Introduction
Millions of people around the globe prefer consuming coffee products from Starbucks Corporation due to its delivery of high quality coffee products. The corporation offers the best coffee to over 80 countries worldwide and extends its services through over 33,830 stores worldwide. More than half of these stores are located in the United States of America; hence its headquarters are in Seattle, Washington. The company offers a vast range of coffee-related products for its customers, therefore, maintaining all kinds of customers. Starbucks is widely known due to its uniqueness, like the products they offer, and thus owns a reputable brand name. Having the brand name allows the firm to attract more customers and investors to help it in propelling its services and delivering its products. Additionally, the brand name and image have placed the company in a better position to charge highly for its shares in the stock market. Below is an analysis of Starbucks Corporation about the general principles of finance. It focuses on the principle that risk requires a reward, and conflict of interests causes agency problems.
The Founding Principles of Finance
Many investors use the guidelines of the financial principles to determine the value of their investments and to decide whether investing in the prospective companies is profitable to them or not. Economic principles include money having a time value, cash flows matter, market prices are generally correct, risk requires a reward, and conflict of interest causes agency problems. A business with more cash flows enjoys more benefits since the transactions indicate its activeness in serving more customers. All companies should identify the difference between the value of money currently and in the future. Due to changing factors like inflation, opportunity costs, and investment risks, a dollar’s worth today is not similar to its value tomorrow. This report focuses on two primary finance principles: every risk has a reward, and agency problems may result from a conflict of interests. The relationship between Starbucks Corporation and these two principles is critical since it determines the number of investors and the relationship between the firm and other stakeholders. The stakeholders that may be affected in the company include shareholders, customers, employees, owners, suppliers, and many others.
Relationship Between Starbucks Reward on Risks Principle
Starbucks Corporation identifies its role in providing its customers with coffee. Besides delivering high-quality products to satisfy customers’ needs, the business offers the desired quality to build its brand image. Brand image is the positioning of its products from an angle that attracts more customers to purchase its items. The business also maintains the old consumers while attracting new investors by increasing their value in the stock market. Having a solid brand image creates value for the company and incites more people to seek investment in the firm. Investors are essential for business growth since they provide investment capital that aids in creating opportunities for the firm. Investors are profit-oriented; hence ensure that the business invests in the correct projects that generate profits for them (Pigshdad-Bosorgi & Srivastava, 2018). The powerful brand image also helps the company to maintain its employees. Starbucks acknowledges its employees’ roles in providing high-quality products and offering a reputable customer care service. Employee satisfaction is critical for the business since it boosts employee morale and encourages them to work tirelessly towards improving the business’ condition. The employees offer advice to the management on improving service delivery and often advertise the company to its target audience.
The main goal for many investors engaging in business activities is to create profits from their spending. Starbucks offers the interested parties an opportunity to invest in it by buying shares in the stocks market. Following the finance principle that states that every risk has a reward, the business allows the chance to fund its operations. Investors spend money on Starbucks by purchasing shares in the company. The principle of every risk having a reward state that the greater the risk, the higher the reward. A risk is the likelihood of losing the money invested in a firm. A person may invest in a company, thus increasing the company’s capital. However, there is no guarantee that the money they spend on the company will increase in value. At times the monetary value may decrease due to mismanagement that leads to the company’s failure and loss of weight. The principle speculates that the higher the risk, the higher the profits, and the smaller the risk, the smaller the profits attributable to the investments.
Starbucks is a well-founded business and enjoys a very high investment ratio due to its brand name and image, guaranteeing greater security for the investors’ money. A proactive investment portfolio attracts more investors into the company and gives the stock value; hence an individual may purchase the supplies and resell them later at higher prices to make profits. Not only do individuals engage in such projects, but financial institutions such as commercial banks and insurance companies engage in the trading. The value of Starbucks in the financial markets is more stable and guarantees returns for investors. However, the stocks are not much risky since the company experiences a loyal customer base, and it has inflation-resistant characteristics. Despite the substantial challenges the business has been facing since the beginning of the COVID-19 pandemic, it continues to thrive in its operations, thus being a solid investment opportunity (Fowlkes, 2020). Starbucks is appropriate for long-term investments since its value continues increasing, and investors encounter more investment opportunities due to its strong fighting power.
