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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. However. creating store environments that are welcoming. it has kept its mission statement clear and concise: “To inspire and nurture the human spirit. 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. making human connections with their customers. but it must addresses the threat that it faces from its lower-priced competitors. Starbucks is recognized for being environmentally responsible. the world has become a very different place than it was in 1971 when it got its start. as the country continues to sink into economic recession.2 Starbucks Swot Analysis Starbucks is known around the world for bringing gourmet coffee and the coffeehouse experience to the masses. important aspect of their business and success: “Starbucks is committed to a role of environmental leadership in all facets of our business. one cup. 2009). 2009) Starbucks‟ success has resulted from the company living these values consistently. Starbucks is committed to serving high quality coffee purchased from growers in an ethical manner. and one neighborhood at a time” (Starbucks. but it faces serious weaknesses in the form of over-exposure. compromised brand image and high prices. The company‟s strengths are its commitment to the people and to the environment.” Underlying both of these broad concepts is a set of core values that the company uses as a foundation for all their business practices. treating employees as partners in business.one person. and has a separate mission statement to address this progressive. 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. .
both within the company and its stores and in the world at large.A. Customers feel welcome to stay. The attention and concern Starbucks pays to the concept of environment. emphasizing how important it is to the fundamental concept of the company. more productive workers. People. relax and enjoy the coffee drinking experience. whether they are customers or partners (employees). but this is exactly where many companies lose focus. Excellence through training ensures that customers‟ orders are correct. 2007). it translates into happier. Environment is addressed in the mission statement as well. 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. “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). is the other key success factor. Starbucks cares about the external environment as well. 2004) is encouraged. When employees know that their employer cares about their well-being. The 2007 Annual Corporate Social Responsibility report published by the company states that “65 percent of our coffee was purchased from C.F. are central to the company‟s mission statement. This relatively simple concept of treating customers and employees well seems intuitive. . and they extend these benefits to the farmers and growers of the coffee sold in stores around the world (Karth). whether they are part-time or full-time. 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). How the two factors work well together is what makes the Starbucks experience so unique.3 Strengths Starbucks can attribute its success to two key factors: people and environment. Starbucks used this strategy to great effect. Starbucks also provides its employees with excellent benefits.E. and employee mistakes are minimized. a place where “socializing and intellectual discussion. To provide excellent customer service. particularly among students and young urban professionals” (Isidro. By ensuring sustainable coffee production.
having kiosks in busy grocery stores is at odds with Starbucks core value of creating an environment where people can gather and relax. Store over-exposure has helped lead to a second significant weakness. in every shopping complex. The first key weakness affecting Starbucks is store over-exposure. p. 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. there is always a Starbucks store. Starbucks boomed for years and as customer traffic increased. 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). A saturating strategy put an overwhelming amount of Starbucks stores within a small area of each other across the nation. 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. 1). 1). p. p. the company does have three critical weaknesses. Since Starbucks has so many stores. value restaurant chains. This weakness is seen by Starbuck‟s product diversification. Starbucks has hurt their brand image by straying away from their core values which are Our Coffee. This change doesn‟t correspond directly with their mission to serve coffee. if not two. “every street corner. Our Customers. Cannibalization is where Starbucks stores are now competing with each other (stealing business and customers away from other Starbucks locations). which causes confusion. Starbucks. . Additionally. This allows Starbucks to be visible to consumers. airport concourse and roadside rest stop in America seemed to attract a Starbucks… in [a] five year [time period]. nearly tripled the number of stores worldwide from 5. This is over-exposure. Our Partner.886 in 2002 to 15. the company is experiencing the cannibalizing effects of its saturating strategy (New York Times. however this causes the cannibalization effect.4 Weaknesses Although Starbucks is widely known to be successful. According to The New York Times. 2008. They are moving away from the strategy of differentiation through quality and environment that set them apart from low-cost. Around every corner. 2008. 1).011 in 2007” (New York Times.
S. 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. The introduction of breakfast foods and pastries has caused confusion about their core values and thus damaged their brand image. 2009).5 Our stores. it is not as risky for Starbucks to open new stores on the international scene. Starbucks does have opportunities available for growth and investment. Opportunities In spite of the weaknesses mentioned above. “„I started buying my coffee at less-expensive places. Although there are some markets that are not taking a nose dive. economy is. it is unlikely to expand or regain their dominance over the market share that they once had.S. with many possible substitutes. consumers were surveyed about their coffee choices. Erik Kirschbaum states in his article “Starbucks Says International Growth to Cushion U. One opportunity for Starbucks is continued expansion in the global market.‟ said another…” (York. One of the only ways that they will be able to continue to see a growth in sales is to look to foreign markets. ninety percent of consumes surveyed said they are cutting back on Starbucks coffee to save money (York. But even with the other markets starting to look grim just as the U. Because of the economic slowdown and the increase in competition in the United States. 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). 2009). for instance as . Our Neighborhood.‟ said one respondent. Also according to the article. In an article published in Advertising Age. while annual growth of only six percent is expected in the United States” (2008). it is easy for consumers to switch from drinking Starbucks coffee to a substitute when they think it‟s too expensive. and Our shareholders. Weakness” that. 2008). Given that most consumers see Starbucks coffee as an elastic product. “Starbucks is aiming to raise its sales abroad by 20 percent per year over the next three years. The final weakness Starbucks has is their prices. „I have it [only] once a week to indulge myself.
