SWOT Analysis of Starbucks

SWOT Analysis of StarbucksStarbucks is a company that is growing at a phenomenal success since taken over by Howard Schultz of the original founders in 1987. With a vision to form café concept he saw while visiting Italy, the entrepreneur is then raised into a global brand has become the “third place” to enjoy coffee, after the home and office. At the height of glory, in 2007, Starbucks is a company worth 10 billion U.S. dollars which serves 50 million customers each week.

Maybe because he see this great success, in 2000, Howard Schultz comfortable resigned as CEO and serves as Chairman of which is no longer involved in daily Starbucks decisions. The role of CEO submitted to Orin Smith, then followed by Jim Donald since 2005.

When Schultz pension, Starbucks is already a huge success and pick the branches all over the world. But his successors are not satisfied with the greatness of it and the more aggressively pursuing growth, especially overseas. In fact there are times where in some locations, there are 2 or more Starbucks cafes. Starbucks also perform a variety of business diversification, down to the ice cream products, beverages in containers, and even record labels. With this, indeed the growth of Starbucks sales and financial performance showed a more brilliant. Starbucks became a global powerhouse.

SWOT Analysis of StarbucksStarbucks is one of the leading purchasers and grinders of quality coffee beans. The company has an international market with shops established around the world. In conducting a SWOT analysis of the company, there are four considerations.

A sentence in a private message Schultz may be able to summarize how the Starbucks company animates care of business. ”We are not in the coffee business serving people. We are in the people business serving coffee”.

Here the Example of Starbucks SWOT Analysis :

SWOT Analysis of Starbucks

  • Starbucks Corporation is a very profitable organization, earning in excess of $600 million in 2004.
  • It is a global coffee brand built upon a reputation for fine products and services.
  • Starbucks was one of the Fortune Top 100 Companies to Work For in 2005. The company is a respected employer that values its workforce.
  • The organization has strong ethical values and an ethical mission statement.
  • Starbucks has a reputation for new product development and creativity. However, they remain vulnerable to the possibility that their innovation may falter over time.
  • The organization has a strong presence in the United States of America. It is often argued that they need to look for a portfolio of countries, in order to spread business risk.
  • The organization is dependant on a main competitive advantage, the retail of coffee. This could make them slow to diversify into other sectors should the need arise.
  • Starbucks are very good at taking advantage of opportunties.
  • In 2004 the company created a CD-burning service in their Santa Monica (California USA) cafe with Hewlett Packard, where customers create their own music CD.
  • New products and services that can be retailed in their cafes, such as Fair Trade products.
  • The company has the opportunity to expand its global operations. New markets for coffee such as India and the Pacific Rim nations are beginning to emerge.
  • Co-branding with other manufacturers of food and drink, and brand franchising to manufacturers of other goods and services both have potential.
  • Who knows if the market for coffee will grow and stay in favour with customers, or whether another type of beverage or leisure activity will replace coffee in the future?
  • Starbucks are exposed to rises in the cost of coffee and dairy products.
  • Since its conception in Pike Place Market, Seattle in 1971, Starbucks’ success has lead to the market entry of many competitors and copy cat brands that pose potential threats.

Disclaimer: This case study has been compiled from information freely available from public sources. It is intended to be used as an example for educational purposes only.

Other Example of Starbucks SWOT Analysis:
Starbucks Corporation

* Starbucks is No. 1 specialty coffee retailer of – in terms of market share and market capitalization. (1997, £4596.6 million and sales growth 20.9%)
* It is a global organisation with 16,000 coffee shops in 15 countries world-wide.
* Strong brand image associated with high quality coffee and excellent customer service – “The Starbucks Experience”.
* Extensive store network, 8,500 shops are owned by Starbucks directly. The company franchises and licenses 6,500 shops. It has developed excellent skills in franchise management.
* Due to its specialism in all things coffee – it achieves high buying volumes – scale economies and utilizes international sourcing, some from fair trade suppliers.
* Committed workforce, one of Fortune Top 100 Companies to Work for

* Starbucks is a premium brand commanding premium prices. As competitive pressures increase, the company could be undercut by lower price rivals such as McDonalds or Costa Coffee.
* Starbucks is seen as an “American Global”, possible perception that big American chains are trampling on national cultures, “Starbucks was trampling on Chinese culture”.
* Over-dependency on coffee and coffee related products.
* US based company, focus on the US domestic market.
* Reputation with pressure groups. Criticized for not using more Free trade products.

* Possible saturation in the coffee, café market. In the US, 600 underperforming company-owned stores were closed. Consolidation on the high street, growing competition from national brands and new entrants, aggressive marketing (price wars, promotions), putting pressure on profit margins. Companies seek cost savings and new way to differentiate to retain customers.
* Several activist groups maintain websites criticizing the company’s fair-trade policies, labour relations, and environmental impact.
* Recession or downturn in the economy affects consumer spending, with less disposable income to spend. Consumers defect to lower price venues and competitors.
* Raw material cost rising – Starbucks is exposed to rises in the cost of coffee, labour and dairy products, and adverse changes in exchange rates.

* Significant opportunities exist, especially outside domestic US market for joint ventures. Starbucks could overcome planning restrictions, reduce costs through co-locating at supermarket chains, pubs & restaurants.
* Product range diversification into greater food ranges and non-food items. The company has experimented with warm sandwich lines, and I-tunes (music link). Also, sold music CD’s and linked with clubs (e.g. book clubs) etc.
* Licensing its name (e.g. ambient coffee through supermarkets) could provide new streams of revenue.
* Through CRM and database marketing it could target its high net worth customers and build greater loyalty with customer base. The introduction of loyalty schemes such as Starbucks Card, free re-fills and technology (free downloads of music) provide a competitive edge to its value proposition.
* Continued focus on improving efficiency and effectiveness in the organisation, from procurement, to supply chain to customer service delivery.
* Become more of a socially responsible brand. Better public relations activity, introducing more fair trade products, better distribution of profits to farmers and ethical sourcing practices.