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University of Washington TBUS 330 February 2, 2009 Submitted by: Steven Thompson Submitted to: Dr. Vanessa C. M. Chio
specifically McDonald‟s. 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. and one neighborhood at a time” (Starbucks. but it faces serious weaknesses in the form of over-exposure. and has a separate mission statement to address this progressive. the world has become a very different place than it was in 1971 when it got its start. Starbucks is recognized for being environmentally responsible.2 Starbucks Swot Analysis Starbucks is known around the world for bringing gourmet coffee and the coffeehouse experience to the masses. 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. compromised brand image and high prices. As the company grew from a single store in Seattle‟s Pike Place Market to thousands of stores worldwide. 2009). However. 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 country continues to sink into economic recession. Starbucks is committed to serving high quality coffee purchased from growers in an ethical manner. . being a responsible neighbor that is involved in the community and providing shareholders with the rewards of success (Starbucks. 2009) Starbucks‟ success has resulted from the company living these values consistently.one person. making human connections with their customers.” Underlying both of these broad concepts is a set of core values that the company uses as a foundation for all their business practices. 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. creating store environments that are welcoming. one cup.
2007). (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. . and they extend these benefits to the farmers and growers of the coffee sold in stores around the world (Karth). emphasizing how important it is to the fundamental concept of the company. but this is exactly where many companies lose focus. relax and enjoy the coffee drinking experience. When employees know that their employer cares about their well-being. By ensuring sustainable coffee production. are central to the company‟s mission statement. Customers feel welcome to stay. Excellence through training ensures that customers‟ orders are correct.3 Strengths Starbucks can attribute its success to two key factors: people and environment. both within the company and its stores and in the world at large. People. Environment is addressed in the mission statement as well. 2004) is encouraged. whether they are part-time or full-time. particularly among students and young urban professionals” (Isidro. whether they are customers or partners (employees). How the two factors work well together is what makes the Starbucks experience so unique. Starbucks cares about the external environment as well. Starbucks also provides its employees with excellent benefits. “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). it translates into happier.E. This relatively simple concept of treating customers and employees well seems intuitive. The 2007 Annual Corporate Social Responsibility report published by the company states that “65 percent of our coffee was purchased from C. more productive workers. Starbucks used this strategy to great effect.A. is the other key success factor. 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).F. Starbucks is investing in its future without compromising the environment and its limited resources. a place where “socializing and intellectual discussion. To provide excellent customer service. The attention and concern Starbucks pays to the concept of environment.
nearly tripled the number of stores worldwide from 5. . This is over-exposure. however this causes the cannibalization effect. Cannibalization is where Starbucks stores are now competing with each other (stealing business and customers away from other Starbucks locations). 2008. A saturating strategy put an overwhelming amount of Starbucks stores within a small area of each other across the nation. 1). 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. they started offering a variety of products other than coffee. 2008. value restaurant chains. Our Partner.886 in 2002 to 15.011 in 2007” (New York Times. They are moving away from the strategy of differentiation through quality and environment that set them apart from low-cost. having kiosks in busy grocery stores is at odds with Starbucks core value of creating an environment where people can gather and relax. 1). 1).4 Weaknesses Although Starbucks is widely known to be successful. there is always a Starbucks store. Since Starbucks has so many stores. Store over-exposure has helped lead to a second significant weakness. This weakness is seen by Starbuck‟s product diversification. p. if not two. p. 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 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. This allows Starbucks to be visible to consumers. Starbucks boomed for years and as customer traffic increased. Around every corner. The first key weakness affecting Starbucks is store over-exposure. Additionally. According to The New York Times. p. in every shopping complex. 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. “every street corner. airport concourse and roadside rest stop in America seemed to attract a Starbucks… in [a] five year [time period]. Our Customers. Starbucks has hurt their brand image by straying away from their core values which are Our Coffee. the company does have three critical weaknesses. which causes confusion.
it is unlikely to expand or regain their dominance over the market share that they once had. „I have it [only] once a week to indulge myself. One opportunity for Starbucks is continued expansion in the global market. Starbucks does have opportunities available for growth and investment. Our Neighborhood. “„I started buying my coffee at less-expensive places. it is not as risky for Starbucks to open new stores on the international scene. 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). ninety percent of consumes surveyed said they are cutting back on Starbucks coffee to save money (York. consumers were surveyed about their coffee choices. 2009). Because of the economic slowdown and the increase in competition in the United States. economy is. But even with the other markets starting to look grim just as the U. “Starbucks is aiming to raise its sales abroad by 20 percent per year over the next three years. Erik Kirschbaum states in his article “Starbucks Says International Growth to Cushion U.5 Our stores. while annual growth of only six percent is expected in the United States” (2008).‟ said one respondent. with many possible substitutes. 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). The final weakness Starbucks has is their prices. Given that most consumers see Starbucks coffee as an elastic product. for instance as . The introduction of breakfast foods and pastries has caused confusion about their core values and thus damaged their brand image. 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.‟ said another…” (York.S. Although there are some markets that are not taking a nose dive.S. rather than in the domestic market. and Our shareholders. Also according to the article. Weakness” that. In an article published in Advertising Age. Opportunities In spite of the weaknesses mentioned above. it is easy for consumers to switch from drinking Starbucks coffee to a substitute when they think it‟s too expensive.
