TABLE OF CONTENTS 1. Introduction2 2. SWOT analysis2 2. 1. Strengths3 2. 2. Weaknessed3 2. 3. Opportunities4 2. 4. Threats5 Figure 1: SWOT Matrix6 3. Conclusion………….. 6 Reference………………7 1. Introduction Starbucks Corporation is an international leader in bringing coffee and the coffeehouse experience. As the company grew from a single store in Seattle, USA (1971) to thousands of stores worldwide, it has kept its mission statement clear and concise: “To inspire and nurture the human spirit- one person, one cup, and one neighborhood at a time” (Starbucks, 2009).
It is their enthusiasm, high-quality coffee and exotic tea and good business sense that help them create the Starbucks of history. Starbucks is not just to please the mass market appeal, but to provide high-quality services. In Starbucks comfortable environment, customers can sit down and relax with special jazz and blue CDs while enjoying a wide choice of coffees such as fresh brewed coffees, different Italian-style espresso drinks, cold blended beverages (Frappuccino), packaged roasted whole bean coffees, or Via Ready Brew and Vivanno Smoothies instant coffee with fresh pastries and other food tems. Also, the company mainly relies on word of mouth, so that more and more people have been coming into their stores. Product prices will not always be very high, and this is one of the reasons that Starbucks has been attracting so many customers for decades. 2. SWOT Analysis SWOT is the acronym for Strengths, Weaknesses, Opportunities and Threats. In paticular, ? Strengths: attributes of the person or company that are helpful to achieving the objective(s). ? Weaknesses: attributes of the person or company that are harmful to achieving the objective(s). Opportunities: external conditions that are helpful to achieving the objective(s). ? Threats: external conditions which could do damage to the objective(s). Identification of SWOTs are essential because subsequent steps in the process of planning for achievement of the selected objective may be derived from the SWOTs. Therefore, the aim of this paper is to do an in-depth SWOT analysis of Starbucks Corporation in order to identify the key internal and external factors that are important to its successful operation. 1. Strengths
To begin with Strengths, Starbucks’ reputation with high brand equity can not be denied. Starbucks is one of the most well-recognizable brand name with high brand loyalty, perceived quality for fine products and services. , and strong brand associations. With almost 9000 cafes and 16000 coffee shops in almost 40 countries world-wide, Starbucks Corporation is a very profitable organization, earning in excess of $600 million in 2004. The company also care about the concept of environment which is mentioned in the mission statement as well.
The internal environment that Starbucks tries to create in its stores is a comfortable place where a customer “can sit for five hours with a single cup of coffee’. Relationship with employees is also important asset for the success of Starbucks. Howard Schultz, the Chairman of Starbucks wrote that to gain profit and be competitive, famous brand and respect employees, both are necessary (Barbara Farfan). Starbucks not only has excellent training program, but through effective encouragement policies, it also creates open communication between employees and managers.
As all employees have options, they were also called “partners”. The headquarters of the company is even named “Starbucks support center” whereas management center of information and support functions are provided to the grassroots shops instead. 2. Weaknesses Although widely known to be successful, the company does have some weaknesses. The first one is its extremely high in pricing. Because it is too expensive, it is easy for customers to switch from drinking Starbucks coffee to cheaper alternatives. And if competitive pressures increase, the company could be undercut by lower price rivals such as McDonalds or Costa Coffee.
The second one is the store over-exposure. Around every corner, in every shopping complex, there is always a Starbucks cofe, if not two. Sometimes, Starbucks stores are just inside and outside the same complex. To many stores in the same small areas can lead to the competition among each other (stealing business and customers away from other Starbucks locations). Additionally, Starbucks is trying to add more foods such as sandwiches and salads but can’t maintain the same level of profit margin as its coffee does.
This changes doesn’t go with its mission to serve coffee, which causes confusion. Many customers started to complain that Starbucks now is more like a fast-food restaurant rather than a coffee house. The introduction of breakfast foods and pastries has caused confusion about their core values and thus damaged their brand image. 2. 3 Opportunities Being a famous brand, Starbucks has lots of opportunities available for further growth and investment. First is to continue expansion in the global market. Some new markets for coffee such as India and the Pacific Rim nations are beginning to emerge.