Relationship Between Starbucks and the Conflict of Interest Principle
Additionally, Starbucks applies the financial principle of conflict of interest leads to agency problems. The principle of conflict of interest comes into action when individuals decide to conduct a specific activity since it favors them. Conflict of interest erodes the trust between the business and its stakeholders (Sah, 2019). Once a company’s management engages in a conflict of interest, the general public and prospective investors avoid the brand since there is doubt about working in the people’s interests. It damages the organizations’ reputation and forts the business since proactive financial partners and customers fail to engage with the company, thus causing losses during the economic periods. Avoiding personal interests and working in the interests of the entire firm creates unity and trust among the stakeholders and provides a leeway for the company to interact with potential investors and consumers. It also helps the company avoid engaging in illegal activities such as corruption that may lead to confrontations with the government and may lead to the withdrawal of licenses by government officials.
Starbucks applies the rule of avoiding conflict of interest among its stakeholders because it may ruin its reputation and cause defamatory effects on the long-built brand of the company. The company’s laws dictate that all employees must avoid conflicts of interest. They define conflict of interest as existing when personal interests interfere or seem to interfere with ones’ duties and roles to Starbucks. The laws further state that even the most ethical person in the company may be affected by the conflict of interest and face integrity issues in the long- term. Starbucks is clear on how all stakeholders must behave to avoid rising conflicts of interest. They should put the interests of the public company before individual interests. Starbucks Corporation involves interactions of different people from all walks of life within the company’s premises. Employees engage with the managers, other employees, and customers, contributing to a conflict of interest within the process. The management faces challenges in ensuring that there is no conflict of interests in any case between themselves or their employees. Therefore, it advocates for truthfulness by creating laws to guide its stakeholders from activities that may ruin the corporate image.
Branding is essential for businesses since it contributes to the competitive advantage in the market. Starbucks is well-positioned in the market to meet the stakeholder’s interests, such as consumer satisfaction, employee and management satisfaction, and the shareholders’ well-being. The company has built its image for a long time and protects it by ensuring that the business that it is truthful in conducting its transactions with government agencies. Every engagement with internal and external agencies must be accurate and truthful to ensure no conflicts of interest. Management of conflicts of interest in the company regulates the business activities by ensuring that every incidence in the organization undergoes a thorough checking to ensure no conflicts of interest. Starbucks Corporation also provides strategic crisis management policies that guide its management in handling emergent issues regarding conflicts of interest.
Conclusion
The finance principles provide guidelines on the strategic forms of investment and aid in the decision-making process on the most viable investment opportunities. Financial managers make both short-term and long-term decisions about investments. The financial principles are principles of risk and return, time-value of money, cash principle, market prices are always correct, and conflict of interest principle. These five principles are critical for all investments and greatly influence the investment decision and brand images of companies.
Starbucks Corporation is a coffee-selling business that sells coffee and its products. The brand has built its influential brand name through the years to meet its current impact in the coffee industry, dominating the investment decisions of most potential investors in the beverage industry. The brand image has contributed to the company’s control in the financial markets since the value of its stocks is stable and guarantees a return to the investor. Starbucks applies the principle of return on investment, where the money every person invests in risk must give an assurance of a reward. The greater the risk, the more the profits, whereas the smaller the risk, the lower the returns. It also uses the principle of conflict of interests where it acknowledges the negative impacts of keeping personal interests before the organizational ones. The company states that conflict of interest is where individuals place their objectives at heart before those of the organization end up interfering or seeming to interfere with its operations. The management has thus focused on ways to counter cases of conflict of interest in case they arise in the processes. Starbucks remains an influential brand in the stock market by having stable prices in the financial market, attracting most small-scale and long-term investors.
Reference
Fowlkes, T. (2020). An analysis of the principles of financial reporting and their applications through the use of case studies. 1-117. Web.
Pishdad-Bozorgi, P., & Srivastava, D. (2018). Assessment of integrated project delivery (IPD) risk and reward sharing strategies from the standpoint of collaboration: A game theory approach. In Construction Research Congress 2018 (pp. 196-206). Web.
Sah, S. (2019). Conflict of interest disclosure as a reminder of professional norms: Clients first!. Organizational Behavior and Human Decision Processes, 154, 62-79. Web.