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University of Washington TBUS 330 February 2, 2009 Submitted by: Steven Thompson Submitted to: Dr. Vanessa C. M. Chio
as the country continues to sink into economic recession. the world has become a very different place than it was in 1971 when it got its start. it has kept its mission statement clear and concise: “To inspire and nurture the human spirit. Starbucks is committed to serving high quality coffee purchased from growers in an ethical manner. making human connections with their customers. 2009). 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. one cup. specifically McDonald‟s.2 Starbucks Swot Analysis Starbucks is known around the world for bringing gourmet coffee and the coffeehouse experience to the masses. creating store environments that are welcoming. The company‟s strengths are its commitment to the people and to the environment. 2009) Starbucks‟ success has resulted from the company living these values consistently. important aspect of their business and success: “Starbucks is committed to a role of environmental leadership in all facets of our business.” Underlying both of these broad concepts is a set of core values that the company uses as a foundation for all their business practices. and one neighborhood at a time” (Starbucks. being a responsible neighbor that is involved in the community and providing shareholders with the rewards of success (Starbucks. There are good opportunities for Starbucks to grow its business through expansion into foreign markets and attract investors with the relatively cheap stock prices.one person. As the company grew from a single store in Seattle‟s Pike Place Market to thousands of stores worldwide. However. . Starbucks is recognized for being environmentally responsible. but it faces serious weaknesses in the form of over-exposure. treating employees as partners in business. but it must addresses the threat that it faces from its lower-priced competitors. compromised brand image and high prices. and has a separate mission statement to address this progressive.
People. and employee mistakes are minimized. “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). When employees know that their employer cares about their well-being. How the two factors work well together is what makes the Starbucks experience so unique. To provide excellent customer service. more productive workers. whether they are customers or partners (employees). Starbucks is investing in its future without compromising the environment and its limited resources. a place where “socializing and intellectual discussion.E. This relatively simple concept of treating customers and employees well seems intuitive.A. emphasizing how important it is to the fundamental concept of the company. relax and enjoy the coffee drinking experience. Starbucks also provides its employees with excellent benefits.3 Strengths Starbucks can attribute its success to two key factors: people and environment. but this is exactly where many companies lose focus. both within the company and its stores and in the world at large. Excellence through training ensures that customers‟ orders are correct. 2007). is the other key success factor. Starbucks cares about the external environment as well. 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. . The attention and concern Starbucks pays to the concept of environment. and they extend these benefits to the farmers and growers of the coffee sold in stores around the world (Karth). Environment is addressed in the mission statement as well.F. (Coffee and Farmer Equity) Practices–approved suppliers who are integrating our rigorous standards for sustainability throughout the coffee supply chain” (Schultz. are central to the company‟s mission statement. Starbucks used this strategy to great effect. By ensuring sustainable coffee production. whether they are part-time or full-time. Customers feel welcome to stay. particularly among students and young urban professionals” (Isidro. 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). it translates into happier.
Our Customers. p. Additionally. A saturating strategy put an overwhelming amount of Starbucks stores within a small area of each other across the nation. nearly tripled the number of stores worldwide from 5. which causes confusion. Our Partner. value restaurant chains. the company does have three critical weaknesses. 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.011 in 2007” (New York Times. This allows Starbucks to be visible to consumers. there is always a Starbucks store. 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. Starbucks boomed for years and as customer traffic increased.4 Weaknesses Although Starbucks is widely known to be successful. Cannibalization is where Starbucks stores are now competing with each other (stealing business and customers away from other Starbucks locations). Starbucks has hurt their brand image by straying away from their core values which are Our Coffee. 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). 1). 2008. 1). This change doesn‟t correspond directly with their mission to serve coffee. Store over-exposure has helped lead to a second significant weakness. According to The New York Times. p. They are moving away from the strategy of differentiation through quality and environment that set them apart from low-cost. . The first key weakness affecting Starbucks is store over-exposure. Since Starbucks has so many stores. This weakness is seen by Starbuck‟s product diversification. they started offering a variety of products other than coffee. Around every corner. if not two. however this causes the cannibalization effect.886 in 2002 to 15. airport concourse and roadside rest stop in America seemed to attract a Starbucks… in [a] five year [time period]. This is over-exposure. p. in every shopping complex. having kiosks in busy grocery stores is at odds with Starbucks core value of creating an environment where people can gather and relax. “every street corner. the company is experiencing the cannibalizing effects of its saturating strategy (New York Times. 1). Starbucks. 2008.