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 and restaurants. Licensing its name could provide new streams of revenne. For new distribution channels, co-branding with other manufactures of food and drink, and brand franchising to manufacturers of other goods and services both have potential. Their technology advancement can also increases the company’s efficiency and effectiveness.
Starbucks has used software developed by a stuffing management technology system called Taleo. With this technology, Starbucks can maintain a database of hundreds of thousands of candidates applying for jobs. This technology helped increase its efficiency in screening out the potential employees to fill up the positions with the correct candidate. The efficiency of their automatic espresso machines helps Starbucks to retain their customers. The machines cut 24 seconds of the time needed to make an espresso. This helped the company to be able to make their espresso in less than 3 seconds. . Threats Despite opportunities as above, the external environment still holds potential threats which can probably put a negative impact on Starbucks’ development. Among those, the most significant one is apparently the global economic downturn. This is the reason why Starbucks dismissed 6,700 employees and closed 300 stores in addition to 600 US store closures announced in 2008 (the Business Journal 2009). What is worse, besides a fall of 6 percent in revenue as reported, its profit, excluding one-time charges, decreased considerably from $208. million to $113 million last year (the Business Journal 2009). Another main threat of the Starbucks Corporation is that it is hard to predict whether the coffee market will grow or stay stable in the future because it is likely that some other types of beverage may replace coffee. Also, realizing its negative health effect, many customers have recently made their way to the alternatives such as green tea or black tea which are more health-friendly. Furthermore, Starbucks has been facing tough competition for coffee drinkers and other fast-food companies as well.
Costa Coffee, The Coffee Been for example, and McDonald’s which obviously can be seen as one of Starbucks leading competitors. Positioning itself as a lower-cost substitute to expensive coffee, McDonald’s offered its premium coffee for about 50 cents cheaper than similar Starbucks offerings (The Associated Press 2008). Accordingly, as a result of McDonald’s success with its McCafe coffee brand sold about $1. 5 billion last year, Sean Gregory claimed in his article that “Starbucks could no longer sit on the sidelines” (Gregory, S. 2010) Figure 1: SWOT Matrix |Beneficial |Harmful | |Internal |S |W | | |Starbucks’ reputation with high brand equity |High pricing | | |Comfortable ambience |Competive environment | | |Valued and motivated employees |Blur on core value | | |Positive working environment. | |External |O |T | | |Global expansion |Global economic downturn, | | |New distribution channels |Threat of alternative drinks | | |Technological advancement | | 3. Conclusion All in all, Starbucks’ weaknesses may probably be outweighed by its significant strengths. However, this corporation could not be unconcerned with constant threats from its fierce competitors as well as other economic factors.
It can be recommended that Starbucks should carry out possible strategies to diversify the main products, and the most important is to lower its price in order to enhance its competitiveness over other coffee brands. In general, from a far-sighted view, if it can make use of available opportunities and strengths to minimize its shortcomings, Starbucks can still be the world best and largest coffeehouse. REFERENCE Barbara Farfan, ‘ Starbucks CEO Howard Schultz: Quotations About Building a World Class Brand’, viewed August 12 2010, available at URL: http://retailindustry. about. com/od/frontlinemanagement/a/starbucksceohowardschulzquotes. htm Gregory, S. 2010, ‘Starbucks Hits McDonald’s with Seattle’s Best’, viewed August 1 2010, available at URL: http://www. time. om/time/business/article/0,8599,1990813,00. html? iid=sphere-inline-sidebar#ixzz0v9attJzm ‘Our Starbucks mission statement’, viewed August 10 2010, available at URL: http://www. starbucks. com/about-us/company-information/mission-statement Starbucks Corporation (2009), ‘Our Starbucks mission’, viewed August 6 2010, available at URL: http://www. starbucks. com/mission/default. asp. The Associated Press (2009), ‘Coffee clash: McDonald’s takes on Starbucks’, viewed August 2 2010, available at URL: http://www. msnbc. msn. com/id/21837962/ The Business Journal (2009), ‘Starbucks to close 300 more stores’, viewed August 2 2010, available at URL: