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University of Washington TBUS 330 February 2, 2009 Submitted by: Steven Thompson Submitted to: Dr. Vanessa C. M. Chio
compromised brand image and high prices. 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. However.” Underlying both of these broad concepts is a set of core values that the company uses as a foundation for all their business practices.one person. The company‟s strengths are its commitment to the people and to the environment.2 Starbucks Swot Analysis Starbucks is known around the world for bringing gourmet coffee and the coffeehouse experience to the masses. one cup. important aspect of their business and success: “Starbucks is committed to a role of environmental leadership in all facets of our business. but it must addresses the threat that it faces from its lower-priced competitors. 2009) Starbucks‟ success has resulted from the company living these values consistently. specifically McDonald‟s. being a responsible neighbor that is involved in the community and providing shareholders with the rewards of success (Starbucks. 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. but it faces serious weaknesses in the form of over-exposure. and has a separate mission statement to address this progressive. Starbucks is recognized for being environmentally responsible. 2009). creating store environments that are welcoming. making human connections with their customers. treating employees as partners in 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. Starbucks is committed to serving high quality coffee purchased from growers in an ethical manner. and one neighborhood at a time” (Starbucks. . as the country continues to sink into economic recession. As the company grew from a single store in Seattle‟s Pike Place Market to thousands of stores worldwide.
a place where “socializing and intellectual discussion. 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). Starbucks used this strategy to great effect. How the two factors work well together is what makes the Starbucks experience so unique. (Coffee and Farmer Equity) Practices–approved suppliers who are integrating our rigorous standards for sustainability throughout the coffee supply chain” (Schultz. . Environment is addressed in the mission statement as well. This relatively simple concept of treating customers and employees well seems intuitive. whether they are customers or partners (employees). 2004) is encouraged. Customers feel welcome to stay. particularly among students and young urban professionals” (Isidro. 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. Excellence through training ensures that customers‟ orders are correct. The attention and concern Starbucks pays to the concept of environment. Starbucks cares about the external environment as well. Starbucks also provides its employees with excellent benefits. emphasizing how important it is to the fundamental concept of the company. both within the company and its stores and in the world at large.A.E. are central to the company‟s mission statement. but this is exactly where many companies lose focus. it translates into happier. relax and enjoy the coffee drinking experience. The 2007 Annual Corporate Social Responsibility report published by the company states that “65 percent of our coffee was purchased from C. To provide excellent customer service. 2007). People. whether they are part-time or full-time.3 Strengths Starbucks can attribute its success to two key factors: people and environment.F. Starbucks is investing in its future without compromising the environment and its limited resources. “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. and employee mistakes are minimized. By ensuring sustainable coffee production. more productive workers.
1). the company does have three critical weaknesses. Our Customers. The first key weakness affecting Starbucks is store over-exposure. According to The New York Times. They are moving away from the strategy of differentiation through quality and environment that set them apart from low-cost. Starbucks boomed for years and as customer traffic increased.4 Weaknesses Although Starbucks is widely known to be successful. . 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). Our Partner. 1). they started offering a variety of products other than coffee. p. Around every corner. the company is experiencing the cannibalizing effects of its saturating strategy (New York Times. value restaurant chains. 2008. Starbucks has hurt their brand image by straying away from their core values which are Our Coffee. 1). Store over-exposure has helped lead to a second significant weakness. p. Since Starbucks has so many stores. Additionally.886 in 2002 to 15. nearly tripled the number of stores worldwide from 5. This change doesn‟t correspond directly with their mission to serve coffee. having kiosks in busy grocery stores is at odds with Starbucks core value of creating an environment where people can gather and relax. Starbucks. This allows Starbucks to be visible to consumers. A saturating strategy put an overwhelming amount of Starbucks stores within a small area of each other across the nation. which causes confusion. This is over-exposure. there is always a Starbucks store. airport concourse and roadside rest stop in America seemed to attract a Starbucks… in [a] five year [time period]. “every street corner. 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. p. however this causes the cannibalization effect. This weakness is seen by Starbuck‟s product diversification. 2008. Cannibalization is where Starbucks stores are now competing with each other (stealing business and customers away from other Starbucks locations). if not two. The New York Times states that eventually customers started to complain that Starbucks felt more like a fast food restaurant rather than a coffeehouse (2008.011 in 2007” (New York Times. in every shopping complex.
