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University of Washington TBUS 330 February 2, 2009 Submitted by: Steven Thompson Submitted to: Dr. Vanessa C. M. Chio
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. Starbucks is recognized for being environmentally responsible. . but it faces serious weaknesses in the form of over-exposure. the world has become a very different place than it was in 1971 when it got its start. but it must addresses the threat that it faces from its lower-priced competitors. it has kept its mission statement clear and concise: “To inspire and nurture the human spirit. As the company grew from a single store in Seattle‟s Pike Place Market to thousands of stores worldwide. and one neighborhood at a time” (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. The company‟s strengths are its commitment to the people and to the environment. making human connections with their customers. specifically McDonald‟s. However. 2009) Starbucks‟ success has resulted from the company living these values consistently. compromised brand image and high prices.one person. treating employees as partners in business. being a responsible neighbor that is involved in the community and providing shareholders with the rewards of success (Starbucks. Starbucks is committed to serving high quality coffee purchased from growers in an ethical manner. creating store environments that are welcoming.2 Starbucks Swot Analysis Starbucks is known around the world for bringing gourmet coffee and the coffeehouse experience to the masses. 2009). 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. as the country continues to sink into economic recession. important aspect of their business and success: “Starbucks is committed to a role of environmental leadership in all facets of our business.
and they extend these benefits to the farmers and growers of the coffee sold in stores around the world (Karth). By ensuring sustainable coffee production. . particularly among students and young urban professionals” (Isidro. are central to the company‟s mission statement. The 2007 Annual Corporate Social Responsibility report published by the company states that “65 percent of our coffee was purchased from C. 2007).E. both within the company and its stores and in the world at large. How the two factors work well together is what makes the Starbucks experience so unique. To provide excellent customer service. more productive workers. is the other key success factor. The attention and concern Starbucks pays to the concept of environment.F. 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 is investing in its future without compromising the environment and its limited resources.3 Strengths Starbucks can attribute its success to two key factors: people and environment. emphasizing how important it is to the fundamental concept of the company. Starbucks cares about the external environment as well. 2004) is encouraged. “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).A. Starbucks also provides its employees with excellent benefits. a place where “socializing and intellectual discussion. When employees know that their employer cares about their well-being. and employee mistakes are minimized. Environment is addressed in the mission statement as well. This relatively simple concept of treating customers and employees well seems intuitive. Starbucks used this strategy to great effect. relax and enjoy the coffee drinking experience. whether they are part-time or full-time. but this is exactly where many companies lose focus. Excellence through training ensures that customers‟ orders are correct. whether they are customers or partners (employees). People. Customers feel welcome to stay. it translates into happier. (Coffee and Farmer Equity) Practices–approved suppliers who are integrating our rigorous standards for sustainability throughout the coffee supply chain” (Schultz.
They are moving away from the strategy of differentiation through quality and environment that set them apart from low-cost. they started offering a variety of products other than coffee. Our Partner. p. Since Starbucks has so many stores. 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. Starbucks has hurt their brand image by straying away from their core values which are Our Coffee. Store over-exposure has helped lead to a second significant weakness. Starbucks boomed for years and as customer traffic increased. According to The New York Times. Starbucks. This is over-exposure. 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.4 Weaknesses Although Starbucks is widely known to be successful. This allows Starbucks to be visible to consumers. 1). A saturating strategy put an overwhelming amount of Starbucks stores within a small area of each other across the nation. 1). which causes confusion. value restaurant chains. 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). 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. Additionally. airport concourse and roadside rest stop in America seemed to attract a Starbucks… in [a] five year [time period]. Our Customers. there is always a Starbucks store. in every shopping complex. The first key weakness affecting Starbucks is store over-exposure. p. 2008. 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. p.011 in 2007” (New York Times. 1). nearly tripled the number of stores worldwide from 5. Around every corner. the company does have three critical weaknesses.886 in 2002 to 15. This change doesn‟t correspond directly with their mission to serve coffee. the company is experiencing the cannibalizing effects of its saturating strategy (New York Times.
