Starbucks Swot Analysis
University of Washington TBUS 330 February 2, 2009 Submitted by: Steven Thompson Submitted to: Dr. Vanessa C. M. Chio
specifically McDonald‟s.one person. but it must addresses the threat that it faces from its lower-priced competitors. and has a separate mission statement to address this progressive. creating store environments that are welcoming. but it faces serious weaknesses in the form of over-exposure. one cup. it has kept its mission statement clear and concise: “To inspire and nurture the human spirit. and one neighborhood at a time” (Starbucks.” Underlying both of these broad concepts is a set of core values that the company uses as a foundation for all their business practices. compromised brand image and high prices. as the country continues to sink into economic recession. 2009) Starbucks‟ success has resulted from the company living these values consistently. being a responsible neighbor that is involved in the community and providing shareholders with the rewards of success (Starbucks. The company‟s strengths are its commitment to the people and to the environment. the world has become a very different place than it was in 1971 when it got its start.
. 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.2
Starbucks Swot Analysis
Starbucks is known around the world for bringing gourmet coffee and the coffeehouse experience to the masses. treating employees as partners in business. 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. However. There are good opportunities for Starbucks to grow its business through expansion into foreign markets and attract investors with the relatively cheap stock prices. making human connections with their customers. As the company grew from a single store in Seattle‟s Pike Place Market to thousands of stores worldwide. 2009). Starbucks is committed to serving high quality coffee purchased from growers in an ethical manner.
more productive workers. The attention and concern Starbucks pays to the concept of environment. and employee mistakes are minimized. To provide excellent customer service. 2007). By ensuring sustainable coffee production. Starbucks cares about the external environment as well. Starbucks also provides its employees with excellent benefits. Excellence through training ensures that customers‟ orders are correct. Starbucks is investing in its future without compromising the environment and its limited resources. (Coffee and Farmer Equity) Practices–approved suppliers who are integrating our rigorous standards for sustainability throughout the coffee supply chain” (Schultz. The 2007 Annual Corporate Social Responsibility report published by the company states that “65 percent of our coffee was purchased from C. a place where “socializing and intellectual discussion. Starbucks used this strategy to great effect. “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). both within the company and its stores and in the world at large.E.F. is the other key success factor. it translates into happier.3 Strengths Starbucks can attribute its success to two key factors: people and environment. Customers feel welcome to stay. relax and enjoy the coffee drinking experience. People. and they extend these benefits to the farmers and growers of the coffee sold in stores around the world (Karth). whether they are part-time or full-time. whether they are customers or partners (employees). How the two factors work well together is what makes the Starbucks experience so unique.
. but this is exactly where many companies lose focus. 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). emphasizing how important it is to the fundamental concept of the company. Environment is addressed in the mission statement as well. particularly among students and young urban professionals” (Isidro. When employees know that their employer cares about their well-being.A. are central to the company‟s mission statement. 2004) is encouraged. This relatively simple concept of treating customers and employees well seems intuitive.
Starbucks has hurt their brand image by straying away from their core values which are Our Coffee. Starbucks. 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). airport concourse and roadside rest stop in America seemed to attract a Starbucks… in [a] five year [time period]. they started offering a variety of products other than coffee. This is over-exposure. having kiosks in busy grocery stores is at odds with Starbucks core value of creating an environment where people can gather and relax.886 in 2002 to 15. 1). This weakness is seen by Starbuck‟s product diversification. Cannibalization is where Starbucks stores are now competing with each other (stealing business and customers away from other Starbucks locations). 2008. Additionally.
. nearly tripled the number of stores worldwide from 5. Our Customers. 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. According to The New York Times. p. there is always a Starbucks store. Since Starbucks has so many stores. Around every corner. p. value restaurant chains.011 in 2007” (New York Times. p. 2008. A saturating strategy put an overwhelming amount of Starbucks stores within a small area of each other across the nation. Store over-exposure has helped lead to a second significant weakness. This allows Starbucks to be visible to consumers. “every street corner. which causes confusion. 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. if not two. This change doesn‟t correspond directly with their mission to serve coffee. Our Partner. 1). in every shopping complex. The first key weakness affecting Starbucks is store over-exposure. Starbucks boomed for years and as customer traffic increased. 1). however this causes the cannibalization effect. They are moving away from the strategy of differentiation through quality and environment that set them apart from low-cost.4 Weaknesses Although Starbucks is widely known to be successful. the company does have three critical weaknesses.
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. while annual growth of only six percent is expected in the United States” (2008). it is easy for consumers to switch from drinking Starbucks coffee to a substitute when they think it‟s too expensive.‟ said another…” (York. Because of the economic slowdown and the increase in competition in the United States. economy is.5 Our stores. and Our shareholders. Starbucks does have opportunities available for growth and investment. “Starbucks is aiming to raise its sales abroad by 20 percent per year over the next three years. 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).S. “„I started buying my coffee at less-expensive places. Our Neighborhood. it is not as risky for Starbucks to open new stores on the international scene. ninety percent of consumes surveyed said they are cutting back on Starbucks coffee to save money (York. „I have it [only] once a week to indulge myself. with many possible substitutes. One opportunity for Starbucks is continued expansion in the global market. Weakness” that. 2008). 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. Also according to the article. 2009). for instance as
. Although there are some markets that are not taking a nose dive. In an article published in Advertising Age.S. consumers were surveyed about their coffee choices. rather than in the domestic market. The introduction of breakfast foods and pastries has caused confusion about their core values and thus damaged their brand image. The final weakness Starbucks has is their prices.‟ said one respondent. 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. Erik Kirschbaum states in his article “Starbucks Says International Growth to Cushion U. 2009). Opportunities In spite of the weaknesses mentioned above.
The research shows that there are markets out there that will support growth and expansion for Starbucks Corporation. During the earnings report for the company‟s fiscal first quarter the company reported a 6 percent drop in revenue. 2009). saying “We want to move from beverages as an accompaniment to being a
.6 Economy Watch stated. Threats
The most significant threat the company faces today is the national economic downturn into recession. McDonald‟s launched its own premium coffee about 3 years ago and added specialty coffee drinks to more than 800 of its U. Don Thompson.1 million to $113 million (The Business Journal. However this came as no surprise for the employees of Starbucks. remains confident. boutique coffee. Besides the lower price McDonalds sustained popularity of its coffee by its quick service. store closures announced last year (The Business Journal.6 billion.S. because of the worldwide recession Starbucks did announce store closures as well as employee layoffs would happen in 2009. to $2. Starbuck‟s competitors are taking advantage of the current economic state to position themselves as lower-cost alternatives to expensive.S. Although hard to believe. McDonald‟s premium coffee is one of Starbucks leading competitors. 2009). The company offered its premium coffee for about $0. “Most analysts project China to become the largest economy in the world this century using all measures of GDP” (2007). Starbucks also announced plans to cut another 700 non-store jobs. 2009). Because of this Starbucks had to lay off 6. 2009).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. president of McDonald‟s USA. including 350 at its Seattle headquarters (The Business Journal. Starbucks profits were also reported to have fallen from $208.700 employees and closed 300 stores in addition to 600 U. stores (Associated Press.
. 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).
2009.time. What you can learn from Starbucks.pdf. H.html?ana=yfcpc
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