it is not as risky for Starbucks to open new stores on the international scene.5 Our stores. The final weakness Starbucks has is their prices. “Starbucks is aiming to raise its sales abroad by 20 percent per year over the next three years. „I have it [only] once a week to indulge myself. Erik Kirschbaum states in his article “Starbucks Says International Growth to Cushion U. Opportunities In spite of the weaknesses mentioned above. 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. Our Neighborhood. 2008).‟ said one respondent. 2009). with many possible substitutes. consumers were surveyed about their coffee choices. Because of the economic slowdown and the increase in competition in the United States. 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). it is easy for consumers to switch from drinking Starbucks coffee to a substitute when they think it‟s too expensive. and Our shareholders. But even with the other markets starting to look grim just as the U. One of the only ways that they will be able to continue to see a growth in sales is to look to foreign markets. rather than in the domestic market. Although there are some markets that are not taking a nose dive. it is unlikely to expand or regain their dominance over the market share that they once had. Also according to the article.S. One opportunity for Starbucks is continued expansion in the global market.‟ said another…” (York. Starbucks does have opportunities available for growth and investment. “„I started buying my coffee at less-expensive places. ninety percent of consumes surveyed said they are cutting back on Starbucks coffee to save money (York.S. Weakness” that. In an article published in Advertising Age. for instance as . 2009). economy is. Given that most consumers see Starbucks coffee as an elastic product.
“Most analysts project China to become the largest economy in the world this century using all measures of GDP” (2007).1 million to $113 million (The Business Journal.6 Economy Watch stated. The research shows that there are markets out there that will support growth and expansion for Starbucks Corporation. 2009). president of McDonald‟s USA. because of the worldwide recession Starbucks did announce store closures as well as employee layoffs would happen in 2009. Starbucks also announced plans to cut another 700 non-store jobs. to $2.S. 2009). boutique coffee. Threats The most significant threat the company faces today is the national economic downturn into recession. store closures announced last year (The Business Journal. remains confident. 2009). Because of this Starbucks had to lay off 6. stores (Associated Press. However this came as no surprise for the employees of Starbucks. McDonald‟s premium coffee is one of Starbucks leading competitors.S.50 cheaper than similar Starbucks offerings. 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). Besides the lower price McDonalds sustained popularity of its coffee by its quick service. saying “We want to move from beverages as an accompaniment to being a . Don Thompson. During the earnings report for the company‟s fiscal first quarter the company reported a 6 percent drop in revenue. Although hard to believe. Starbuck‟s competitors are taking advantage of the current economic state to position themselves as lower-cost alternatives to expensive. McDonald‟s launched its own premium coffee about 3 years ago and added specialty coffee drinks to more than 800 of its U. including 350 at its Seattle headquarters (The Business Journal.6 billion. The company offered its premium coffee for about $0. Starbucks profits were also reported to have fallen from $208.
. These factors help give McDonald‟s premium coffee the edge in the coffee market compare to Starbucks. and give them the potential to become the world‟s largest chain of coffee houses.7 beverage destination” (Associated Press. 2009).
Our Starbucks mission.time. How Starbucks achieved its amazing success.S. The Business Journal (2009).com/ resources/marketing/articles/20050401/starbucks. A.(2008. The New York Times. 2009.com/id/21837962/. (2009). Retrieved January 24. (2007). H.html. Retrieved February 3. Tancer.com/globalbiz/content/jul2008/gb2008072_462789. 2009. 2009 from http://www.reuters. Coffee clash: McDonald's takes on Starbucks.html.asp. Learning from Starbucks: 10 lessons for small businesses. McDonald's. D. Brewing Battle: Starbucks vs. Karth. Retrieved January 26.com/triad/stories/2009/01/26/daily44.htm. 2009 from http://www. October 24).msn. (2008. from Economy Watch Web site: http://www.helium.starbucks.inc.com/topics/news/business/ companies/starbucks_corporation/index.msnbc. 2009.8 References The Associated Press (2009). Our commitment to ethical coffee sourcing. 2009 from http://topics.nytimes. Retrieved January 28. http://www.00. Matlack. E.d.8599.economywatch. July 2). B. from http://www. Kirschbaum. from http://www. (2008).com/items/674277-how-starbucks-achieved-its-amazing-success.html?ana=yfcpc . (2009). Starbucks Corporation. I. 2009.com/time/business/article/0.pdf. (n. (2008). Isidro.). Retrieved January 22. From: http://triad. 2009.powerhomebiz. What you can learn from Starbucks.com/vol144/starbucks. Starbucks Corporation.com/aboutus/csrreport/Coffee_Report_PDF_FY07. Retrieved January 23. 2009. Retrieved February 3.htm?campaign_id= rss_daily The New York Times. Retrieved January 24. Retrieved January 28.com/article/ousiv/ idUSL1614331820080616. Starbucks Says International Growth to Cushion U.html.2009. Starbucks to close 300 more stores.1702277. Retrieved January 28. (2004.starbucks. 2009 from http://www. 2009 from http://www. November 11).com/mission/default.businessweek. Carol. Schultz. http://www. Retrieved February 4. Retrieved January 28.bizjournals. Will Global Growth Help Starbucks. China's Economy. Weakness.com/world_economy/china/ Hanft. from http://www.
Sbux.yahoo.com/article?article_id=133871. Retrieved January 23. Starbucks. Consumers skip Starbucks for plain ol‟ joe.9 Yahoo Inc. (2009). (2009. from Yahoo Finance Website: http://finance. 2009. E. 2009 from http://adage.com/q?s=sbux York. . Retrieved January 26. January 19).