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University of Washington TBUS 330 February 2, 2009 Submitted by: Steven Thompson Submitted to: Dr. Vanessa C. M. Chio
.2 Starbucks Swot Analysis Starbucks is known around the world for bringing gourmet coffee and the coffeehouse experience to the masses. compromised brand image and high prices. as the country continues to sink into economic recession. creating store environments that are welcoming. and has a separate mission statement to address this progressive.” 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. Starbucks is committed to serving high quality coffee purchased from growers in an ethical manner. but it must addresses the threat that it faces from its lower-priced competitors.one person. 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. treating employees as partners in business. specifically McDonald‟s. one cup. The company‟s strengths are its commitment to the people and to the environment. it has kept its mission statement clear and concise: “To inspire and nurture the human spirit. and one neighborhood at a time” (Starbucks. 2009) Starbucks‟ success has resulted from the company living these values consistently. Starbucks is recognized for being environmentally responsible. important aspect of their business and success: “Starbucks is committed to a role of environmental leadership in all facets of our business. There are good opportunities for Starbucks to grow its business through expansion into foreign markets and attract investors with the relatively cheap stock prices. However. but it faces serious weaknesses in the form of over-exposure. being a responsible neighbor that is involved in the community and providing shareholders with the rewards of success (Starbucks. As the company grew from a single store in Seattle‟s Pike Place Market to thousands of stores worldwide. making human connections with their customers.
Starbucks cares about the external environment as well. whether they are customers or partners (employees). Customers feel welcome to stay. Environment is addressed in the mission statement as well. People. (Coffee and Farmer Equity) Practices–approved suppliers who are integrating our rigorous standards for sustainability throughout the coffee supply chain” (Schultz. a place where “socializing and intellectual discussion. When employees know that their employer cares about their well-being. but this is exactly where many companies lose focus.E. particularly among students and young urban professionals” (Isidro. 2007).F.A. By ensuring sustainable coffee production. it translates into happier. whether they are part-time or full-time. relax and enjoy the coffee drinking experience.3 Strengths Starbucks can attribute its success to two key factors: people and environment. 2004) is encouraged. Starbucks is investing in its future without compromising the environment and its limited resources. emphasizing how important it is to the fundamental concept of the company. is the other key success factor. both within the company and its stores and in the world at large. This relatively simple concept of treating customers and employees well seems intuitive. are central to the company‟s mission statement. “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). The 2007 Annual Corporate Social Responsibility report published by the company states that “65 percent of our coffee was purchased from C. Starbucks also provides its employees with excellent benefits. and employee mistakes are minimized. Excellence through training ensures that customers‟ orders are correct. How the two factors work well together is what makes the Starbucks experience so unique. Starbucks used this strategy to great effect. and they extend these benefits to the farmers and growers of the coffee sold in stores around the world (Karth). To provide excellent customer service. The attention and concern Starbucks pays to the concept of environment. 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). . more productive workers.
having kiosks in busy grocery stores is at odds with Starbucks core value of creating an environment where people can gather and relax. in every shopping complex. They are moving away from the strategy of differentiation through quality and environment that set them apart from low-cost.011 in 2007” (New York Times. . “every street corner. p. This allows Starbucks to be visible to consumers. Our Partner. Store over-exposure has helped lead to a second significant weakness. This is over-exposure. which causes confusion. 1). Around every corner. 1). p. 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. 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). Cannibalization is where Starbucks stores are now competing with each other (stealing business and customers away from other Starbucks locations). value restaurant chains. Starbucks has hurt their brand image by straying away from their core values which are Our Coffee. there is always a Starbucks store. 1). they started offering a variety of products other than coffee. p.886 in 2002 to 15. A saturating strategy put an overwhelming amount of Starbucks stores within a small area of each other across the nation. Starbucks boomed for years and as customer traffic increased. Our Customers. According to The New York Times. Starbucks. if not two. the company does have three critical weaknesses. 2008. This weakness is seen by Starbuck‟s product diversification.4 Weaknesses Although Starbucks is widely known to be successful. 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. however this causes the cannibalization effect. the company is experiencing the cannibalizing effects of its saturating strategy (New York Times. 2008. Since Starbucks has so many stores. Additionally. nearly tripled the number of stores worldwide from 5. This change doesn‟t correspond directly with their mission to serve coffee. The first key weakness affecting Starbucks is store over-exposure. airport concourse and roadside rest stop in America seemed to attract a Starbucks… in [a] five year [time period].