with many possible substitutes.S. rather than in the domestic market. while annual growth of only six percent is expected in the United States” (2008).‟ said one respondent. Although there are some markets that are not taking a nose dive. Our Neighborhood. The final weakness Starbucks has is their prices. 2009). it is easy for consumers to switch from drinking Starbucks coffee to a substitute when they think it‟s too expensive. it is not as risky for Starbucks to open new stores on the international scene. In an article published in Advertising Age. Weakness” that. “Starbucks is aiming to raise its sales abroad by 20 percent per year over the next three years.S. 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). Also according to the article. 2009). consumers were surveyed about their coffee choices.5 Our stores. Opportunities In spite of the weaknesses mentioned above. Given that most consumers see Starbucks coffee as an elastic product. it is unlikely to expand or regain their dominance over the market share that they once had. for instance as . 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. The introduction of breakfast foods and pastries has caused confusion about their core values and thus damaged their brand image. ninety percent of consumes surveyed said they are cutting back on Starbucks coffee to save money (York. Because of the economic slowdown and the increase in competition in the United States. and Our shareholders. “„I started buying my coffee at less-expensive places. But even with the other markets starting to look grim just as the U. Erik Kirschbaum states in his article “Starbucks Says International Growth to Cushion U.‟ said another…” (York. One opportunity for Starbucks is continued expansion in the global market. economy is. „I have it [only] once a week to indulge myself. 2008). Starbucks does have opportunities available for growth and investment. One of the only ways that they will be able to continue to see a growth in sales is to look to foreign markets.
Besides the lower price McDonalds sustained popularity of its coffee by its quick service.50 cheaper than similar Starbucks offerings. Starbucks profits were also reported to have fallen from $208. 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. Starbuck‟s competitors are taking advantage of the current economic state to position themselves as lower-cost alternatives to expensive. Threats The most significant threat the company faces today is the national economic downturn into recession. Starbucks also announced plans to cut another 700 non-store jobs. “Most analysts project China to become the largest economy in the world this century using all measures of GDP” (2007). The company offered its premium coffee for about $0. However this came as no surprise for the employees of Starbucks. because of the worldwide recession Starbucks did announce store closures as well as employee layoffs would happen in 2009. The research shows that there are markets out there that will support growth and expansion for Starbucks Corporation. store closures announced last year (The Business Journal. 2009). to $2. During the earnings report for the company‟s fiscal first quarter the company reported a 6 percent drop in revenue. Although hard to believe.6 billion.700 employees and closed 300 stores in addition to 600 U. president of McDonald‟s USA. Don Thompson. 2009).S. remains confident. 2009). including 350 at its Seattle headquarters (The Business Journal. McDonald‟s launched its own premium coffee about 3 years ago and added specialty coffee drinks to more than 800 of its U.6 Economy Watch stated. McDonald‟s premium coffee is one of Starbucks leading competitors. boutique coffee.1 million to $113 million (The Business Journal. Because of this Starbucks had to lay off 6. saying “We want to move from beverages as an accompaniment to being a . 2009).S.
2009). . and give them the potential to become the world‟s largest chain of coffee houses.7 beverage destination” (Associated Press. These factors help give McDonald‟s premium coffee the edge in the coffee market compare to Starbucks.
(2009). The Business Journal (2009). 2009. 2009 from http://topics. 2009 from http://www. How Starbucks achieved its amazing success. 2009 from http://www. Retrieved February 3.00. Retrieved February 3. Learning from Starbucks: 10 lessons for small businesses. 2009. Coffee clash: McDonald's takes on Starbucks. Tancer. Matlack.1702277.S. from http://www. China's Economy. Carol.com/time/business/article/0.com/aboutus/csrreport/Coffee_Report_PDF_FY07.com/ resources/marketing/articles/20050401/starbucks.pdf.8599. Retrieved January 26. Starbucks Says International Growth to Cushion U. McDonald's. 2009 from http://www.2009.htm. Retrieved February 4.businessweek. B. What you can learn from Starbucks. http://www.powerhomebiz.starbucks.html. E. from http://www. Our commitment to ethical coffee sourcing. Retrieved January 24. Starbucks to close 300 more stores.d.com/world_economy/china/ Hanft. (n. (2008). 2009 from http://www.html. Isidro. I. (2007). Retrieved January 23. H. (2004. Retrieved January 28.html. D. Weakness. Our Starbucks mission. November 11).8 References The Associated Press (2009). http://www. July 2). Starbucks Corporation.reuters. Retrieved January 24. Karth. 2009. From: http://triad. Will Global Growth Help Starbucks. Retrieved January 28. Starbucks Corporation.msn.msnbc. October 24).com/items/674277-how-starbucks-achieved-its-amazing-success. The New York Times.com/mission/default. from http://www.helium.). (2008). Kirschbaum. A.economywatch.com/vol144/starbucks. Schultz.com/id/21837962/.htm?campaign_id= rss_daily The New York Times. 2009.com/globalbiz/content/jul2008/gb2008072_462789.html?ana=yfcpc .asp.bizjournals.com/topics/news/business/ companies/starbucks_corporation/index.time. 2009. Retrieved January 28.nytimes.(2008. from Economy Watch Web site: http://www.inc.com/triad/stories/2009/01/26/daily44. Retrieved January 28. (2008. Retrieved January 22. Brewing Battle: Starbucks vs. (2009).starbucks.com/article/ousiv/ idUSL1614331820080616. 2009.
9 Yahoo Inc. Retrieved January 23. 2009.com/article?article_id=133871. from Yahoo Finance Website: http://finance. (2009. January 19). Retrieved January 26. . 2009 from http://adage. E. Consumers skip Starbucks for plain ol‟ joe. Sbux. Starbucks.com/q?s=sbux York. (2009).yahoo.
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