Starbucks Swot Analysis

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

Starbucks is committed to serving high quality coffee purchased from growers in an ethical manner.” Underlying both of these broad concepts is a set of core values that the company uses as a foundation for all their business practices. the world has become a very different place than it was in 1971 when it got its start. 2009). one cup. and has a separate mission statement to address this progressive. 2009) Starbucks‟ success has resulted from the company living these values consistently. The company‟s strengths are its commitment to the people and to the environment.2 Starbucks Swot Analysis Starbucks is known around the world for bringing gourmet coffee and the coffeehouse experience to the masses. but it faces serious weaknesses in the form of over-exposure. 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 must addresses the threat that it faces from its lower-priced competitors. making human connections with their customers. However. treating employees as partners in business.one person. As the company grew from a single store in Seattle‟s Pike Place Market to thousands of stores worldwide. compromised brand image and high prices. . Starbucks is recognized for being environmentally responsible. as the country continues to sink into economic recession. 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. being a responsible neighbor that is involved in the community and providing shareholders with the rewards of success (Starbucks. 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. and one neighborhood at a time” (Starbucks. it has kept its mission statement clear and concise: “To inspire and nurture the human spirit.

The 2007 Annual Corporate Social Responsibility report published by the company states that “65 percent of our coffee was purchased from C. is the other key success factor. but this is exactly where many companies lose focus. How the two factors work well together is what makes the Starbucks experience so unique. more productive workers. particularly among students and young urban professionals” (Isidro. Starbucks cares about the external environment as well. whether they are customers or partners (employees). People. “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.E. When employees know that their employer cares about their well-being. 2004) is encouraged. The attention and concern Starbucks pays to the concept of environment. . Environment is addressed in the mission statement as well. Excellence through training ensures that customers‟ orders are correct.F.3 Strengths Starbucks can attribute its success to two key factors: people and environment. are central to the company‟s mission statement. 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). it translates into happier. whether they are part-time or full-time. and they extend these benefits to the farmers and growers of the coffee sold in stores around the world (Karth). Starbucks also provides its employees with excellent benefits. By ensuring sustainable coffee production. relax and enjoy the coffee drinking experience. and employee mistakes are minimized.A. a place where “socializing and intellectual discussion. To provide excellent customer service. emphasizing how important it is to the fundamental concept of the company. This relatively simple concept of treating customers and employees well seems intuitive. 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. Starbucks used this strategy to great effect. both within the company and its stores and in the world at large. 2007).

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

2009).S. One of the only ways that they will be able to continue to see a growth in sales is to look to foreign markets. it is easy for consumers to switch from drinking Starbucks coffee to a substitute when they think it‟s too expensive. “„I started buying my coffee at less-expensive places. 2009). “Starbucks is aiming to raise its sales abroad by 20 percent per year over the next three years. 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. The final weakness Starbucks has is their prices. 2008). Our Neighborhood. consumers were surveyed about their coffee choices.‟ said one respondent. 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. Also according to the article. economy is. while annual growth of only six percent is expected in the United States” (2008). But even with the other markets starting to look grim just as the U. 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. with many possible substitutes. Opportunities In spite of the weaknesses mentioned above. ninety percent of consumes surveyed said they are cutting back on Starbucks coffee to save money (York. 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.S. Erik Kirschbaum states in his article “Starbucks Says International Growth to Cushion U. 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. „I have it [only] once a week to indulge myself. and Our shareholders.‟ said another…” (York. Weakness” that. rather than in the domestic market. for instance as .5 Our stores. it is unlikely to expand or regain their dominance over the market share that they once had. In an article published in Advertising Age.

“Most analysts project China to become the largest economy in the world this century using all measures of GDP” (2007). The company offered its premium coffee for about $0. store closures announced last year (The Business Journal.1 million to $113 million (The Business Journal. 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. However this came as no surprise for the employees of Starbucks. During the earnings report for the company‟s fiscal first quarter the company reported a 6 percent drop in revenue.6 Economy Watch stated. Threats The most significant threat the company faces today is the national economic downturn into recession. 2009). Starbucks profits were also reported to have fallen from $208.700 employees and closed 300 stores in addition to 600 U.50 cheaper than similar Starbucks offerings. stores (Associated Press. to $2.6 billion. Besides the lower price McDonalds sustained popularity of its coffee by its quick service. president of McDonald‟s USA. 2009).S. Don Thompson. including 350 at its Seattle headquarters (The Business Journal. 2009). The research shows that there are markets out there that will support growth and expansion for Starbucks Corporation. Starbucks also faced stiff competition for coffee drinkers from McDonald‟s and other fast-foot establishments which lead to another threat for the company. Because of this Starbucks had to lay off 6. McDonald‟s premium coffee is one of Starbucks leading competitors. 2009). remains confident. boutique coffee.S. Although hard to believe. McDonald‟s launched its own premium coffee about 3 years ago and added specialty coffee drinks to more than 800 of its U. Starbuck‟s competitors are taking advantage of the current economic state to position themselves as lower-cost alternatives to expensive. saying “We want to move from beverages as an accompaniment to being a .

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. 2009).

McDonald's. From: http://triad. Retrieved January 28.8 References The Associated Press (2009).msn. 2009. from http://www. July 2). Learning from Starbucks: 10 lessons for small businesses.html. E. 2009 from http://www. October 24). Retrieved January 28. 2009. 2009 from http://www.htm. Retrieved February 3. Retrieved January 24.2009.starbucks. Carol. Retrieved January 28. B.inc. 2009 from http://www. (2009). 2009.html?ana=yfcpc . November 11). Retrieved January 24. The Business Journal (2009). 2009 from http://topics.1702277. (2004. How Starbucks achieved its amazing success.com/aboutus/csrreport/Coffee_Report_PDF_FY07.(2008. 2009.pdf. H.com/globalbiz/content/jul2008/gb2008072_462789. (n. Karth.com/article/ousiv/ idUSL1614331820080616.helium.com/time/business/article/0.businessweek.asp. Starbucks Corporation. from http://www.msnbc. (2008). Schultz. 2009 from http://www. from http://www. from Economy Watch Web site: http://www.S. What you can learn from Starbucks.com/world_economy/china/ Hanft. Starbucks Says International Growth to Cushion U. 2009.html.8599. (2009).nytimes.com/items/674277-how-starbucks-achieved-its-amazing-success. Retrieved January 23. Brewing Battle: Starbucks vs. Retrieved January 22.time. (2008).htm?campaign_id= rss_daily The New York Times. China's Economy.com/id/21837962/. 2009.com/triad/stories/2009/01/26/daily44. I.com/topics/news/business/ companies/starbucks_corporation/index.com/mission/default. Kirschbaum.com/vol144/starbucks. http://www. (2008. Weakness. Retrieved January 28.00. (2007).powerhomebiz.economywatch. Isidro.).bizjournals. Our commitment to ethical coffee sourcing. Coffee clash: McDonald's takes on Starbucks. Our Starbucks mission.html. A. Will Global Growth Help Starbucks. D. Retrieved January 26. Retrieved February 3. Tancer. http://www.reuters.starbucks. Starbucks Corporation. Retrieved February 4. Matlack.com/ resources/marketing/articles/20050401/starbucks.d. Starbucks to close 300 more stores. The New York Times.

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

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