2009). to $2. Starbucks also announced plans to cut another 700 non-store jobs. The company offered its premium coffee for about $0. store closures announced last year (The Business Journal. 2009).S. president of McDonald‟s USA. 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.6 Economy Watch stated.6 billion. Besides the lower price McDonalds sustained popularity of its coffee by its quick service. During the earnings report for the company‟s fiscal first quarter the company reported a 6 percent drop in revenue. including 350 at its Seattle headquarters (The Business Journal.50 cheaper than similar Starbucks offerings. saying “We want to move from beverages as an accompaniment to being a . However this came as no surprise for the employees of Starbucks. The research shows that there are markets out there that will support growth and expansion for Starbucks Corporation.1 million to $113 million (The Business Journal. McDonald‟s premium coffee is one of Starbucks leading competitors. “Most analysts project China to become the largest economy in the world this century using all measures of GDP” (2007). remains confident. stores (Associated Press. 2009). because of the worldwide recession Starbucks did announce store closures as well as employee layoffs would happen in 2009. boutique coffee. Although hard to believe. Don Thompson. 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. 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).700 employees and closed 300 stores in addition to 600 U.S. Because of this Starbucks had to lay off 6.
2009). and give them the potential to become the world‟s largest chain of coffee houses. . These factors help give McDonald‟s premium coffee the edge in the coffee market compare to Starbucks.7 beverage destination” (Associated Press.
S. (2007).inc.2009. Retrieved January 28. Will Global Growth Help Starbucks.com/vol144/starbucks.html.msnbc. 2009.com/time/business/article/0.asp.msn. China's Economy. 2009.economywatch. B. Brewing Battle: Starbucks vs. Starbucks Says International Growth to Cushion U.com/world_economy/china/ Hanft. The New York Times. Learning from Starbucks: 10 lessons for small businesses.com/aboutus/csrreport/Coffee_Report_PDF_FY07.bizjournals. Isidro. (2009). 2009 from http://www. (2009).pdf. McDonald's. H. November 11).com/items/674277-how-starbucks-achieved-its-amazing-success. Retrieved January 28. October 24).com/article/ousiv/ idUSL1614331820080616.businessweek. Retrieved February 3. Starbucks Corporation. Retrieved January 23.). Our commitment to ethical coffee sourcing.reuters. Retrieved January 28. 2009 from http://www. Schultz.(2008. Matlack.helium. 2009 from http://www. 2009. 2009.starbucks.d.1702277.com/ resources/marketing/articles/20050401/starbucks. http://www. Retrieved January 26. (2008). (2008).powerhomebiz. What you can learn from Starbucks.com/id/21837962/. Tancer.time. (n. from http://www. 2009 from http://topics. from http://www. Retrieved February 3. D. from Economy Watch Web site: http://www. Retrieved January 22. July 2).html. 2009.starbucks. From: http://triad.00. Retrieved January 28.com/triad/stories/2009/01/26/daily44. The Business Journal (2009).nytimes. A. Retrieved February 4. Retrieved January 24. How Starbucks achieved its amazing success. 2009 from http://www.html. Karth. Coffee clash: McDonald's takes on Starbucks.htm?campaign_id= rss_daily The New York Times. Starbucks to close 300 more stores. (2008. Weakness. http://www. Starbucks Corporation. I. Retrieved January 24.htm.html?ana=yfcpc .com/topics/news/business/ companies/starbucks_corporation/index. 2009. Our Starbucks mission.8599. Carol.com/mission/default.8 References The Associated Press (2009). (2004.com/globalbiz/content/jul2008/gb2008072_462789. E. Kirschbaum. from http://www.
9 Yahoo Inc. 2009.com/q?s=sbux York. Retrieved January 23. January 19).com/article?article_id=133871.yahoo. (2009. Retrieved January 26. from Yahoo Finance Website: http://finance. Sbux. . E. Consumers skip Starbucks for plain ol‟ joe. (2009). 2009 from http://adage. Starbucks.
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