it is not as risky for Starbucks to open new stores on the international scene. Our Neighborhood. for instance as .5 Our stores. Although there are some markets that are not taking a nose dive. 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. Because of the economic slowdown and the increase in competition in the United States. „I have it [only] once a week to indulge myself.‟ said one respondent. rather than in the domestic market. 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. 2009).‟ said another…” (York. it is unlikely to expand or regain their dominance over the market share that they once had.S. But even with the other markets starting to look grim just as the U. The introduction of breakfast foods and pastries has caused confusion about their core values and thus damaged their brand image. Opportunities In spite of the weaknesses mentioned above. Starbucks does have opportunities available for growth and investment. consumers were surveyed about their coffee choices. economy is. while annual growth of only six percent is expected in the United States” (2008). One opportunity for Starbucks is continued expansion in the global market. 2009). and Our shareholders. Erik Kirschbaum states in his article “Starbucks Says International Growth to Cushion U. with many possible substitutes. The final weakness Starbucks has is their prices. Weakness” that. it is easy for consumers to switch from drinking Starbucks coffee to a substitute when they think it‟s too expensive. One of the only ways that they will be able to continue to see a growth in sales is to look to foreign markets. ninety percent of consumes surveyed said they are cutting back on Starbucks coffee to save money (York. Also according to the article. In an article published in Advertising Age. 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). “„I started buying my coffee at less-expensive places.S.
700 employees and closed 300 stores in addition to 600 U.1 million to $113 million (The Business Journal. saying “We want to move from beverages as an accompaniment to being a . Although hard to believe. president of McDonald‟s USA. to $2. boutique coffee. 2009).50 cheaper than similar Starbucks offerings. Starbucks also announced plans to cut another 700 non-store jobs. Threats The most significant threat the company faces today is the national economic downturn into recession. During the earnings report for the company‟s fiscal first quarter the company reported a 6 percent drop in revenue. 2009). remains confident. However this came as no surprise for the employees of Starbucks. stores (Associated Press. 2009). because of the worldwide recession Starbucks did announce store closures as well as employee layoffs would happen in 2009. Because of this Starbucks had to lay off 6.S. Don Thompson.6 billion. McDonald‟s launched its own premium coffee about 3 years ago and added specialty coffee drinks to more than 800 of its U. 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. 2009). including 350 at its Seattle headquarters (The Business Journal.S. Besides the lower price McDonalds sustained popularity of its coffee by its quick service. 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). 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.6 Economy Watch stated. The company offered its premium coffee for about $0. McDonald‟s premium coffee is one of Starbucks leading competitors.
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.
Our Starbucks mission. Retrieved January 24.com/world_economy/china/ Hanft. McDonald's. from http://www. E.com/globalbiz/content/jul2008/gb2008072_462789. http://www. Retrieved February 3.reuters. Karth. Starbucks Corporation. B. 2009.com/article/ousiv/ idUSL1614331820080616.economywatch. October 24). Retrieved February 4. Retrieved January 28. Retrieved January 28. 2009.com/ resources/marketing/articles/20050401/starbucks. Retrieved January 26. H.htm?campaign_id= rss_daily The New York Times. I. Brewing Battle: Starbucks vs. (2004. from http://www. 2009.com/aboutus/csrreport/Coffee_Report_PDF_FY07. What you can learn from Starbucks. Starbucks Says International Growth to Cushion U. July 2).asp.com/topics/news/business/ companies/starbucks_corporation/index. 2009. How Starbucks achieved its amazing success. (2009). Retrieved January 28. D.html. Tancer. 2009 from http://topics.bizjournals. from http://www.S. Isidro. (2008. Starbucks to close 300 more stores. 2009 from http://www.starbucks.com/time/business/article/0.com/items/674277-how-starbucks-achieved-its-amazing-success. Kirschbaum.8 References The Associated Press (2009).pdf. November 11).htm.html. Coffee clash: McDonald's takes on Starbucks.(2008.helium.8599.starbucks.2009. from Economy Watch Web site: http://www. Starbucks Corporation. Carol. (2008).nytimes.powerhomebiz. From: http://triad. Retrieved January 23. A. Will Global Growth Help Starbucks. The Business Journal (2009).html?ana=yfcpc . Learning from Starbucks: 10 lessons for small businesses. (2007). 2009. Weakness. (2009).time.inc.businessweek. (n. Matlack. China's Economy. 2009 from http://www. Our commitment to ethical coffee sourcing.com/mission/default.msn.00. http://www.). The New York Times.1702277. Retrieved February 3. 2009. 2009 from http://www. (2008).html.com/triad/stories/2009/01/26/daily44. 2009 from http://www. Retrieved January 24. Retrieved January 22.msnbc. Retrieved January 28.com/vol144/starbucks.d. Schultz.com/id/21837962/.
9 Yahoo Inc. 2009 from http://adage.yahoo. from Yahoo Finance Website: http://finance. Starbucks. E. Retrieved January 26.com/article?article_id=133871. Retrieved January 23. 2009. . Consumers skip Starbucks for plain ol‟ joe.com/q?s=sbux York. (2009. (2009). January 19). Sbux.
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