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Starbucks Swot Analysis

University of Washington TBUS 330 February 2, 2009 Submitted by: Steven Thompson Submitted to: Dr. Vanessa C. M. Chio

one person. as the country continues to sink into economic recession. . The company‟s strengths are its commitment to the people and to the environment. 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. 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. 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. making human connections with their customers. but it must addresses the threat that it faces from its lower-priced competitors. specifically McDonald‟s. and has a separate mission statement to address this progressive. 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. Starbucks is recognized for being environmentally responsible. 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. compromised brand image and high prices. important aspect of their business and success: “Starbucks is committed to a role of environmental leadership in all facets of our business. Starbucks is committed to serving high quality coffee purchased from growers in an ethical manner. one cup. the world has become a very different place than it was in 1971 when it got its start. 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. 2009). and one neighborhood at a time” (Starbucks.

are central to the company‟s mission statement. whether they are customers or partners (employees). 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.A. 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). both within the company and its stores and in the world at large. Starbucks also provides its employees with excellent benefits. By ensuring sustainable coffee production. it translates into happier. “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). This relatively simple concept of treating customers and employees well seems intuitive.F. Starbucks cares about the external environment as well. more productive workers. Excellence through training ensures that customers‟ orders are correct. People. Customers feel welcome to stay. and employee mistakes are minimized. but this is exactly where many companies lose focus. whether they are part-time or full-time. 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. relax and enjoy the coffee drinking experience. To provide excellent customer service. . The attention and concern Starbucks pays to the concept of environment. Starbucks used this strategy to great effect. a place where “socializing and intellectual discussion. emphasizing how important it is to the fundamental concept of the company.E. particularly among students and young urban professionals” (Isidro. Environment is addressed in the mission statement as well. 2007). 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. The 2007 Annual Corporate Social Responsibility report published by the company states that “65 percent of our coffee was purchased from C. 2004) is encouraged. When employees know that their employer cares about their well-being.

p. 1). Our Customers. the company does have three critical weaknesses. The first key weakness affecting Starbucks is store over-exposure. They are moving away from the strategy of differentiation through quality and environment that set them apart from low-cost. Starbucks has hurt their brand image by straying away from their core values which are Our Coffee. p. value restaurant chains. This allows Starbucks to be visible to consumers. Starbucks. 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. nearly tripled the number of stores worldwide from 5. 2008. having kiosks in busy grocery stores is at odds with Starbucks core value of creating an environment where people can gather and relax. . 1). which causes confusion.011 in 2007” (New York Times. in every shopping complex. This is over-exposure. 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). This weakness is seen by Starbuck‟s product diversification.886 in 2002 to 15. p.4 Weaknesses Although Starbucks is widely known to be successful. if not two. Starbucks boomed for years and as customer traffic increased. however this causes the cannibalization effect. 2008. airport concourse and roadside rest stop in America seemed to attract a Starbucks… in [a] five year [time period]. Cannibalization is where Starbucks stores are now competing with each other (stealing business and customers away from other Starbucks locations). Our Partner. A saturating strategy put an overwhelming amount of Starbucks stores within a small area of each other across the nation. This change doesn‟t correspond directly with their mission to serve coffee. Around every corner. the company is experiencing the cannibalizing effects of its saturating strategy (New York Times. 1). “every street corner. Store over-exposure has helped lead to a second significant weakness. Additionally. they started offering a variety of products other than coffee. According to The New York Times. there is always a Starbucks store. Since Starbucks has so many stores. 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.

Starbucks does have opportunities available for growth and investment. Also according to the article. ninety percent of consumes surveyed said they are cutting back on Starbucks coffee to save money (York.‟ said another…” (York. Although there are some markets that are not taking a nose dive. In an article published in Advertising Age. The introduction of breakfast foods and pastries has caused confusion about their core values and thus damaged their brand image. consumers were surveyed about their coffee choices. and Our shareholders. Erik Kirschbaum states in his article “Starbucks Says International Growth to Cushion U. “„I started buying my coffee at less-expensive places. 2009). it is not as risky for Starbucks to open new stores on the international scene. One opportunity for Starbucks is continued expansion in the global market.S. But even with the other markets starting to look grim just as the U. The final weakness Starbucks has is their prices.S. Our Neighborhood. it is unlikely to expand or regain their dominance over the market share that they once had. 2008). 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. rather than in the domestic market. „I have it [only] once a week to indulge myself. economy is. Weakness” that. 2009). Because of the economic slowdown and the increase in competition in the United States. 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). for instance as . Given that most consumers see Starbucks coffee as an elastic product. while annual growth of only six percent is expected in the United States” (2008). with many possible substitutes.5 Our stores.‟ said one respondent. 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. “Starbucks is aiming to raise its sales abroad by 20 percent per year over the next three years.

