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University of Washington TBUS 330 February 2, 2009 Submitted by: Steven Thompson Submitted to: Dr. Vanessa C. M. Chio
Starbucks is recognized for being environmentally responsible. creating store environments that are welcoming. 2009). treating employees as partners in business.one person. . one cup. and has a separate mission statement to address this progressive. being a responsible neighbor that is involved in the community and providing shareholders with the rewards of success (Starbucks. important aspect of their business and success: “Starbucks is committed to a role of environmental leadership in all facets of our business. it has kept its mission statement clear and concise: “To inspire and nurture the human spirit.” Underlying both of these broad concepts is a set of core values that the company uses as a foundation for all their business practices. the world has become a very different place than it was in 1971 when it got its start. The company‟s strengths are its commitment to the people and to the environment. but it faces serious weaknesses in the form of over-exposure. making human connections with their customers. but it must addresses the threat that it faces from its lower-priced competitors. and one neighborhood at a time” (Starbucks. as the country continues to sink into economic recession. compromised brand image and high prices. As the company grew from a single store in Seattle‟s Pike Place Market to thousands of stores worldwide. However. 2009) Starbucks‟ success has resulted from the company living these values consistently. There are good opportunities for Starbucks to grow its business through expansion into foreign markets and attract investors with the relatively cheap stock prices. Starbucks is committed to serving high quality coffee purchased from growers in an ethical manner.2 Starbucks Swot Analysis Starbucks is known around the world for bringing gourmet coffee and the coffeehouse experience to the masses. 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. specifically McDonald‟s.
Starbucks is investing in its future without compromising the environment and its limited resources. Starbucks used this strategy to great effect. The 2007 Annual Corporate Social Responsibility report published by the company states that “65 percent of our coffee was purchased from C. People. more productive workers. 2007).3 Strengths Starbucks can attribute its success to two key factors: people and environment. This relatively simple concept of treating customers and employees well seems intuitive. a place where “socializing and intellectual discussion. Environment is addressed in the mission statement as well. are central to the company‟s mission statement. but this is exactly where many companies lose focus. The attention and concern Starbucks pays to the concept of environment.E. “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). whether they are part-time or full-time. Customers feel welcome to stay. To provide excellent customer service. whether they are customers or partners (employees).A. Starbucks also provides its employees with excellent benefits. When employees know that their employer cares about their well-being. and they extend these benefits to the farmers and growers of the coffee sold in stores around the world (Karth). . relax and enjoy the coffee drinking experience. both within the company and its stores and in the world at large. 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). How the two factors work well together is what makes the Starbucks experience so unique. By ensuring sustainable coffee production.F. Starbucks cares about the external environment as well. is the other key success factor. it translates into happier. Excellence through training ensures that customers‟ orders are correct. 2004) is encouraged. and employee mistakes are minimized. particularly among students and young urban professionals” (Isidro. emphasizing how important it is to the fundamental concept of the company. (Coffee and Farmer Equity) Practices–approved suppliers who are integrating our rigorous standards for sustainability throughout the coffee supply chain” (Schultz.
in every shopping complex. p. there is always a Starbucks store. the company does have three critical weaknesses. This weakness is seen by Starbuck‟s product diversification. p. According to The New York Times. This allows Starbucks to be visible to consumers. 1). “every street corner. which causes confusion. airport concourse and roadside rest stop in America seemed to attract a Starbucks… in [a] five year [time period]. 1). They are moving away from the strategy of differentiation through quality and environment that set them apart from low-cost. 1). . Store over-exposure has helped lead to a second significant weakness.011 in 2007” (New York Times. Since Starbucks has so many stores. This change doesn‟t correspond directly with their mission to serve coffee. however this causes the cannibalization effect. Cannibalization is where Starbucks stores are now competing with each other (stealing business and customers away from other Starbucks locations). A saturating strategy put an overwhelming amount of Starbucks stores within a small area of each other across the nation. 2008. value restaurant chains. Starbucks has hurt their brand image by straying away from their core values which are Our Coffee. having kiosks in busy grocery stores is at odds with Starbucks core value of creating an environment where people can gather and relax. nearly tripled the number of stores worldwide from 5. 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. The first key weakness affecting Starbucks is store over-exposure. they started offering a variety of products other than coffee. 2008. Starbucks boomed for years and as customer traffic increased. This is over-exposure. Our Customers. if not two. 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.886 in 2002 to 15.4 Weaknesses Although Starbucks is widely known to be successful. Around every corner. the company is experiencing the cannibalizing effects of its saturating strategy (New York Times. 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). p. Starbucks. Additionally. Our Partner.
