Starbucks Swot Analysis

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

2009).one person. The company‟s strengths are its commitment to the people and to the environment. making human connections with their customers. However. but it must addresses the threat that it faces from its lower-priced competitors. the world has become a very different place than it was in 1971 when it got its start. 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. There are good opportunities for Starbucks to grow its business through expansion into foreign markets and attract investors with the relatively cheap stock prices. important aspect of their business and success: “Starbucks is committed to a role of environmental leadership in all facets of our business. specifically McDonald‟s. as the country continues to sink into economic recession. being a responsible neighbor that is involved in the community and providing shareholders with the rewards of success (Starbucks. Starbucks is recognized for being environmentally responsible. 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. As the company grew from a single store in Seattle‟s Pike Place Market to thousands of stores worldwide. 2009) Starbucks‟ success has resulted from the company living these values consistently. . compromised brand image and high prices. one cup. but it faces serious weaknesses in the form of over-exposure. creating store environments that are welcoming. and one neighborhood at a time” (Starbucks.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. and has a separate mission statement to address this progressive. treating employees as partners in business.

The 2007 Annual Corporate Social Responsibility report published by the company states that “65 percent of our coffee was purchased from C. emphasizing how important it is to the fundamental concept of the company. Starbucks is investing in its future without compromising the environment and its limited resources. Starbucks cares about the external environment as well. How the two factors work well together is what makes the Starbucks experience so unique. To provide excellent customer service. particularly among students and young urban professionals” (Isidro. By ensuring sustainable coffee production. “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).F. but this is exactly where many companies lose focus.E. 2004) is encouraged. This relatively simple concept of treating customers and employees well seems intuitive. 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). .3 Strengths Starbucks can attribute its success to two key factors: people and environment. People. a place where “socializing and intellectual discussion. relax and enjoy the coffee drinking experience. whether they are customers or partners (employees). and they extend these benefits to the farmers and growers of the coffee sold in stores around the world (Karth). Customers feel welcome to stay. Excellence through training ensures that customers‟ orders are correct. Starbucks also provides its employees with excellent benefits. When employees know that their employer cares about their well-being. (Coffee and Farmer Equity) Practices–approved suppliers who are integrating our rigorous standards for sustainability throughout the coffee supply chain” (Schultz. both within the company and its stores and in the world at large. are central to the company‟s mission statement. whether they are part-time or full-time. Environment is addressed in the mission statement as well. is the other key success factor.A. Starbucks used this strategy to great effect. more productive workers. it translates into happier. and employee mistakes are minimized. The attention and concern Starbucks pays to the concept of environment. 2007).

This is over-exposure. 1). . airport concourse and roadside rest stop in America seemed to attract a Starbucks… in [a] five year [time period]. Starbucks. they started offering a variety of products other than coffee.4 Weaknesses Although Starbucks is widely known to be successful. Starbucks boomed for years and as customer traffic increased. 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. 1). Additionally. 1).011 in 2007” (New York Times. Our Customers.886 in 2002 to 15. “every street corner. the company does have three critical weaknesses. the company is experiencing the cannibalizing effects of its saturating strategy (New York Times. however this causes the cannibalization effect. The first key weakness affecting Starbucks is store over-exposure. This weakness is seen by Starbuck‟s product diversification. Around every corner. This allows Starbucks to be visible to consumers. A saturating strategy put an overwhelming amount of Starbucks stores within a small area of each other across the nation. there is always a Starbucks store. 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). which causes confusion. Starbucks has hurt their brand image by straying away from their core values which are Our Coffee. 2008. p. 2008. Store over-exposure has helped lead to a second significant weakness. if not two. According to The New York Times. in every shopping complex. p. Our Partner. Cannibalization is where Starbucks stores are now competing with each other (stealing business and customers away from other Starbucks locations). nearly tripled the number of stores worldwide from 5. Since Starbucks has so many stores. They are moving away from the strategy of differentiation through quality and environment that set them apart from low-cost. 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. value restaurant chains. having kiosks in busy grocery stores is at odds with Starbucks core value of creating an environment where people can gather and relax. p. This change doesn‟t correspond directly with their mission to serve coffee.

