Starbucks Swot Analysis

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

as the country continues to sink into economic recession. 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. making human connections with their customers. treating employees as partners in business. creating store environments that are welcoming. and has a separate mission statement to address this progressive. 2009) Starbucks‟ success has resulted from the company living these values consistently. important aspect of their business and success: “Starbucks is committed to a role of environmental leadership in all facets of our business. However. As the company grew from a single store in Seattle‟s Pike Place Market to thousands of stores worldwide. but it must addresses the threat that it faces from its lower-priced competitors. specifically McDonald‟s. but it faces serious weaknesses in the form of over-exposure. Starbucks is recognized for being environmentally responsible. and one neighborhood at a time” (Starbucks. one cup. 2009). 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. being a responsible neighbor that is involved in the community and providing shareholders with the rewards of success (Starbucks. compromised brand image and high person. The company‟s strengths are its commitment to the people and to the environment. 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.2 Starbucks Swot Analysis Starbucks is known around the world for bringing gourmet coffee and the coffeehouse experience to the masses. it has kept its mission statement clear and concise: “To inspire and nurture the human spirit. .

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

2008. 1). They are moving away from the strategy of differentiation through quality and environment that set them apart from low-cost. 1). “every street corner. Store over-exposure has helped lead to a second significant weakness. having kiosks in busy grocery stores is at odds with Starbucks core value of creating an environment where people can gather and relax. Our Customers. the company does have three critical weaknesses. A saturating strategy put an overwhelming amount of Starbucks stores within a small area of each other across the nation. nearly tripled the number of stores worldwide from 5.4 Weaknesses Although Starbucks is widely known to be successful. Starbucks boomed for years and as customer traffic increased. Starbucks has hurt their brand image by straying away from their core values which are Our Coffee. The first key weakness affecting Starbucks is store over-exposure. if not two. Starbucks. airport concourse and roadside rest stop in America seemed to attract a Starbucks… in [a] five year [time period]. they started offering a variety of products other than coffee. p. value restaurant chains. This allows Starbucks to be visible to consumers. . there is always a Starbucks store. 1). which causes confusion. the company is experiencing the cannibalizing effects of its saturating strategy (New York Times. Our Partner. According to The New York Times. Since Starbucks has so many stores. Cannibalization is where Starbucks stores are now competing with each other (stealing business and customers away from other Starbucks locations). Additionally. This change doesn‟t correspond directly with their mission to serve coffee. 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). 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. This is over-exposure. however this causes the cannibalization effect. p. in every shopping complex. 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.011 in 2007” (New York Times. This weakness is seen by Starbuck‟s product diversification.886 in 2002 to 15. 2008.

5 Our stores. Weakness” that. 2008). 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). The introduction of breakfast foods and pastries has caused confusion about their core values and thus damaged their brand image. Also according to the article. consumers were surveyed about their coffee choices. Starbucks does have opportunities available for growth and investment. while annual growth of only six percent is expected in the United States” (2008). rather than in the domestic market. Erik Kirschbaum states in his article “Starbucks Says International Growth to Cushion U. One of the only ways that they will be able to continue to see a growth in sales is to look to foreign markets.‟ said one respondent. and Our shareholders.S. But even with the other markets starting to look grim just as the U. ninety percent of consumes surveyed said they are cutting back on Starbucks coffee to save money (York. 2009).S. economy is. „I have it [only] once a week to indulge myself. Although there are some markets that are not taking a nose dive. with many possible substitutes. “„I started buying my coffee at less-expensive places. Opportunities In spite of the weaknesses mentioned above. In an article published in Advertising Age. One opportunity for Starbucks is continued expansion in the global market. it is easy for consumers to switch from drinking Starbucks coffee to a substitute when they think it‟s too expensive. “Starbucks is aiming to raise its sales abroad by 20 percent per year over the next three years. it is unlikely to expand or regain their dominance over the market share that they once had. Because of the economic slowdown and the increase in competition in the United States. 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. for instance as . The final weakness Starbucks has is their prices. Our Neighborhood.‟ said another…” (York. Given that most consumers see Starbucks coffee as an elastic product. 2009). it is not as risky for Starbucks to open new stores on the international scene.

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). 2009). president of McDonald‟s USA. 2009). stores (Associated Press. During the earnings report for the company‟s fiscal first quarter the company reported a 6 percent drop in revenue. store closures announced last year (The Business Journal. Besides the lower price McDonalds sustained popularity of its coffee by its quick service. Although hard to believe. boutique coffee. The research shows that there are markets out there that will support growth and expansion for Starbucks Corporation. 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.6 Economy Watch stated.S. The company offered its premium coffee for about $0. to $2.1 million to $113 million (The Business Journal. Threats The most significant threat the company faces today is the national economic downturn into recession. Starbucks profits were also reported to have fallen from $208. However this came as no surprise for the employees of Starbucks. Don Thompson. 2009). Starbucks also announced plans to cut another 700 non-store jobs. Starbuck‟s competitors are taking advantage of the current economic state to position themselves as lower-cost alternatives to expensive. because of the worldwide recession Starbucks did announce store closures as well as employee layoffs would happen in 2009.6 billion. Because of this Starbucks had to lay off 6.700 employees and closed 300 stores in addition to 600 U.50 cheaper than similar Starbucks offerings. saying “We want to move from beverages as an accompaniment to being a . remains confident. “Most analysts project China to become the largest economy in the world this century using all measures of GDP” (2007). McDonald‟s premium coffee is one of Starbucks leading competitors.S.

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

(2009). China's Hanft. Starbucks Says International Growth to Cushion U. From: http://triad.starbucks.businessweek. 2009.1702277.starbucks. Tancer. 2009 from http://www. The Business Journal (2009). McDonald's. The New York Times.msnbc. (n. Starbucks Corporation.pdf.htm?campaign_id= rss_daily The New York Times. Retrieved February 3. Retrieved January 28. 2009. Retrieved January 24. Brewing Battle: Starbucks vs. D. Our Starbucks mission.8 References The Associated Press (2009). Retrieved January 24. idUSL1614331820080616.(2008. Retrieved January 28. Retrieved January 22. Starbucks Carol. Retrieved January 28. November 11).html. from Economy Watch Web site: http://www. B. October 24). resources/marketing/articles/20050401/starbucks. (2007). http://www. 2009 from http://www. H. Retrieved January Retrieved February 3. 2009. Retrieved February 4. Starbucks to close 300 more stores. 2009 from http://www. Schultz.html?ana=yfcpc .powerhomebiz. E. Weakness. Learning from Starbucks: 10 lessons for small businesses. (2008.nytimes.2009. 2009 from http://topics.msn.). Retrieved January companies/starbucks_corporation/index. What you can learn from Starbucks. 2009. from http://www. I. from http://www.d.html. (2009). 2009 from http://www. Isidro. (2008). from http://www. How Starbucks achieved its amazing success.html. Our commitment to ethical coffee sourcing. (2008).com/id/21837962/.com/triad/stories/2009/01/26/daily44. Will Global Growth Help Starbucks. July 2). (2004. Coffee clash: McDonald's takes on Starbucks.economywatch.bizjournals.8599. Retrieved January 28.helium. 2009.

2009 from http://adage.9 Yahoo York. Starbucks. (2009). Retrieved January January 19). from Yahoo Finance Website: http://finance. Retrieved January 23. E. Consumers skip Starbucks for plain ol‟ joe. . 2009. (2009. Sbux.

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