Starbucks Swot Analysis

University of Washington TBUS 330 February 2, 2009 Submitted by: Steven Thompson Submitted to: Dr. Vanessa C. M. Chio

There are good opportunities for Starbucks to grow its business through expansion into foreign markets and attract investors with the relatively cheap stock prices. as the country continues to sink into economic recession. 2009) Starbucks‟ success has resulted from the company living these values consistently. making human connections with their customers.” Underlying both of these broad concepts is a set of core values that the company uses as a foundation for all their business practices. but it must addresses the threat that it faces from its lower-priced competitors. important aspect of their business and success: “Starbucks is committed to a role of environmental leadership in all facets of our business. specifically McDonald‟s. 2009). the world has become a very different place than it was in 1971 when it got its start. As the company grew from a single store in Seattle‟s Pike Place Market to thousands of stores worldwide. A reevaluation of the company‟s mission through the tool of SWOT analysis will provide a more accurate portrait of where the company stands today. treating employees as partners in business. Starbucks is recognized for being environmentally responsible. The company‟s strengths are its commitment to the people and to the environment. and has a separate mission statement to address this progressive.2 Starbucks Swot Analysis Starbucks is known around the world for bringing gourmet coffee and the coffeehouse experience to the masses. being a responsible neighbor that is involved in the community and providing shareholders with the rewards of success (Starbucks. and one neighborhood at a time” (Starbucks. Starbucks is committed to serving high quality coffee purchased from growers in an ethical manner. creating store environments that are welcoming. However. one cup. compromised brand image and high prices. but it faces serious weaknesses in the form of over-exposure. it has kept its mission statement clear and concise: “To inspire and nurture the human spirit. .one person.

A. Customers feel welcome to stay. whether they are customers or partners (employees). Starbucks cares about the external environment as well.3 Strengths Starbucks can attribute its success to two key factors: people and environment. more productive workers. 2007). . Starbucks used this strategy to great effect. whether they are part-time or full-time. (Coffee and Farmer Equity) Practices–approved suppliers who are integrating our rigorous standards for sustainability throughout the coffee supply chain” (Schultz. particularly among students and young urban professionals” (Isidro. How the two factors work well together is what makes the Starbucks experience so unique. This relatively simple concept of treating customers and employees well seems intuitive. it translates into happier.E. Excellence through training ensures that customers‟ orders are correct. emphasizing how important it is to the fundamental concept of the company. 2004) is encouraged. The 2007 Annual Corporate Social Responsibility report published by the company states that “65 percent of our coffee was purchased from C. When employees know that their employer cares about their well-being. By ensuring sustainable coffee production. and employee mistakes are minimized. The internal environment that Starbucks strives to create in its stores is one where a customer “can sit for five hours with a single cup of coffee” (Hanft). both within the company and its stores and in the world at large. are central to the company‟s mission statement. Starbucks also provides its employees with excellent benefits.F. relax and enjoy the coffee drinking experience. People. and they extend these benefits to the farmers and growers of the coffee sold in stores around the world (Karth). is the other key success factor. Starbucks is investing in its future without compromising the environment and its limited resources. a place where “socializing and intellectual discussion. To provide excellent customer service. The attention and concern Starbucks pays to the concept of environment. Environment is addressed in the mission statement as well. but this is exactly where many companies lose focus. “a manager or assistant manager at a Starbucks receives at least 80 hours of training and a barista receives 40 hours of training before they are allowed to make drinks without supervision” (Karth).

This allows Starbucks to be visible to consumers. Cannibalization is where Starbucks stores are now competing with each other (stealing business and customers away from other Starbucks locations). the company is experiencing the cannibalizing effects of its saturating strategy (New York Times. Starbucks. nearly tripled the number of stores worldwide from 5. Additionally. p. Store over-exposure has helped lead to a second significant weakness. they started offering a variety of products other than coffee. however this causes the cannibalization effect. p. 1). which causes confusion. Our Partner. p. The New York Times states that eventually customers started to complain that Starbucks felt more like a fast food restaurant rather than a coffeehouse (2008. This weakness is seen by Starbuck‟s product diversification. 2008.886 in 2002 to 15. in every shopping complex. value restaurant chains. Starbucks has hurt their brand image by straying away from their core values which are Our Coffee. According to The New York Times. the company does have three critical weaknesses. A saturating strategy put an overwhelming amount of Starbucks stores within a small area of each other across the nation. This is over-exposure. if not two. The first key weakness affecting Starbucks is store over-exposure. 2008. This change doesn‟t correspond directly with their mission to serve coffee. Our Customers. 1). having kiosks in busy grocery stores is at odds with Starbucks core value of creating an environment where people can gather and relax.011 in 2007” (New York Times. Many times there will be a Starbucks store in the same complex as a grocery store and inside the grocery store there will be a Starbucks. there is always a Starbucks store. Starbucks boomed for years and as customer traffic increased.4 Weaknesses Although Starbucks is widely known to be successful. Since Starbucks has so many stores. airport concourse and roadside rest stop in America seemed to attract a Starbucks… in [a] five year [time period]. “every street corner. . 1). Around every corner. This is a very big problem if Starbucks wishes to be seen as a traditional coffee-shop (a place to relax and talk over a cup of coffee). They are moving away from the strategy of differentiation through quality and environment that set them apart from low-cost.

