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University of Washington TBUS 330 February 2, 2009 Submitted by: Steven Thompson Submitted to: Dr. Vanessa C. M. Chio
and has a separate mission statement to address this progressive. As the company grew from a single store in Seattle‟s Pike Place Market to thousands of stores worldwide. treating employees as partners in business. and one neighborhood at a time” (Starbucks. The company‟s strengths are its commitment to the people and to the environment. the world has become a very different place than it was in 1971 when it got its start.one person. specifically McDonald‟s. but it faces serious weaknesses in the form of over-exposure. 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.2 Starbucks Swot Analysis Starbucks is known around the world for bringing gourmet coffee and the coffeehouse experience to the masses. 2009). being a responsible neighbor that is involved in the community and providing shareholders with the rewards of success (Starbucks. it has kept its mission statement clear and concise: “To inspire and nurture the human spirit. There are good opportunities for Starbucks to grow its business through expansion into foreign markets and attract investors with the relatively cheap stock prices. 2009) Starbucks‟ success has resulted from the company living these values consistently. but it must addresses the threat that it faces from its lower-priced competitors. Starbucks is committed to serving high quality coffee purchased from growers in an ethical manner. making human connections with their customers. as the country continues to sink into economic recession. compromised brand image and high prices.” Underlying both of these broad concepts is a set of core values that the company uses as a foundation for all their business practices. Starbucks is recognized for being environmentally responsible. creating store environments that are welcoming. important aspect of their business and success: “Starbucks is committed to a role of environmental leadership in all facets of our business. one cup. However. .
are central to the company‟s mission statement. but this is exactly where many companies lose focus. and employee mistakes are minimized. particularly among students and young urban professionals” (Isidro. Excellence through training ensures that customers‟ orders are correct. (Coffee and Farmer Equity) Practices–approved suppliers who are integrating our rigorous standards for sustainability throughout the coffee supply chain” (Schultz. People. The attention and concern Starbucks pays to the concept of environment. 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).A. By ensuring sustainable coffee production. relax and enjoy the coffee drinking experience. emphasizing how important it is to the fundamental concept of the company. is the other key success factor. To provide excellent customer service. Starbucks is investing in its future without compromising the environment and its limited resources. Starbucks also provides its employees with excellent benefits. Starbucks cares about the external environment as well. 2007). Starbucks used this strategy to great effect. 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 customers or partners (employees). Environment is addressed in the mission statement as well. more productive workers.E. Customers feel welcome to stay. whether they are part-time or full-time. it translates into happier.3 Strengths Starbucks can attribute its success to two key factors: people and environment. How the two factors work well together is what makes the Starbucks experience so unique. 2004) is encouraged. “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). When employees know that their employer cares about their well-being. both within the company and its stores and in the world at large.F. a place where “socializing and intellectual discussion. and they extend these benefits to the farmers and growers of the coffee sold in stores around the world (Karth). This relatively simple concept of treating customers and employees well seems intuitive. .
Since Starbucks has so many stores. the company does have three critical weaknesses. in every shopping complex. According to The New York Times. value restaurant chains. Starbucks boomed for years and as customer traffic increased. 1).4 Weaknesses Although Starbucks is widely known to be successful. A saturating strategy put an overwhelming amount of Starbucks stores within a small area of each other across the nation. They are moving away from the strategy of differentiation through quality and environment that set them apart from low-cost. This weakness is seen by Starbuck‟s product diversification. which causes confusion. Cannibalization is where Starbucks stores are now competing with each other (stealing business and customers away from other Starbucks locations). Our Customers. airport concourse and roadside rest stop in America seemed to attract a Starbucks… in [a] five year [time period].011 in 2007” (New York Times. The first key weakness affecting Starbucks is store over-exposure. p. Starbucks has hurt their brand image by straying away from their core values which are Our Coffee. the company is experiencing the cannibalizing effects of its saturating strategy (New York Times. nearly tripled the number of stores worldwide from 5. 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). p. Starbucks. This is over-exposure. 1). . there is always a Starbucks store. Additionally. This allows Starbucks to be visible to consumers. This change doesn‟t correspond directly with their mission to serve coffee. “every street corner. if not two. however this causes the cannibalization effect. 2008. 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.886 in 2002 to 15. 2008. Our Partner. p. having kiosks in busy grocery stores is at odds with Starbucks core value of creating an environment where people can gather and relax. 1). 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. Around every corner. Store over-exposure has helped lead to a second significant weakness.