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. Opportunities In spite of the weaknesses mentioned above. consumers were surveyed about their coffee choices.5 Our stores. „I have it [only] once a week to indulge myself. Our Neighborhood. Weakness” that. 2009). for instance as . Because of the economic slowdown and the increase in competition in the United States.‟ said one respondent. it is not as risky for Starbucks to open new stores on the international scene. and Our shareholders.S. One opportunity for Starbucks is continued expansion in the global market. economy is. with many possible substitutes. Starbucks does have opportunities available for growth and investment. Although there are some markets that are not taking a nose dive.‟ said another…” (York. Given that most consumers see Starbucks coffee as an elastic product. rather than in the domestic market. 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. 2009). The introduction of breakfast foods and pastries has caused confusion about their core values and thus damaged their brand image. Erik Kirschbaum states in his article “Starbucks Says International Growth to Cushion U. Also according to the article. In an article published in Advertising Age. “„I started buying my coffee at less-expensive places. But even with the other markets starting to look grim just as the U. “Starbucks is aiming to raise its sales abroad by 20 percent per year over the next three years.S. it is unlikely to expand or regain their dominance over the market share that they once had. One of the only ways that they will be able to continue to see a growth in sales is to look to foreign markets. while annual growth of only six percent is expected in the United States” (2008). 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). ninety percent of consumes surveyed said they are cutting back on Starbucks coffee to save money (York. 2008).
to $2. president of McDonald‟s USA.S. 2009). 2009). including 350 at its Seattle headquarters (The Business Journal.700 employees and closed 300 stores in addition to 600 U. Starbucks profits were also reported to have fallen from $208.6 Economy Watch stated. Starbuck‟s competitors are taking advantage of the current economic state to position themselves as lower-cost alternatives to expensive. “Most analysts project China to become the largest economy in the world this century using all measures of GDP” (2007).50 cheaper than similar Starbucks offerings. During the earnings report for the company‟s fiscal first quarter the company reported a 6 percent drop in revenue. Don Thompson. store closures announced last year (The Business Journal. However this came as no surprise for the employees of Starbucks. boutique coffee. Because of this Starbucks had to lay off 6. 2009).S. McDonald‟s launched its own premium coffee about 3 years ago and added specialty coffee drinks to more than 800 of its U. 2009). Besides the lower price McDonalds sustained popularity of its coffee by its quick service. Starbucks also faced stiff competition for coffee drinkers from McDonald‟s and other fast-foot establishments which lead to another threat for the company. The research shows that there are markets out there that will support growth and expansion for Starbucks Corporation. Although hard to believe. remains confident. saying “We want to move from beverages as an accompaniment to being a . Threats The most significant threat the company faces today is the national economic downturn into recession.6 billion.1 million to $113 million (The Business Journal. The company offered its premium coffee for about $0. Starbucks also announced plans to cut another 700 non-store jobs. McDonald‟s premium coffee is one of Starbucks leading competitors. because of the worldwide recession Starbucks did announce store closures as well as employee layoffs would happen in 2009. stores (Associated Press.
7 beverage destination” (Associated Press. These factors help give McDonald‟s premium coffee the edge in the coffee market compare to Starbucks. 2009). and give them the potential to become the world‟s largest chain of coffee houses. .
Retrieved February 4. B. From: http://triad.2009.starbucks.bizjournals.com/article/ousiv/ idUSL1614331820080616. 2009. Retrieved February 3. The Business Journal (2009).time. from Economy Watch Web site: http://www.starbucks. from http://www.msn. H.html. 2009. How Starbucks achieved its amazing success. Starbucks to close 300 more stores. 2009 from http://topics. Retrieved January 24.). (2004.htm?campaign_id= rss_daily The New York Times. The New York Times. 2009 from http://www.html?ana=yfcpc .pdf. Retrieved January 23. (2008). 2009 from http://www. Schultz.businessweek. Learning from Starbucks: 10 lessons for small businesses. I. E.com/globalbiz/content/jul2008/gb2008072_462789.com/time/business/article/0. Retrieved January 24. (2007).00. 2009 from http://www. from http://www.html.html. http://www. 2009.com/ resources/marketing/articles/20050401/starbucks. Starbucks Corporation.msnbc.inc.com/id/21837962/.com/items/674277-how-starbucks-achieved-its-amazing-success. China's Economy. from http://www.reuters.com/mission/default.S.com/topics/news/business/ companies/starbucks_corporation/index.asp.economywatch. Retrieved January 22. (2008. Retrieved January 28.8599. Starbucks Says International Growth to Cushion U.nytimes. McDonald's. http://www. Retrieved January 28. Retrieved January 28. Our Starbucks mission. October 24).8 References The Associated Press (2009). November 11). Brewing Battle: Starbucks vs.com/world_economy/china/ Hanft. Weakness. Coffee clash: McDonald's takes on Starbucks.com/aboutus/csrreport/Coffee_Report_PDF_FY07. (2008). Carol. Retrieved February 3. A. D. Starbucks Corporation. Our commitment to ethical coffee sourcing. Retrieved January 28. Will Global Growth Help Starbucks. (n.helium. 2009 from http://www. Retrieved January 26.com/vol144/starbucks. Isidro. Kirschbaum. Tancer. What you can learn from Starbucks.d. Karth. 2009. (2009).htm. (2009). July 2).(2008. Matlack.com/triad/stories/2009/01/26/daily44. 2009.powerhomebiz.1702277. 2009.
Consumers skip Starbucks for plain ol‟ joe. Sbux. E. Starbucks. (2009).9 Yahoo Inc. 2009 from http://adage. Retrieved January 23. from Yahoo Finance Website: http://finance.com/article?article_id=133871. 2009. Retrieved January 26.com/q?s=sbux York. January 19).yahoo. . (2009.
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