Starbucks Swot Analysis

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

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

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

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

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

2009). stores (Associated Press.700 employees and closed 300 stores in addition to 600 U.6 billion. 2009). Besides the lower price McDonalds sustained popularity of its coffee by its quick service.50 cheaper than similar Starbucks offerings. Because of this Starbucks had to lay off 6. “Most analysts project China to become the largest economy in the world this century using all measures of GDP” (2007).1 million to $113 million (The Business Journal. president of McDonald‟s USA.6 Economy Watch stated. 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. to $2. Threats The most significant threat the company faces today is the national economic downturn into recession. Although hard to believe. saying “We want to move from beverages as an accompaniment to being a . Don Thompson. The research shows that there are markets out there that will support growth and expansion for Starbucks Corporation.S. 2009). Starbuck‟s competitors are taking advantage of the current economic state to position themselves as lower-cost alternatives to expensive. store closures announced last year (The Business Journal. 2009). McDonald‟s launched its own premium coffee about 3 years ago and added specialty coffee drinks to more than 800 of its U. However this came as no surprise for the employees of Starbucks. Starbucks also announced plans to cut another 700 non-store jobs.S. The company offered its premium coffee for about $0. remains confident. including 350 at its Seattle headquarters (The Business Journal. During the earnings report for the company‟s fiscal first quarter the company reported a 6 percent drop in revenue. because of the worldwide recession Starbucks did announce store closures as well as employee layoffs would happen in 2009. Starbucks profits were also reported to have fallen from $208. boutique coffee.

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

html. Retrieved January 24. 2009 from http://www. Kirschbaum. (2007).powerhomebiz.com/triad/stories/2009/01/26/daily44.com/mission/default. 2009 from http://www. 2009 from http://topics. Weakness.msn. A.com/vol144/starbucks. From: http://triad. Karth.com/items/674277-how-starbucks-achieved-its-amazing-success. Retrieved January 23. B. D. What you can learn from Starbucks. Retrieved January 28. 2009.com/world_economy/china/ Hanft. Retrieved January 28. Schultz. Starbucks to close 300 more stores. H.nytimes.(2008. (2008).starbucks. Retrieved January 24.html. Retrieved January 22. How Starbucks achieved its amazing success. Coffee clash: McDonald's takes on Starbucks. Will Global Growth Help Starbucks. http://www. 2009 from http://www. Retrieved February 3.2009. I. (2004. Retrieved January 28. October 24). Retrieved January 26.starbucks. Tancer. China's Economy.bizjournals. Starbucks Corporation. (n. 2009. 2009.com/article/ousiv/ idUSL1614331820080616.time. Carol.com/aboutus/csrreport/Coffee_Report_PDF_FY07.htm. Starbucks Corporation. from http://www. 2009. Brewing Battle: Starbucks vs.8599. from Economy Watch Web site: http://www.S. (2008). November 11). http://www. Retrieved February 3.htm?campaign_id= rss_daily The New York Times. (2009).html?ana=yfcpc . from http://www.). Starbucks Says International Growth to Cushion U. Isidro. E.00. Learning from Starbucks: 10 lessons for small businesses.businessweek.com/globalbiz/content/jul2008/gb2008072_462789. (2009). McDonald's.msnbc.com/ resources/marketing/articles/20050401/starbucks. Our commitment to ethical coffee sourcing.economywatch. from http://www. The Business Journal (2009).com/id/21837962/.pdf.html.reuters. 2009 from http://www. (2008.com/time/business/article/0. 2009. July 2).8 References The Associated Press (2009). Retrieved February 4.asp.helium. The New York Times.d.inc.1702277. Retrieved January 28.com/topics/news/business/ companies/starbucks_corporation/index. Our Starbucks mission. Matlack. 2009.

E.com/article?article_id=133871.9 Yahoo Inc. 2009 from http://adage. 2009. Retrieved January 26. (2009. Retrieved January 23. January 19). Starbucks. Sbux. Consumers skip Starbucks for plain ol‟ joe. .com/q?s=sbux York.yahoo. from Yahoo Finance Website: http://finance. (2009).

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