Starbucks Swot Analysis

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

There are good opportunities for Starbucks to grow its business through expansion into foreign markets and attract investors with the relatively cheap stock prices. treating employees as partners in business.one person. being a responsible neighbor that is involved in the community and providing shareholders with the rewards of success (Starbucks. but it must addresses the threat that it faces from its lower-priced competitors. . Starbucks is recognized for being environmentally responsible. and has a separate mission statement to address this progressive. 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. specifically McDonald‟s. 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. Starbucks is committed to serving high quality coffee purchased from growers in an ethical manner.2 Starbucks Swot Analysis Starbucks is known around the world for bringing gourmet coffee and the coffeehouse experience to the masses. As the company grew from a single store in Seattle‟s Pike Place Market to thousands of stores worldwide.” Underlying both of these broad concepts is a set of core values that the company uses as a foundation for all their business practices. However. 2009) Starbucks‟ success has resulted from the company living these values consistently. as the country continues to sink into economic recession. creating store environments that are welcoming. 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. making human connections with their customers. but it faces serious weaknesses in the form of over-exposure. one cup. and one neighborhood at a time” (Starbucks. 2009). the world has become a very different place than it was in 1971 when it got its start.

3 Strengths Starbucks can attribute its success to two key factors: people and environment. a place where “socializing and intellectual discussion. 2007). This relatively simple concept of treating customers and employees well seems intuitive. (Coffee and Farmer Equity) Practices–approved suppliers who are integrating our rigorous standards for sustainability throughout the coffee supply chain” (Schultz. Starbucks is investing in its future without compromising the environment and its limited resources.A. it translates into happier. How the two factors work well together is what makes the Starbucks experience so unique. . is the other key success factor. To provide excellent customer service. whether they are part-time or full-time. particularly among students and young urban professionals” (Isidro. whether they are customers or partners (employees). Environment is addressed in the mission statement as well. and they extend these benefits to the farmers and growers of the coffee sold in stores around the world (Karth). relax and enjoy the coffee drinking experience. Excellence through training ensures that customers‟ orders are correct. Starbucks cares about the external environment as well.E. both within the company and its stores and in the world at large. When employees know that their employer cares about their well-being. Starbucks used this strategy to great effect.F. “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). Customers feel welcome to stay. and employee mistakes are minimized. The attention and concern Starbucks pays to the concept of environment. The 2007 Annual Corporate Social Responsibility report published by the company states that “65 percent of our coffee was purchased from C. People. 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). 2004) is encouraged. By ensuring sustainable coffee production. Starbucks also provides its employees with excellent benefits. emphasizing how important it is to the fundamental concept of the company. are central to the company‟s mission statement. but this is exactly where many companies lose focus. more productive workers.

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

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

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. including 350 at its Seattle headquarters (The Business Journal. Because of this Starbucks had to lay off 6. However this came as no surprise for the employees of Starbucks. remains confident. Starbucks profits were also reported to have fallen from $208. stores (Associated Press. Threats The most significant threat the company faces today is the national economic downturn into recession. boutique coffee.1 million to $113 million (The Business Journal. 2009).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. 2009).S. Starbucks also announced plans to cut another 700 non-store jobs. to $2. store closures announced last year (The Business Journal.700 employees and closed 300 stores in addition to 600 U. Don Thompson. The research shows that there are markets out there that will support growth and expansion for Starbucks Corporation. 2009). Although hard to believe. Besides the lower price McDonalds sustained popularity of its coffee by its quick service. because of the worldwide recession Starbucks did announce store closures as well as employee layoffs would happen in 2009. president of McDonald‟s USA. saying “We want to move from beverages as an accompaniment to being a .6 billion. 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).50 cheaper than similar Starbucks offerings.S. 2009). Starbuck‟s competitors are taking advantage of the current economic state to position themselves as lower-cost alternatives to expensive. McDonald‟s premium coffee is one of Starbucks leading competitors.

2009). and give them the potential to become the world‟s largest chain of coffee houses.7 beverage destination” (Associated Press. These factors help give McDonald‟s premium coffee the edge in the coffee market compare to Starbucks. .

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

(2009). (2009. Consumers skip Starbucks for plain ol‟ joe. Sbux.yahoo. E. Starbucks. . Retrieved January 23. 2009. 2009 from http://adage. Retrieved January 26. from Yahoo Finance Website: http://finance. January 19).9 Yahoo Inc.com/article?article_id=133871.com/q?s=sbux York.

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