boutique coffee.700 employees and closed 300 stores in addition to 600 U. Starbucks profits were also reported to have fallen from $208. However this came as no surprise for the employees of Starbucks. “Most analysts project China to become the largest economy in the world this century using all measures of GDP” (2007). 2009). Starbucks also faced stiff competition for coffee drinkers from McDonald‟s and other fast-foot establishments which lead to another threat for the company.6 Economy Watch stated. The research shows that there are markets out there that will support growth and expansion for Starbucks Corporation. McDonald‟s premium coffee is one of Starbucks leading competitors. 2009). remains confident. McDonald‟s launched its own premium coffee about 3 years ago and added specialty coffee drinks to more than 800 of its U.6 billion. saying “We want to move from beverages as an accompaniment to being a . Although hard to believe. The company offered its premium coffee for about $0. stores (Associated Press.1 million to $113 million (The Business Journal.50 cheaper than similar Starbucks offerings. president of McDonald‟s USA. store closures announced last year (The Business Journal. During the earnings report for the company‟s fiscal first quarter the company reported a 6 percent drop in revenue.S. Starbuck‟s competitors are taking advantage of the current economic state to position themselves as lower-cost alternatives to expensive. to $2. Don Thompson. because of the worldwide recession Starbucks did announce store closures as well as employee layoffs would happen in 2009. Starbucks also announced plans to cut another 700 non-store jobs. 2009). Threats The most significant threat the company faces today is the national economic downturn into recession. Besides the lower price McDonalds sustained popularity of its coffee by its quick service. including 350 at its Seattle headquarters (The Business Journal. Because of this Starbucks had to lay off 6.S. 2009).
7 beverage destination” (Associated Press. 2009). 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. .
Retrieved January 28.1702277.com/topics/news/business/ companies/starbucks_corporation/index. from http://www. November 11).2009. 2009. Retrieved January 28. Karth. 2009 from http://www.htm?campaign_id= rss_daily The New York Times.com/aboutus/csrreport/Coffee_Report_PDF_FY07.8599. (2004.time. The Business Journal (2009). Starbucks Corporation.html.com/vol144/starbucks.pdf. from Economy Watch Web site: http://www.com/ resources/marketing/articles/20050401/starbucks. (n.msnbc.reuters. Will Global Growth Help Starbucks.8 References The Associated Press (2009).bizjournals. (2008). Our commitment to ethical coffee sourcing. Starbucks Says International Growth to Cushion U.helium. McDonald's. Retrieved January 23. 2009. Our Starbucks mission. What you can learn from Starbucks. Retrieved February 3. From: http://triad.S.starbucks. Tancer. Retrieved February 4. 2009 from http://topics. D.nytimes.starbucks. I. http://www. (2009).com/id/21837962/. 2009. from http://www.com/time/business/article/0. Carol. (2007).html.msn. Retrieved January 28. B.com/article/ousiv/ idUSL1614331820080616. Starbucks to close 300 more stores. E. October 24). 2009. The New York Times.asp.inc. Retrieved January 26. Isidro. 2009 from http://www. Schultz. Matlack. Retrieved January 24. Learning from Starbucks: 10 lessons for small businesses.powerhomebiz.economywatch.businessweek.html.(2008. 2009. (2008. Starbucks Corporation. from http://www.com/items/674277-how-starbucks-achieved-its-amazing-success. Retrieved January 28.com/mission/default. Retrieved January 24.com/globalbiz/content/jul2008/gb2008072_462789.com/triad/stories/2009/01/26/daily44. July 2). 2009. Kirschbaum. A. Retrieved January 22.htm. Retrieved February 3. 2009 from http://www. China's Economy.00.d. Coffee clash: McDonald's takes on Starbucks.html?ana=yfcpc . (2008). Brewing Battle: Starbucks vs. How Starbucks achieved its amazing success. 2009 from http://www.com/world_economy/china/ Hanft. http://www.). H. (2009). Weakness.
E. 2009 from http://adage. Sbux.yahoo.com/q?s=sbux York. (2009). Starbucks.com/article?article_id=133871. Consumers skip Starbucks for plain ol‟ joe. .9 Yahoo Inc. Retrieved January 26. January 19). 2009. from Yahoo Finance Website: http://finance. (2009. Retrieved January 23.
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