A legal system alludes to a framework utilized for translating and upholding laws ( Alexander & Alexander, 2011 ). In the United States (U.S), the constitution acts as the basis for the country’s legal system. The laws affect both individuals and business entities . Moreover, besides influencing local businesses, the U.S legal system also has implications for U.S based firms that have operations outside the country ( Braithwaite & Drahos, 2000) . One such business is Starbucks. This is a globally renowned coffee company as well as a chain of coffeehouses that has roots in Seattle, Washington D.C. It was formed in 1971, and as at the end of 2016, the company had operations in 23,768 different locations globally. The legal and administrative environment plays an extremely critical role in deciding the accomplishment of any organization (Cheeseman, 2016). The U.S government imposes taxes coupled with other regulat ory measures to elevate financial development and to cushion customers from abuse. All U.S companies must follow the state ’s rules and regulations , and this affects their operations both in the U.S and abroad. This paper examines two ways in which Starbucks is affected by the U.S legal system and the risks encountered by the company when handling international litigation, as well as strategies used to reduce exposure to such risks . Further, it will explore a global business dispute that Starbucks has been involved in then compare and contrast traditional litigation with an alternative dispute resolution (ADR).
One way that the U.S legal system affects Starbucks is its influence on t axation . Tax is a key regulatory factor that affects any business in the U.S mostly based on size and the profit generated. Globally, tax codes may shift from one nation to another and from one locale in a nation to the next. Some tax measures bolster a business while others limit certain business operations ( Alexander & Alexander, 2011 ). The government can likewise increase or reduce duties to advance or control the nation’s economic development. In the past, Starbucks has experienced problems with payment of taxes since these taxes highly influence its operations . It has been claimed that Starbucks affects other small businesses that deal with the same products since the smaller business entities pay more taxes compared to the Starbucks outlets that are located outside the U.S (Fuest et al., 2013). This legal system may affect the publicity of Starbucks, and in an attempt to follow the legal restrictions, the company ends up paying more tax so as to address the resultant negative publicity. Eventually, this adversely affects its development as well as the profit made.
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The right of employees’ is another avenue through which the legal system in U.S affects Starbucks ( Argenti , 2004). The government’s aim, in this case, is to protect the employees. This protection comes in the form of unions, whereby the rights of the employees are emphasized . Therefore, it’s upon all businesses in the country to ensure that their s taff are satisfied and are working under the best conditions to avoid any wrangles that may arise with the government. Starbucks has been in the past experienced challenges problems with its employees, resulting in demonstrations and the need to review its salary structure. Some of the issues raised by Starbuck’s employees include their treatment and salaries . Leeder (2016) highlighted this issue in July 2016. Due to such problems, the U.S government has been forced to intervene. Subsequently, t his has affected the company’s operations, reducing its profit margins in an attempt to ensure that its employees are satisfied as per the government's regulations.
When dealing with traditional litigation, businesses are bound to encounter myriad risks. This is especially in their attempt to avoid breaking the law ( Alexander & Alexander, 2011 ). Therefore, business managers must be careful while dealing with such cases so that they can limit negative implications of such endeavors. Firstly, traditional litigation tends to be expensive and time-consuming (Cheeseman, 2016). At Starbucks, a lot of money and time is required to launch new products. Moreover, substantial investments are made in such exercises as product advancement and market investigation. Therefore, if it is dealing with a traditional limitation, the implications are dire.
Spreading risks is one of the measures that managers can take to reduce risks in tradition litigation so as to avoid such consequences as losses. Insurance policies may also be used as an alternative by managers to cope with risks faced when dealing with traditional litigation. For instance, a Starbucks manager may apply for several insurance policies so as to ensure that the business is guaranteed of success. Through such measures, the company can take any risk without fear of encountering losses in its operations. Employing experienced lawyers is another strategy that managers can use. These lawyers are not only vital in promoting an understanding of traditional litigation but also are better placed to handle litigation if it arises.
Business disputes are a common occurrence in most organizations today. As a result, ADR is aimed at helping such organizations to solve these disputes through several methods ( Alexander & Alexander, 2011 ). For instance, in 2013, packaged coffee dispute occurred between Starbucks and Kraft. This was after Starbuck’s ceased using Kraft to distribute its packaged coffee in groceries . Due to this conflict , Starbucks had to come up with ways of coming into an agreement with Kraft for the sake of its publicity. Ultimately, Starbucks was fined $2.76 Billion (Reuters and the Associated Press, 2013; Starbucks Newsroom, 2013). One form of ADR that could have been used to resolve this dispute was arbitration. Both arbitration and traditional litigation are similar in that a common intermediary must be present. Secondly, in both options, a common mediator comes up with the final decision which is supported by the courts. In contrast, however, traditional litigation is more expensive compared to arbitration, and this is a crucial distinction between the two methods of dispute resolution (Cheeseman, 2016). Therefore, arbitration has the upper hand cost-wise. Starbucks and Kraft held an arbitration in 2013, and both parties came to an agreement that Starbucks should compensate Kraft for the losses incurred (Reuters and the Associated Press, 2013; Starbucks Newsroom, 2013). Arbitration is thus recommended as opposed to traditional litigation. This is because less money and time is spent before an agreement is reached . Secondly, arbitration can take two forms which include judicial or private arbitration. This makes it simpler for the parties involved since they can choose the method they prefer.
In conclusion, the role of the U.S legal system in regulating business interest both internally and overseas cannot be overemphasized . On the other hand, business managers have a critical part to play in reducing the impacts of litigation. This is through such measures as spreading risks, hiring experienced lawyers and use of insurance. One form of ADR is arbitration, and as opposed to traditional litigation, ADR is a preferred option since less money and spent is spent.
References
Alexander, K., & Alexander, M. D. (2011). American public school law . Cengage Learning.
Argenti, P. A. (2004). Collaborating with activists: How Starbucks works with NGOs. California Management Review , 47 (1), 91-116.
Braithwaite, J., & Drahos, P. (2000). Global business regulation . Cambridge University Press.
Cheeseman, H. R. (2016). Legal environment of business: online commerce, business ethics, and global issues, 8 th Edition. Boston: Pearson.
Fuest, C., Spengel, C., Finke, K., Heckemeyer, J., & Nusser, H. (2013). Profit shifting and 'aggressive' tax planning by multinational firms: Issues and options for reform.
Leeder, H. (2016, July 4). Disgruntled Starbucks Employees Defiantly Dump English Breakfast Tea Into Boston Rd. Retrieved from http://www.newcirclecircular.com/lex-tea-party/
Reuters and the Associated Press (2013, November 13). Starbucks slammed with US$2.76-billion fine in dispute with Kraft over coffee distribution. business.financialpost.com. Retrieved from http://business.financialpost.com/news/retail-marketing/starbucks-kraft-dispute
Starbucks Newsroom (2013). Starbucks Concludes Packaged Coffee Dispute with Kraft. Starbucks. Retrieved from https://news.starbucks.com/news/starbucks-concludes-packaged-coffee-dispute-with-kraft
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