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University of Washington TBUS 330 February 2, 2009 Submitted by: Steven Thompson Submitted to: Dr. Vanessa C. M. Chio
2 Starbucks Swot Analysis Starbucks is known around the world for bringing gourmet coffee and the coffeehouse experience to the masses. However. The company‟s strengths are its commitment to the people and to the environment. specifically McDonald‟s. 2009) Starbucks‟ success has resulted from the company living these values consistently. one cup. making human connections with their customers. . as the country continues to sink into economic recession. creating store environments that are welcoming. and has a separate mission statement to address this progressive. 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 person. and one neighborhood at a time” (Starbucks. being a responsible neighbor that is involved in the community and providing shareholders with the rewards of success (Starbucks. As the company grew from a single store in Seattle‟s Pike Place Market to thousands of stores worldwide. 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 recognized for being environmentally responsible.” Underlying both of these broad concepts is a set of core values that the company uses as a foundation for all their business practices. 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 world has become a very different place than it was in 1971 when it got its start. 2009). but it must addresses the threat that it faces from its lower-priced competitors. but it faces serious weaknesses in the form of over-exposure. Starbucks is committed to serving high quality coffee purchased from growers in an ethical manner. compromised brand image and high prices. it has kept its mission statement clear and concise: “To inspire and nurture the human spirit.
“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). and employee mistakes are minimized. a place where “socializing and intellectual discussion. Starbucks is investing in its future without compromising the environment and its limited resources. How the two factors work well together is what makes the Starbucks experience so unique. is the other key success factor. (Coffee and Farmer Equity) Practices–approved suppliers who are integrating our rigorous standards for sustainability throughout the coffee supply chain” (Schultz.F. This relatively simple concept of treating customers and employees well seems intuitive. Starbucks cares about the external environment as well. 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). particularly among students and young urban professionals” (Isidro. 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.A. are central to the company‟s mission statement. The attention and concern Starbucks pays to the concept of environment. 2007). both within the company and its stores and in the world at large. . Customers feel welcome to stay. Starbucks used this strategy to great effect. Environment is addressed in the mission statement as well. whether they are customers or partners (employees). People.E. The 2007 Annual Corporate Social Responsibility report published by the company states that “65 percent of our coffee was purchased from C. whether they are part-time or full-time. To provide excellent customer service. By ensuring sustainable coffee production. relax and enjoy the coffee drinking experience. it translates into happier. more productive workers.3 Strengths Starbucks can attribute its success to two key factors: people and environment. When employees know that their employer cares about their well-being. Excellence through training ensures that customers‟ orders are correct. but this is exactly where many companies lose focus. 2004) is encouraged. emphasizing how important it is to the fundamental concept of the company.
the company does have three critical weaknesses. p. 1). 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. Starbucks boomed for years and as customer traffic increased. This allows Starbucks to be visible to consumers. p.886 in 2002 to 15.4 Weaknesses Although Starbucks is widely known to be successful. 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. “every street corner. Around every corner. 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. they started offering a variety of products other than coffee. nearly tripled the number of stores worldwide from 5. there is always a Starbucks store. . They are moving away from the strategy of differentiation through quality and environment that set them apart from low-cost. 1). value restaurant chains. 1). Additionally. 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). 2008. This weakness is seen by Starbuck‟s product diversification. The first key weakness affecting Starbucks is store over-exposure. According to The New York Times. Cannibalization is where Starbucks stores are now competing with each other (stealing business and customers away from other Starbucks locations). Our Partner. the company is experiencing the cannibalizing effects of its saturating strategy (New York Times. Since Starbucks has so many stores. which causes confusion. p. This change doesn‟t correspond directly with their mission to serve coffee. Store over-exposure has helped lead to a second significant weakness. Starbucks. 2008. Our Customers. if not two. however this causes the cannibalization effect. airport concourse and roadside rest stop in America seemed to attract a Starbucks… in [a] five year [time period]. in every shopping complex.011 in 2007” (New York Times. This is over-exposure.
Although there are some markets that are not taking a nose dive. while annual growth of only six percent is expected in the United States” (2008). economy is.‟ said one respondent. “Starbucks is aiming to raise its sales abroad by 20 percent per year over the next three years. for instance as . 2009). it is easy for consumers to switch from drinking Starbucks coffee to a substitute when they think it‟s too expensive. Weakness” that. Given that most consumers see Starbucks coffee as an elastic product. it is unlikely to expand or regain their dominance over the market share that they once had. The final weakness Starbucks has is their prices.‟ said another…” (York. it is not as risky for Starbucks to open new stores on the international scene.S. Starbucks does have opportunities available for growth and investment. 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). But even with the other markets starting to look grim just as the U.S. and Our shareholders. Also according to the article. ninety percent of consumes surveyed said they are cutting back on Starbucks coffee to save money (York. rather than in the domestic market. 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. 2009). In an article published in Advertising Age.5 Our stores. Opportunities In spite of the weaknesses mentioned above. with many possible substitutes. Our Neighborhood. consumers were surveyed about their coffee choices. Erik Kirschbaum states in his article “Starbucks Says International Growth to Cushion U. “„I started buying my coffee at less-expensive places. Because of the economic slowdown and the increase in competition in the United States. One of the only ways that they will be able to continue to see a growth in sales is to look to foreign markets. One opportunity for Starbucks is continued expansion in the global market. The introduction of breakfast foods and pastries has caused confusion about their core values and thus damaged their brand image. 2008). „I have it [only] once a week to indulge myself.
