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University of Washington TBUS 330 February 2, 2009 Submitted by: Steven Thompson Submitted to: Dr. Vanessa C. M. Chio
creating store environments that are welcoming. important aspect of their business and success: “Starbucks is committed to a role of environmental leadership in all facets of our business. treating employees as partners in business. . Starbucks is committed to serving high quality coffee purchased from growers in an ethical manner. it has kept its mission statement clear and concise: “To inspire and nurture the human spirit. making human connections with their customers. 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. 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. The company‟s strengths are its commitment to the people and to the environment. being a responsible neighbor that is involved in the community and providing shareholders with the rewards of success (Starbucks. 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. However. as the country continues to sink into economic recession.one person. 2009). compromised brand image and high prices. and has a separate mission statement to address this progressive. Starbucks is recognized for being environmentally responsible. There are good opportunities for Starbucks to grow its business through expansion into foreign markets and attract investors with the relatively cheap stock prices. specifically McDonald‟s. 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.” Underlying both of these broad concepts is a set of core values that the company uses as a foundation for all their business practices.2 Starbucks Swot Analysis Starbucks is known around the world for bringing gourmet coffee and the coffeehouse experience to the masses.
Starbucks used this strategy to great effect.E. Environment is addressed in the mission statement as well. Customers feel welcome to stay. . Excellence through training ensures that customers‟ orders are correct. both within the company and its stores and in the world at large.3 Strengths Starbucks can attribute its success to two key factors: people and environment. 2004) is encouraged. whether they are part-time or full-time. The attention and concern Starbucks pays to the concept of environment. are central to the company‟s mission statement.F. The 2007 Annual Corporate Social Responsibility report published by the company states that “65 percent of our coffee was purchased from C. “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. Starbucks also provides its employees with excellent benefits. To provide excellent customer service. People. and they extend these benefits to the farmers and growers of the coffee sold in stores around the world (Karth). Starbucks is investing in its future without compromising the environment and its limited resources. emphasizing how important it is to the fundamental concept of the company. 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). is the other key success factor. How the two factors work well together is what makes the Starbucks experience so unique. 2007). whether they are customers or partners (employees). but this is exactly where many companies lose focus. particularly among students and young urban professionals” (Isidro.A. relax and enjoy the coffee drinking experience. By ensuring sustainable coffee production. Starbucks cares about the external environment as well. (Coffee and Farmer Equity) Practices–approved suppliers who are integrating our rigorous standards for sustainability throughout the coffee supply chain” (Schultz. and employee mistakes are minimized. more productive workers. When employees know that their employer cares about their well-being. it translates into happier. a place where “socializing and intellectual discussion.
According to The New York Times. Our Customers. 1). however this causes the cannibalization effect. 1).011 in 2007” (New York Times. the company does have three critical weaknesses.886 in 2002 to 15. “every street corner. nearly tripled the number of stores worldwide from 5. 2008. airport concourse and roadside rest stop in America seemed to attract a Starbucks… in [a] five year [time period]. 1). Around every corner. p. there is always a Starbucks store. This allows Starbucks to be visible to consumers. 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). p. 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. Since Starbucks has so many stores. Our Partner. They are moving away from the strategy of differentiation through quality and environment that set them apart from low-cost. Starbucks. 2008. A saturating strategy put an overwhelming amount of Starbucks stores within a small area of each other across the nation. This is over-exposure. if not two. This weakness is seen by Starbuck‟s product diversification. they started offering a variety of products other than coffee. Starbucks boomed for years and as customer traffic increased.4 Weaknesses Although Starbucks is widely known to be successful. Cannibalization is where Starbucks stores are now competing with each other (stealing business and customers away from other Starbucks locations). Starbucks has hurt their brand image by straying away from their core values which are Our Coffee. in every shopping complex. The first key weakness affecting Starbucks is store 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. . Store over-exposure has helped lead to a second significant weakness. Additionally. 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. the company is experiencing the cannibalizing effects of its saturating strategy (New York Times. which causes confusion. This change doesn‟t correspond directly with their mission to serve coffee. p. value restaurant chains.
Weakness” that. The final weakness Starbucks has is their prices. 2008).‟ said another…” (York. 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). Opportunities In spite of the weaknesses mentioned above. Given that most consumers see Starbucks coffee as an elastic product. The introduction of breakfast foods and pastries has caused confusion about their core values and thus damaged their brand image. One of the only ways that they will be able to continue to see a growth in sales is to look to foreign markets. 2009). ninety percent of consumes surveyed said they are cutting back on Starbucks coffee to save money (York. 2009). rather than in the domestic market. Starbucks does have opportunities available for growth and investment. Because of the economic slowdown and the increase in competition in the United States. and Our shareholders. it is not as risky for Starbucks to open new stores on the international scene. while annual growth of only six percent is expected in the United States” (2008).‟ said one respondent. Although there are some markets that are not taking a nose dive. Also according to the article. “Starbucks is aiming to raise its sales abroad by 20 percent per year over the next three years.5 Our stores.S. “„I started buying my coffee at less-expensive places. „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. One opportunity for Starbucks is continued expansion in the global market. 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. economy is. Erik Kirschbaum states in his article “Starbucks Says International Growth to Cushion U.S. for instance as . with many possible substitutes. Our Neighborhood. In an article published in Advertising Age. consumers were surveyed about their coffee choices. it is easy for consumers to switch from drinking Starbucks coffee to a substitute when they think it‟s too expensive.