Also according to the article. In an article published in Advertising Age. “„I started buying my coffee at less-expensive places. One of the only ways that they will be able to continue to see a growth in sales is to look to foreign markets. Although there are some markets that are not taking a nose dive.‟ said one respondent. and Our shareholders.S. rather than in the domestic market. Our Neighborhood.S. for instance as . Weakness” that. with many possible substitutes. it is easy for consumers to switch from drinking Starbucks coffee to a substitute when they think it‟s too expensive. The final weakness Starbucks has is their prices. economy is.‟ said another…” (York. Starbucks does have opportunities available for growth and investment. 2009). According to Business Week “…almost two-thirds of stores run either by licensees or by partnerships in which Starbucks owns stakes ranging from 18% to 50%”(2008).5 Our stores. while annual growth of only six percent is expected in the United States” (2008). 2009). „I have it [only] once a week to indulge myself. One opportunity for Starbucks is continued expansion in the global market. The introduction of breakfast foods and pastries has caused confusion about their core values and thus damaged their brand image. The article goes on to talk about how the partners or licensees cover a big chunk or all of the startup costs and even though if the partners or licensees are not making any money Starbucks Company still is (Business Week. 2008). Because of the economic slowdown and the increase in competition in the United States. Given that most consumers see Starbucks coffee as an elastic product. “Starbucks is aiming to raise its sales abroad by 20 percent per year over the next three years. Erik Kirschbaum states in his article “Starbucks Says International Growth to Cushion U. ninety percent of consumes surveyed said they are cutting back on Starbucks coffee to save money (York. Opportunities In spite of the weaknesses mentioned above. consumers were surveyed about their coffee choices. But even with the other markets starting to look grim just as the U. it is not as risky for Starbucks to open new stores on the international scene. it is unlikely to expand or regain their dominance over the market share that they once had.

However this came as no surprise for the employees of Starbucks. Starbucks also announced plans to cut another 700 non-store jobs. 2009). 2009).6 billion. store closures announced last year (The Business Journal. The research shows that there are markets out there that will support growth and expansion for Starbucks Corporation. remains confident. Starbucks profits were also reported to have fallen from $208. “Most analysts project China to become the largest economy in the world this century using all measures of GDP” (2007). 2009). The company offered its premium coffee for about $0. Starbuck‟s competitors are taking advantage of the current economic state to position themselves as lower-cost alternatives to expensive. president of McDonald‟s USA.700 employees and closed 300 stores in addition to 600 U. Because of this Starbucks had to lay off 6. McDonald‟s launched its own premium coffee about 3 years ago and added specialty coffee drinks to more than 800 of its U. During the earnings report for the company‟s fiscal first quarter the company reported a 6 percent drop in revenue. 2009). to $2.S. including 350 at its Seattle headquarters (The Business Journal. boutique coffee. Don Thompson.S.50 cheaper than similar Starbucks offerings. Besides the lower price McDonalds sustained popularity of its coffee by its quick service.6 Economy Watch stated. Although hard to believe. because of the worldwide recession Starbucks did announce store closures as well as employee layoffs would happen in 2009. McDonald‟s premium coffee is one of Starbucks leading competitors.1 million to $113 million (The Business Journal. stores (Associated Press. Starbucks also faced stiff competition for coffee drinkers from McDonald‟s and other fast-foot establishments which lead to another threat for the company. Threats The most significant threat the company faces today is the national economic downturn into recession. saying “We want to move from beverages as an accompaniment to being a .

2009). These factors help give McDonald‟s premium coffee the edge in the coffee market compare to Starbucks.7 beverage destination” (Associated Press. . and give them the potential to become the world‟s largest chain of coffee houses. November 11).helium. Retrieved January Retrieved January 28.nytimes. Retrieved January 24. Isidro. 2009.reuters. A. Starbucks to close 300 more stores. Weakness. 2009 from http://www.html. Starbucks Corporation. Retrieved February 4. Retrieved January 28. http://www. Carol. The Business Journal (2009) idUSL1614331820080616.html. Retrieved January 26.8599. Retrieved January 22. (2004.(2008. Learning from Starbucks: 10 lessons for small businesses. B. From: http://triad.html. Coffee clash: McDonald's takes on Starbucks. from http://www. How Starbucks achieved its amazing References The Associated Press (2009).com/id/21837962/. 2009. (2009). 2009. from http://www.asp. Our commitment to ethical coffee sourcing. I. Brewing Battle: Starbucks vs. McDonald' resources/marketing/articles/20050401/starbucks.pdf.msnbc. 2009. 2009 from Hanft. 2009 from http://www. ( Retrieved February 3. from http://www.time.htm?campaign_id= rss_daily The New York Times.html?ana=yfcpc . China's Economy. Matlack. The New York Times. July 2). companies/starbucks_corporation/index. Retrieved January 23. from Economy Watch Web site: http://www. Retrieved January 28. Starbucks Corporation. http://www. What you can learn from (2008). 2009 from http://www.powerhomebiz.msn.1702277. (2008. Karth.2009.htm. (2008). 2009. Will Global Growth Help Starbucks. Our Starbucks mission. Retrieved February 3. 2009 from http://www. D. Kirschbaum.00. (2009). H. Retrieved January 24. October 24).starbucks.businessweek. Starbucks Says International Growth to Cushion U.bizjournals. (2007).economywatch.

(2009). from Yahoo Finance Website: http://finance. Consumers skip Starbucks for plain ol‟ joe. 2009.9 Yahoo Inc. Retrieved January 23. January 19). (2009. 2009 from http://adage. Starbucks. E. York. Retrieved January 26. .

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