SWOT Analysis of Starbucks

SWOTAnalysis of Starbucks

SWOTAnalysis of Starbucks

Strengthsand Weaknesses

Strengths

  1. Excellent employee treatment. Starbucks values and treats its hundreds of thousands of employees in a respectful manner. The company has been previously ranked Fortunes 100 best companies to work for (Lomax, 2013). When employees feel valued and satisfied, they will increase their performance and productivity.

  2. An effective and well-planned growth and reinvestment strategy. The company ploughs back most of its profits to expand the business. This approach leads to rapid growth evidenced by the constantly increasing number of stores.

  3. Strong position in the global market. Market position influences the perceptions of consumers about a given organization. Having a strong market position, therefore, sells Starbucks as a strong organization hence customers will want to be a part of Starbucks.

  4. Strong emphasis on quality products and service. People, coffee, and experience are the main reasons why many people choose Starbucks (Paryani, 2011). The focus on quality enables the organization to increase market share, profitability, and productivity.

  5. Innovation. Creativity and innovation improve the organization`s efficiency, problem-solving capability, and competitive advantage in the marketplace. Starbucks owes much of its successes to innovation and creativity. For instance, the introductions of the Starbucks card and the Frappuccino coffee brand were positive turning points for the company (Bingham et, al, 2011).

  6. Effective utilization of social media. The internet, through websites and social networking sites, has provided a new pool of opportunities for organizations to attract and interact with their customers. Proper use of social media sites has enabled Starbucks to reach a wider customer base quickly. Hence, sales have increased, and costs of advertisement have dipped.

  7. Ethicality and an environmentally friendly business model. Starbucks operations are based on ethical practices and behaviors which help build the reputation of the organization. Also, many customers are aware of the need to preserve the environment. The adoption of an environmentally friendly model appeals to the environmentally conscious consumers and attracts more customers.

  8. Product diversification. Starbucks have diverse product offerings that meet the various customer tastes and preferences. People will prefer a Starbucks outlet over other rivals since they know at they will get everything they need under one roof at Starbucks. As such, product diversification has helped the company build an unassailable customer loyalty.

Weaknesses

  1. Self-cannibalization. Cannibalization refers to the decrease in sales of a company’s existing products due to competition from a new product offered by the same company. Starbucks increased growth and acceleration of new store openings offering the same product line have led to poor performance of new stores and cannibalization of existing stores (Hess &amp Lieditka, 2012).

  2. Product pricing. The prices of Starbucks` products are relatively higher than that of most competitors. Price is a primary source of competitive advantage. Therefore, the company loses many customers to its competitors as they move away in search of cheaper similar offerings.

  3. Dependence on the US market. The majority of Starbucks outlets are located in within the US. Increased focus on the domestic market leads to decreased control over overseas stores as well as under-utilization of lucrative opportunities in international markets

  4. Increased competition in coffee markets. Increased competition leads to difficulty in acquiring fresh, high-quality coffee as rivals compete for the same sources of coffee like Starbucks. Besides, competitors provide alternatives for loyal as well as potential Starbucks customers leading to a decrease in market share.

  5. High rate of stores closure. Starbucks has closed many stores resulting in a reduction in revenues, profits, and market share. For instance, the company closed 800 stores within two years between 2008 and 2010 (Williams, 2011).

Opportunitiesand threats

Opportunities

  1. Global expansion in the Middle East, Asia, and Africa. While the company does not have many coffeehouses globally, most of them are based in the United States. There are plenty of regions including Asia, Africa, and the Middle East where profitably branching out is possible (Aminattaheri, Sorooshian, &amp Aghabakhshi, 2013). Starbucks can leverage its experience, size, efficiencies and financial prowess to create a new market share.

  2. Co-branding and introduction of new products. Starbucks product would be readily welcomed in supermarkets across the globe, something that has already begun. Marketing and selling the company`s branded products in stores other than the corporation`s stores would be a great opportunity for maximization of the firm`s value and its big reputation (Reinhard, 2016). The company also have the possibility of teaming up with other businesses and co-brands to increase its market reach.

  3. Technological advances. The company has leveraged the utilization of mobile applications in addition to investing partnership with mobile payment apps such as Square which is integrated with the corporation`s app. This enhances customer experience with the use process and also aligns consumer loyalty through various reward programs. The organization has already set milestones in the industry with this technological advancement (Reinhard, 2016). Considering that mobile technology is a growing field, the company has a great opportunity for driving more business into their stores as technology keeps advancing.

  4. New distribution channels. The company Launched a beta version of a delivery system referred to as Mobile Pour (Reinhard, 2016). This presents an opportunity for future expansion of Starbucks` end product distribution systems and it could also increase revenue generation.

  5. Brand extension. Starbucks has a reputable brand image which can be leveraged for extension into horizontal lines of the corporation`s business in addition to venturing into product diversification while keeping brand dilution in check (Aminattaheri, Sorooshian, &amp Aghabakhshi, 2013). This could create a great opportunity for growth and market expansion through enhanced revenue generation.

Threats

  1. Extreme competition from cheaper alternatives. McDonald`s and Dunkin` Donuts are two other big multinationals that directly compete with some the products offered by Starbucks. While these corporations do not pride themselves fully on their teas and coffees, they offer products with the same quality but at a slightly lower price compared to Starbucks` prices (Reinhard, 2016). As a result, these leads to the threat of a possible shift in consumers from Starbucks to these alternatives due to price differences.

  2. A specific market. The company`s success can be partially linked to the popularity of teas, coffees and other convenient snacks in today`s society. In case consumers happen to shift from these products to other substitutes, it would leave the company struggling to survive in the market (Aminattaheri, Sorooshian, &amp Aghabakhshi, 2013). Consumers of Starbucks` products are also prone to feeling the impact of an increase in prices of tea, coffee, and dairy products.

  3. The volatility of prices in the global coffee market. Market prices of high-quality coffee beans have been subject to significant fluctuations which create a great threat considering the company has no control over market prices (Reinhard, 2016).

  4. Changing consumer tastes, preferences and lifestyle choices. The shift in consumer preferences toward healthy products as well as the risk of coffee culture presents a significant threat to the company going into the future (Reinhard, 2016).

References

Aminattaheri,H., Sorooshian, S., &amp Aghabakhshi, N. (2013, March). MarketingPlan: Starbucks Case Analysis. In EROS2013: International Conference on Business Knowledge for AfricanDevelopment.

Binghamet, al. (2011).Create Competitive Advantage with Innovation(Collection). FT Press.

Hess,E. D., &amp Liedtka, J. (2012). Thephysics of business Growth: Mindsets, system, and processes.Stanford,California: Stanford University Press.

Lomax,A. (2013, Feb 27). What Makes Starbucks one of America’s BestCompanies? TheMotley Fool.Retrievedhttp://www.fool.com/investing/general/2013/02/27/what-makes-starbucks-one-of-americas-best-companie.aspx

Paryani,K. Product Quality, Service Reliability and Management of Operationsat Starbucks. InternationalJournal of Engineering, Science and Technology,Vol. 3, No. 7. http://dx.doi.org/10.4314/ijest.v3i7.1S

Reinhard,K. (2016). Differentiationas the key to success. A marketing plan for Starbucks. GRINVerlag.

Williams,C. (2011). Management.Mason, OH: South-Western Cengage Learning