sun fields. Coffee industrialization has dramatically changed the balance of

(a) Ecological degradation due to technified coffee farms.

(b) Human death/disease from insecticides

(c) Green Labels for Conscientious Coffee Drinkers

(1) Organic Crop Improvement Association, Farm Verified Organic, Naturland, or the Demeter Association

(2) Fair Trade or Social Justice coffee- Transfair Social-Justice label

(a)These focus on community health and education, fair prices, fair wages, chemical avoidance, commitment to sustainable development, respect for local ecosystems and natural resources conservation.

(b) Grower members are guaranteed a premium price

(c) Newer labels- Eco-OK certifying sustainability (shade protection, wildlife conservation & water pollution prevention) by the Rainforest Alliance and Conservation International.

(d) Interestingly, Starbucks initiated this movement in 1995 under pressure from the U.S. Guatemala Labor Education Project concerning the low wages and brutal working conditions on their Guatemalan farms. While Starbucks inaugurated a labor code stipulating improved quality for coffee growers, some consider Starbucks to be in non-compliance with their own