Starbuck‟s competitors are taking advantage of the current economic state to position themselves as lower-cost alternatives to expensive. Starbucks also faced stiff competition for coffee drinkers from McDonald‟s and other fast-foot establishments which lead to another threat for the company. 2009).S. Besides the lower price McDonalds sustained popularity of its coffee by its quick service. The research shows that there are markets out there that will support growth and expansion for Starbucks Corporation.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. because of the worldwide recession Starbucks did announce store closures as well as employee layoffs would happen in 2009.1 million to $113 million (The Business Journal. During the earnings report for the company‟s fiscal first quarter the company reported a 6 percent drop in revenue.S. “Most analysts project China to become the largest economy in the world this century using all measures of GDP” (2007).700 employees and closed 300 stores in addition to 600 U.6 Economy Watch stated. 2009). Starbucks profits were also reported to have fallen from $208. However this came as no surprise for the employees of Starbucks. stores (Associated Press. The company offered its premium coffee for about $0. president of McDonald‟s USA. 2009).50 cheaper than similar Starbucks offerings. store closures announced last year (The Business Journal. Threats The most significant threat the company faces today is the national economic downturn into recession. Don Thompson. including 350 at its Seattle headquarters (The Business Journal. McDonald‟s premium coffee is one of Starbucks leading competitors. remains confident. 2009). Although hard to believe. to $2. saying “We want to move from beverages as an accompaniment to being a . Because of this Starbucks had to lay off 6. Starbucks also announced plans to cut another 700 non-store jobs. boutique coffee.

7 beverage destination” (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. 2009). .

bizjournals. Isidro. from http://www. Retrieved January 22.reuters.com/world_economy/china/ Hanft. Retrieved January 23. 2009.com/triad/stories/2009/01/26/daily44. 2009 from http://www. Retrieved January 28.com/ resources/marketing/articles/20050401/starbucks.00.html. Carol.com/time/business/article/0.html?ana=yfcpc . Learning from Starbucks: 10 lessons for small businesses. Starbucks Says International Growth to Cushion U. Weakness.msn.time. (2008).html.asp.starbucks.com/topics/news/business/ companies/starbucks_corporation/index. H. (2007). Retrieved February 3. Will Global Growth Help Starbucks. 2009. Starbucks Corporation. 2009 from http://www. http://www.powerhomebiz. I. Retrieved February 3. Retrieved February 4. 2009.nytimes. The Business Journal (2009).inc.1702277. Retrieved January 28. (2008.com/globalbiz/content/jul2008/gb2008072_462789.htm. Retrieved January 28.businessweek.pdf.com/vol144/starbucks. 2009 from http://topics.com/article/ousiv/ idUSL1614331820080616. Starbucks to close 300 more stores.8599. Starbucks Corporation. 2009 from http://www. From: http://triad. from http://www. 2009.com/aboutus/csrreport/Coffee_Report_PDF_FY07. Matlack. from Economy Watch Web site: http://www. B. (2004. Coffee clash: McDonald's takes on Starbucks.helium. 2009. China's Economy. Retrieved January 24.html.htm?campaign_id= rss_daily The New York Times. Retrieved January 26. How Starbucks achieved its amazing success. Our commitment to ethical coffee sourcing. D. E. (2009).com/mission/default. (n.(2008. October 24). Schultz. Kirschbaum. Tancer. 2009. 2009 from http://www. Karth. What you can learn from Starbucks. (2009). McDonald's. Our Starbucks mission. from http://www.). November 11).S. (2008).com/items/674277-how-starbucks-achieved-its-amazing-success. July 2). Retrieved January 28.2009.d. Retrieved January 24.starbucks. The New York Times.8 References The Associated Press (2009).msnbc. Brewing Battle: Starbucks vs.economywatch. A.com/id/21837962/. http://www.

Retrieved January 26. (2009). Retrieved January 23.9 Yahoo Inc. Sbux. 2009 from http://adage.yahoo. Consumers skip Starbucks for plain ol‟ joe.com/q?s=sbux York.com/article?article_id=133871. Starbucks. 2009. January 19). E. . (2009. from Yahoo Finance Website: http://finance.

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