S. store closures announced last year (The Business Journal.1 million to $113 million (The Business Journal. Don Thompson. including 350 at its Seattle headquarters (The Business Journal. “Most analysts project China to become the largest economy in the world this century using all measures of GDP” (2007). Threats The most significant threat the company faces today is the national economic downturn into recession. The company offered its premium coffee for about $0. However this came as no surprise for the employees of Starbucks. McDonald‟s launched its own premium coffee about 3 years ago and added specialty coffee drinks to more than 800 of its U.50 cheaper than similar Starbucks offerings. because of the worldwide recession Starbucks did announce store closures as well as employee layoffs would happen in 2009. boutique coffee. Besides the lower price McDonalds sustained popularity of its coffee by its quick service. stores (Associated Press. 2009). The research shows that there are markets out there that will support growth and expansion for Starbucks Corporation. president of McDonald‟s USA. Although hard to believe.700 employees and closed 300 stores in addition to 600 U. Because of this Starbucks had to lay off 6. Starbuck‟s competitors are taking advantage of the current economic state to position themselves as lower-cost alternatives to expensive.6 billion. Starbucks also announced plans to cut another 700 non-store jobs. 2009). Starbucks profits were also reported to have fallen from $208. saying “We want to move from beverages as an accompaniment to being a . 2009). to $2. 2009). McDonald‟s premium coffee is one of Starbucks leading competitors. Starbucks also faced stiff competition for coffee drinkers from McDonald‟s and other fast-foot establishments which lead to another threat for the company. remains confident.6 Economy Watch stated. During the earnings report for the company‟s fiscal first quarter the company reported a 6 percent drop in revenue.S.
7 beverage destination” (Associated Press. These factors help give McDonald‟s premium coffee the edge in the coffee market compare to Starbucks. . 2009). and give them the potential to become the world‟s largest chain of coffee houses.
(2008. The New York Times. 2009 from http://www. from http://www.html. McDonald's. Starbucks to close 300 more stores. Our commitment to ethical coffee sourcing.html. from Economy Watch Web site: http://www. H. (2008.nytimes.com/article/ousiv/ idUSL1614331820080616.com/aboutus/csrreport/Coffee_Report_PDF_FY07. I. 2009. Starbucks Corporation. Isidro. From: http://triad. Matlack. Starbucks Says International Growth to Cushion U. 2009. 2009. Starbucks Corporation. How Starbucks achieved its amazing success.8599. 2009 from http://topics.1702277.reuters.htm?campaign_id= rss_daily The New York Times.8 References The Associated Press (2009).com/id/21837962/. (2008). 2009. (n. (2009). Brewing Battle: Starbucks vs. (2009).powerhomebiz. October 24). China's Economy. 2009. Retrieved January 26. Retrieved February 4.inc.htm. E.com/triad/stories/2009/01/26/daily44. Tancer. Karth.com/globalbiz/content/jul2008/gb2008072_462789. Retrieved January 24.economywatch. Schultz.2009.html?ana=yfcpc . Coffee clash: McDonald's takes on Starbucks. Retrieved January 28.com/ resources/marketing/articles/20050401/starbucks.msn. Retrieved January 28. Our Starbucks mission. Kirschbaum.com/time/business/article/0. Retrieved January 24. Weakness.com/vol144/starbucks. Retrieved February 3. Learning from Starbucks: 10 lessons for small businesses. A. Retrieved January 23.helium.starbucks.00.bizjournals.pdf.msnbc.html. Carol.starbucks. (2008). Retrieved January 22. 2009 from http://www.com/items/674277-how-starbucks-achieved-its-amazing-success.time. http://www. from http://www.).com/world_economy/china/ Hanft. Retrieved February 3. Retrieved January 28.d. B. Will Global Growth Help Starbucks. from http://www.S. What you can learn from Starbucks. 2009 from http://www. November 11). The Business Journal (2009).com/topics/news/business/ companies/starbucks_corporation/index. (2004. 2009.com/mission/default. 2009 from http://www. http://www. D.asp.businessweek. Retrieved January 28. (2007). July 2).
(2009). Sbux. . Consumers skip Starbucks for plain ol‟ joe. Retrieved January 23. 2009 from http://adage.com/q?s=sbux York. (2009.9 Yahoo Inc. Retrieved January 26.com/article?article_id=133871. Starbucks.yahoo. January 19). from Yahoo Finance Website: http://finance. 2009. E.