S. Given that most consumers see Starbucks coffee as an elastic product.S. Starbucks does have opportunities available for growth and investment. “„I started buying my coffee at less-expensive places. Although there are some markets that are not taking a nose dive.‟ said another…” (York. for instance as . 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). it is easy for consumers to switch from drinking Starbucks coffee to a substitute when they think it‟s too expensive. economy is. Because of the economic slowdown and the increase in competition in the United States. “Starbucks is aiming to raise its sales abroad by 20 percent per year over the next three years. it is not as risky for Starbucks to open new stores on the international scene. consumers were surveyed about their coffee choices. it is unlikely to expand or regain their dominance over the market share that they once had. Also according to the article. Weakness” that. while annual growth of only six percent is expected in the United States” (2008). Our Neighborhood. rather than in the domestic market. „I have it [only] once a week to indulge myself. 2008). Erik Kirschbaum states in his article “Starbucks Says International Growth to Cushion U. One opportunity for Starbucks is continued expansion in the global market. One of the only ways that they will be able to continue to see a growth in sales is to look to foreign markets. 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. In an article published in Advertising Age.5 Our stores. The introduction of breakfast foods and pastries has caused confusion about their core values and thus damaged their brand image. But even with the other markets starting to look grim just as the U. with many possible substitutes. Opportunities In spite of the weaknesses mentioned above. and Our shareholders. ninety percent of consumes surveyed said they are cutting back on Starbucks coffee to save money (York. The final weakness Starbucks has is their prices. 2009). 2009).‟ said one respondent.
store closures announced last year (The Business Journal. 2009). 2009). Threats The most significant threat the company faces today is the national economic downturn into recession. boutique coffee. Besides the lower price McDonalds sustained popularity of its coffee by its quick service. During the earnings report for the company‟s fiscal first quarter the company reported a 6 percent drop in revenue. McDonald‟s launched its own premium coffee about 3 years ago and added specialty coffee drinks to more than 800 of its U. 2009).S. Starbuck‟s competitors are taking advantage of the current economic state to position themselves as lower-cost alternatives to expensive. stores (Associated Press. saying “We want to move from beverages as an accompaniment to being a . Don Thompson.50 cheaper than similar Starbucks offerings. including 350 at its Seattle headquarters (The Business Journal. However this came as no surprise for the employees of Starbucks. Starbucks profits were also reported to have fallen from $208. Because of this Starbucks had to lay off 6. 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. to $2. president of McDonald‟s USA.6 billion. Although hard to believe.1 million to $113 million (The Business Journal. remains confident.S. The research shows that there are markets out there that will support growth and expansion for Starbucks Corporation. “Most analysts project China to become the largest economy in the world this century using all measures of GDP” (2007).6 Economy Watch stated. Starbucks also faced stiff competition for coffee drinkers from McDonald‟s and other fast-foot establishments which lead to another threat for the company.700 employees and closed 300 stores in addition to 600 U. 2009). The company offered its premium coffee for about $0. Starbucks also announced plans to cut another 700 non-store jobs.
and give them the potential to become the world‟s largest chain of coffee houses. 2009). These factors help give McDonald‟s premium coffee the edge in the coffee market compare to Starbucks. .7 beverage destination” (Associated Press.
2009 from http://www.nytimes.com/items/674277-how-starbucks-achieved-its-amazing-success. Learning from Starbucks: 10 lessons for small businesses. Starbucks Says International Growth to Cushion U. Weakness. From: http://triad. Retrieved January 28. (2004. Starbucks Corporation. October 24). Retrieved February 3. E. (2008.S. (2008).reuters. Retrieved January 24. from Economy Watch Web site: http://www. 2009 from http://topics.com/mission/default. A. 2009 from http://www. What you can learn from Starbucks. 2009.businessweek. Starbucks to close 300 more stores.html?ana=yfcpc . Retrieved January 22.com/world_economy/china/ Hanft. Carol.). July 2). 2009. Coffee clash: McDonald's takes on Starbucks. 2009 from http://www. Retrieved January 28. (2009). (2009).html. Our commitment to ethical coffee sourcing. Our Starbucks mission.starbucks. 2009 from http://www. Retrieved January 26. http://www. Retrieved February 4.(2008. Tancer. How Starbucks achieved its amazing success.8 References The Associated Press (2009). http://www. The Business Journal (2009).com/globalbiz/content/jul2008/gb2008072_462789.com/triad/stories/2009/01/26/daily44. 2009. 2009.com/id/21837962/.powerhomebiz. China's Economy. The New York Times.helium.com/ resources/marketing/articles/20050401/starbucks.com/vol144/starbucks.com/article/ousiv/ idUSL1614331820080616.pdf. Retrieved January 28. from http://www.com/time/business/article/0. Brewing Battle: Starbucks vs.00. B. Karth. Starbucks Corporation.msnbc. I.inc. H. November 11). (2008). Will Global Growth Help Starbucks. 2009.htm?campaign_id= rss_daily The New York Times.htm. Isidro.starbucks. 2009.1702277.com/topics/news/business/ companies/starbucks_corporation/index.d.time. from http://www.8599.msn. (n.com/aboutus/csrreport/Coffee_Report_PDF_FY07. from http://www. Retrieved January 24. Matlack.html. Schultz. Retrieved February 3. Retrieved January 28. Retrieved January 23.2009.economywatch. (2007). Kirschbaum.html. D.bizjournals. McDonald's.asp.
Sbux.9 Yahoo Inc. from Yahoo Finance Website: http://finance. (2009. 2009 from http://adage. 2009. Retrieved January 23. Consumers skip Starbucks for plain ol‟ joe. Retrieved January 26.yahoo. E.com/q?s=sbux York.com/article?article_id=133871. Starbucks. January 19). (2009). .
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