2009). Besides the lower price McDonalds sustained popularity of its coffee by its quick service. including 350 at its Seattle headquarters (The Business Journal. Although hard to believe.S. McDonald‟s launched its own premium coffee about 3 years ago and added specialty coffee drinks to more than 800 of its U. The research shows that there are markets out there that will support growth and expansion for Starbucks Corporation. However this came as no surprise for the employees of Starbucks. because of the worldwide recession Starbucks did announce store closures as well as employee layoffs would happen in 2009. 2009).6 billion. to $2.6 Economy Watch stated. stores (Associated Press. “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. McDonald‟s premium coffee is one of Starbucks leading competitors. Threats The most significant threat the company faces today is the national economic downturn into recession. 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. Starbucks profits were also reported to have fallen from $208. saying “We want to move from beverages as an accompaniment to being a . 2009). boutique coffee. Starbuck‟s competitors are taking advantage of the current economic state to position themselves as lower-cost alternatives to expensive. store closures announced last year (The Business Journal. The company offered its premium coffee for about $0. remains confident. Because of this Starbucks had to lay off 6.1 million to $113 million (The Business Journal.700 employees and closed 300 stores in addition to 600 U. During the earnings report for the company‟s fiscal first quarter the company reported a 6 percent drop in revenue.50 cheaper than similar Starbucks offerings.S. 2009). Don Thompson.
and give them the potential to become the world‟s largest chain of coffee houses. These factors help give McDonald‟s premium coffee the edge in the coffee market compare to Starbucks.7 beverage destination” (Associated Press. . 2009).
from http://www. Matlack. Schultz. Retrieved February 4. Starbucks Says International Growth to Cushion U.com/ resources/marketing/articles/20050401/starbucks.8 References The Associated Press (2009). 2009 from http://www. 2009 from http://www. How Starbucks achieved its amazing success. From: http://triad. (n. Retrieved January 28.com/items/674277-how-starbucks-achieved-its-amazing-success. Retrieved January 26.reuters. July 2).1702277.com/globalbiz/content/jul2008/gb2008072_462789. I. October 24). E. 2009. 2009 from http://www. Our commitment to ethical coffee sourcing. Retrieved January 22.economywatch. Retrieved January 28.helium. Will Global Growth Help Starbucks.com/time/business/article/0.com/article/ousiv/ idUSL1614331820080616.com/world_economy/china/ Hanft. 2009. Tancer. Weakness.inc. Karth. 2009. Retrieved January 23.S. http://www. McDonald's.html.bizjournals.starbucks. (2007).time.htm?campaign_id= rss_daily The New York Times. http://www. Retrieved February 3.com/triad/stories/2009/01/26/daily44. Coffee clash: McDonald's takes on Starbucks. B.htm. Learning from Starbucks: 10 lessons for small businesses. 2009.html?ana=yfcpc . Retrieved January 24. Kirschbaum. 2009.businessweek. Retrieved February 3.com/aboutus/csrreport/Coffee_Report_PDF_FY07.com/mission/default. November 11).). The New York Times.html.powerhomebiz. Brewing Battle: Starbucks vs. 2009 from http://www. (2009).pdf. Starbucks Corporation. The Business Journal (2009). Our Starbucks mission. What you can learn from Starbucks.msnbc. Retrieved January 28.2009. Starbucks Corporation. (2008. 2009.8599. D. A. (2008). (2009).html.nytimes. H. from Economy Watch Web site: http://www. Retrieved January 28. Isidro. Carol.com/vol144/starbucks.d. (2008).msn. from http://www.com/topics/news/business/ companies/starbucks_corporation/index.asp. Retrieved January 24. (2004.starbucks.(2008. Starbucks to close 300 more stores.00.com/id/21837962/. China's Economy. from http://www. 2009 from http://topics.
(2009). Sbux. E.9 Yahoo Inc.com/q?s=sbux York. Retrieved January 26.com/article?article_id=133871. (2009. Retrieved January 23. Consumers skip Starbucks for plain ol‟ joe. . 2009. Starbucks. January 19).yahoo. from Yahoo Finance Website: http://finance. 2009 from http://adage.
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