Opportunities In spite of the weaknesses mentioned above. 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. 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).5 Our stores.S. ninety percent of consumes surveyed said they are cutting back on Starbucks coffee to save money (York.‟ said another…” (York. The introduction of breakfast foods and pastries has caused confusion about their core values and thus damaged their brand image. “„I started buying my coffee at less-expensive places. it is not as risky for Starbucks to open new stores on the international scene. it is easy for consumers to switch from drinking Starbucks coffee to a substitute when they think it‟s too expensive. 2009). Given that most consumers see Starbucks coffee as an elastic product. „I have it [only] once a week to indulge myself. consumers were surveyed about their coffee choices. with many possible substitutes. In an article published in Advertising Age. while annual growth of only six percent is expected in the United States” (2008). economy is. Also according to the article. Although there are some markets that are not taking a nose dive. and Our shareholders. rather than in the domestic market. The final weakness Starbucks has is their prices. 2008). Because of the economic slowdown and the increase in competition in the United States.S. “Starbucks is aiming to raise its sales abroad by 20 percent per year over the next three years. One of the only ways that they will be able to continue to see a growth in sales is to look to foreign markets. Erik Kirschbaum states in his article “Starbucks Says International Growth to Cushion U. for instance as . Weakness” that. One opportunity for Starbucks is continued expansion in the global market.‟ said one respondent. But even with the other markets starting to look grim just as the U. Starbucks does have opportunities available for growth and investment. it is unlikely to expand or regain their dominance over the market share that they once had. 2009). Our Neighborhood.
Starbucks profits were also reported to have fallen from $208. president of McDonald‟s USA.50 cheaper than similar Starbucks offerings. During the earnings report for the company‟s fiscal first quarter the company reported a 6 percent drop in revenue. 2009). The research shows that there are markets out there that will support growth and expansion for Starbucks Corporation. saying “We want to move from beverages as an accompaniment to being a . “Most analysts project China to become the largest economy in the world this century using all measures of GDP” (2007). store closures announced last year (The Business Journal. The company offered its premium coffee for about $0. remains confident. Don Thompson.1 million to $113 million (The Business Journal.S. Starbucks also announced plans to cut another 700 non-store jobs. 2009). 2009).700 employees and closed 300 stores in addition to 600 U.6 billion. 2009). Threats The most significant threat the company faces today is the national economic downturn into recession. However this came as no surprise for the employees of Starbucks. Although hard to believe. Starbuck‟s competitors are taking advantage of the current economic state to position themselves as lower-cost alternatives to expensive.S. McDonald‟s premium coffee is one of Starbucks leading competitors.6 Economy Watch stated. boutique coffee. Because of this Starbucks had to lay off 6. Starbucks also faced stiff competition for coffee drinkers from McDonald‟s and other fast-foot establishments which lead to another threat for the company. stores (Associated Press. because of the worldwide recession Starbucks did announce store closures as well as employee layoffs would happen in 2009. Besides the lower price McDonalds sustained popularity of its coffee by its quick service. McDonald‟s launched its own premium coffee about 3 years ago and added specialty coffee drinks to more than 800 of its U. to $2. including 350 at its Seattle headquarters (The Business Journal.
These factors help give McDonald‟s premium coffee the edge in the coffee market compare to Starbucks. and give them the potential to become the world‟s largest chain of coffee houses.7 beverage destination” (Associated Press. 2009). .
html?ana=yfcpc . Our Starbucks mission. 2009 from http://www. Retrieved January 26. How Starbucks achieved its amazing success.msnbc. Retrieved January 24.(2008.helium.com/article/ousiv/ idUSL1614331820080616. Karth.com/world_economy/china/ Hanft. 2009 from http://www. (2009).com/topics/news/business/ companies/starbucks_corporation/index. China's Economy.S. from http://www.html.). http://www. Starbucks Corporation.8599. E. October 24). Matlack.starbucks.msn. B. Retrieved January 28. Will Global Growth Help Starbucks. 2009.1702277.pdf.asp. Starbucks to close 300 more stores. Our commitment to ethical coffee sourcing. From: http://triad.com/globalbiz/content/jul2008/gb2008072_462789.businessweek. July 2). Retrieved January 24. 2009. D. Coffee clash: McDonald's takes on Starbucks. Retrieved January 28. (2004. Tancer.com/triad/stories/2009/01/26/daily44. What you can learn from Starbucks. (2008.inc. November 11). Retrieved February 3. Brewing Battle: Starbucks vs.com/items/674277-how-starbucks-achieved-its-amazing-success. McDonald's. H. 2009.bizjournals.time. Retrieved January 28. Retrieved January 22.html.com/mission/default.html. I. Isidro.nytimes. The New York Times.com/time/business/article/0.htm?campaign_id= rss_daily The New York Times. Carol. Starbucks Corporation. from http://www. (2008). The Business Journal (2009). http://www.8 References The Associated Press (2009). Retrieved February 4.economywatch. 2009.htm.com/id/21837962/. Learning from Starbucks: 10 lessons for small businesses. (n. 2009 from http://topics. 2009 from http://www. (2008). Starbucks Says International Growth to Cushion U. (2009).00.starbucks.powerhomebiz. from Economy Watch Web site: http://www. 2009 from http://www. Retrieved January 28. Retrieved January 23. from http://www. Kirschbaum. 2009.com/aboutus/csrreport/Coffee_Report_PDF_FY07. A. Weakness. Schultz.reuters.2009. (2007).d.com/ resources/marketing/articles/20050401/starbucks. 2009. Retrieved February 3.com/vol144/starbucks.
. E.com/article?article_id=133871. 2009 from http://adage. Sbux. (2009). 2009.com/q?s=sbux York. (2009.yahoo. Starbucks. January 19). Consumers skip Starbucks for plain ol‟ joe. Retrieved January 26. from Yahoo Finance Website: http://finance.9 Yahoo Inc. Retrieved January 23.
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