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

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. “Most analysts project China to become the largest economy in the world this century using all measures of GDP” (2007). 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. Besides the lower price McDonalds sustained popularity of its coffee by its quick service. store closures announced last year (The Business Journal. The company offered its premium coffee for about $0. During the earnings report for the company‟s fiscal first quarter the company reported a 6 percent drop in revenue.6 billion.S. 2009).1 million to $113 million (The Business Journal. to $2. However this came as no surprise for the employees of Starbucks. Although hard to believe. Don Thompson. saying “We want to move from beverages as an accompaniment to being a . including 350 at its Seattle headquarters (The Business Journal. Starbuck‟s competitors are taking advantage of the current economic state to position themselves as lower-cost alternatives to expensive. 2009). 2009). stores (Associated Press. Because of this Starbucks had to lay off 6. Threats The most significant threat the company faces today is the national economic downturn into recession. boutique coffee. president of McDonald‟s USA.S. remains confident. McDonald‟s premium coffee is one of Starbucks leading competitors. McDonald‟s launched its own premium coffee about 3 years ago and added specialty coffee drinks to more than 800 of its U. Starbucks profits were also reported to have fallen from $208.50 cheaper than similar Starbucks offerings.700 employees and closed 300 stores in addition to 600 U. The research shows that there are markets out there that will support growth and expansion for Starbucks Corporation. 2009).

2009). . 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.

Tancer. B.com/id/21837962/.helium. Carol.html. Starbucks Corporation. November 11).pdf.inc.com/aboutus/csrreport/Coffee_Report_PDF_FY07.bizjournals. E. What you can learn from Starbucks.html. (2008.com/mission/default. Retrieved February 3. Starbucks Says International Growth to Cushion U. (2007).msn. 2009. 2009 from http://topics. I. 2009 from http://www.com/article/ousiv/ idUSL1614331820080616.starbucks.8599.economywatch. Our Starbucks mission. (2008).com/items/674277-how-starbucks-achieved-its-amazing-success.businessweek.S. The Business Journal (2009).(2008.00. (2008). Weakness.com/world_economy/china/ Hanft.htm?campaign_id= rss_daily The New York Times.asp. Retrieved February 4. Kirschbaum.starbucks. Retrieved January 24.com/ resources/marketing/articles/20050401/starbucks.htm.com/triad/stories/2009/01/26/daily44.com/topics/news/business/ companies/starbucks_corporation/index. Matlack. Retrieved January 22.html.2009. From: http://triad. 2009 from http://www. Karth. 2009. 2009.8 References The Associated Press (2009).msnbc.nytimes. 2009 from http://www. McDonald's. Our commitment to ethical coffee sourcing. from http://www. Coffee clash: McDonald's takes on Starbucks. Retrieved January 24. H. from Economy Watch Web site: http://www.time.d. http://www. 2009. (2009). (n.).com/vol144/starbucks.html?ana=yfcpc . Isidro. The New York Times. A. (2009).com/globalbiz/content/jul2008/gb2008072_462789. July 2). http://www. How Starbucks achieved its amazing success.1702277.com/time/business/article/0. 2009. Retrieved January 26. Learning from Starbucks: 10 lessons for small businesses. China's Economy. from http://www. Will Global Growth Help Starbucks. October 24). 2009 from http://www. Retrieved January 28. from http://www. Retrieved January 28. D. Schultz. Retrieved February 3. Retrieved January 23. Starbucks Corporation. 2009. (2004.reuters.powerhomebiz. Starbucks to close 300 more stores. Retrieved January 28. Retrieved January 28. Brewing Battle: Starbucks vs.

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

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