Starbucks originally was founded by three partners who met while they were students, and they were inspired to sell a high-quality coffee beans. The first Starbucks store was located in Seattle, Washington and was founded in 1971. During the time of the opening, the company only sold roasted whole coffee beans and did not brew coffee yet in order to sell coffee. At their first year of operation, they purchased green from Peet’s and then they began buying directly from growers. Starbucks Corporations now is considered as the world’s largest coffeehouse, the company operates 27,339 locations around the world with 238,000 number of employees and in 62 countries. Coffee is one of the rapidly growing industry in the world and that’s because of its business strategy. Starbucks serves hot and cold coffees as well as their big menu like beverages, snack plates and bakery food, but the major product is brewed coffee. More recently, Starbucks has expanded into selling branded products such as coffee machines, packaged coffee beans, mugs and gift cards. Starbucks also markets their products mix with other brands within its portfolio of companies, which include Seattle’s Best Coffee, Tazo and Teavana. The company main goal was to expand their branches all over the world, to broad their retail business, develop new techniques, products and to introduce new distribution channels in order to achieve its goals. Customers come to Starbucks more often to enjoy their quality time with their friends, complete their work and study, have a cup of coffee and just relax between university or work breaks. Starbucks had a total revenue of $22.387 billion as of 2017 with net income of $2.885 billion. Analyzing Starbucks with the help of SWOT analysis, this technique will show the company’s greatest strengths, weaknesses, opportunities and threats. It will show what the future might have in stores for Starbucks.
Starbucks stores location is one of the greatest strengths. Starbucks has stores in some of the most strategic places across the globe. They target high-visibility and high-traffic locations near a variety of settings, including downtown centers, university campuses, office buildings and off-highway locations across the world. Their stores in general are visually appealing and have a unique factor attached to it with a design that reflects the unique character of the neighborhood they are in and environmentally friendly. Starbucks stores provide a warm atmosphere where they provide a free wi-fi connection, great service, good music and they provide an environment of community meeting spot. The main goal for the firm is to make their stores a ‘third place’ where people can go besides home and work. Starbucks are loyal to their customer which counts as a great strength of the company. They have implemented a loyalty-based programs in order to drive loyalty with Starbucks Card and Starbucks Reward programs. The Starbucks Card is a value card that provides support gifting and it increases the frequency of store visits by cardholders. This Starbucks Card allow customers to receive various benefits depending on the number of reward points they earn in 12 months.
A major weakness of Starbucks company is their high prices of their products. Their products are premium in quality but their prices are higher than most competitors. This is a real issue because due their expensive prices they lose a large number of customers which they have no other choice but to choose another company with a lower cost of price. Starbucks products are easily imitated by other competitors who sell almost the same products but at a lower cost. These are the two biggest weaknesses of Starbucks company. If only Starbucks could bring their prices of its products lower, they could attract more customers to buy from them. However, they have a good quality coffee and an excellent service that costs a high price that in not affordable for anyone.
Starbucks has a significant opportunity in diversifying their product line to help the brand grow larger and to improve their value. Starbucks is best known for its premium quality coffee. They can add more products including snacks, beverages and coffee machine equipment to its products line in order to provide their customers with a variety of choices. They can also add a delivery service where customers can ask for their coffee and other products to be delivered to them when they do not have the time to go to the store. Another major opportunity for the Starbucks brand is to partnership with other brands. Starbucks can partner with other snack brands or regional stores to sell its own products. Some partnerships can help Starbucks improve their brand presence and get closer to their customers. This way they could sell their coffee through local stores and big retailers too. Strategic partnership will not just increase its customer baser but will improve its brand awareness as well.
Starbucks brand is facing a heavy competition from their rivals such as Dunkin’ Donuts and McDonald’s. These companies do not just sell coffees and tees, but they offer products of a similar quality but at a lower cost. Consumers are more attracted towards the rivals due the lower costs of their products. It increases the competitive threat for Starbucks brand. Most likely, rivals imitate Starbucks’s products and sell them at a lower cost to attract more customers. However, Starbucks sells premium quality products that rivals can not imitate. Another major threat comes from the shift of consumers toward a healthier lifestyle trends and that have affected its business to a small extent. People are looking for healthier products to buy. The sales of juices, healthy snacks, and other healthy drinks has gone up. Although coffee is not considered unhealthy drink, but still its sales are lightly affected.
Competitive advantage (recommendations):
Starbucks brand’s SWOT analysis shows that the business strength to maintain competitiveness. While they have one of the world’s most popular brands. The company has a growing population of loyal customers who would choose Starbucks based on quality. However, Starbucks must exploit the opportunities in order to expand their brand around the world. Regardless of their considerably diverse product mix, having more diverse products and services can improve their competitive advantage. Partnerships and alliances can be a way to strengthen Starbucks competitive position. The high prices of Starbucks products can make them less accessible to the large population of lower and middle class consumers. Additionally, Starbucks brand is imitable in terms of their coffee. This part of the SWOT analysis shows that Starbucks brand should innovate in order to overcome its weaknesses, in specie the imitability of products. Starbucks can solve this issue by emphasizing quality and uniqueness of their products to differentiate them. Moreover, they can increase efforts for trademark and intellectual property protection to help reduce the threat of imitation. The low-cost coffee from other companies like Dunkin’ Donuts and McDonald’s effectively compete against Starbucks’s pricey products. Other companies can imitate the business easily. Many rivals have already succeeded in imitating Starbucks, for example Stars and Bucks. Also as consumers shifts more towards the healthy lifestyle, Starbucks should expand their menu and add healthier choices like juices and healthy snacks and other beverages. This part of the SWOT analysis shows that Starbucks should ensure competitive advantage amid potential negative effects of Starbucks threats.
Responsibly Grown and Fair Trade Coffee. (n.d.). Retrieved from https://www.starbucks.com/responsibility/sourcing/coffee
Figure 2f from: Irimia R, Gottschling M (2016) Taxonomic revision of Rochefortia Sw. (Ehretiaceae, Boraginales). Biodiversity Data Journal 4: E7720. https://doi.org/10.3897/BDJ.4.e7720. (n.d.). doi:10.3897/bdj.4.e7720.figure2f
Community. (n.d.). Retrieved from https://www.starbucks.com/responsibility/community
Store Design. (n.d.). Retrieved from https://www.starbucks.com/coffeehouse/store-design
Starbucks’ quest for healthy growth: An interview with Howard Schultz. (n.d.). Retrieved from https://www.mckinsey.com/featured-insights/employment-and-growth/starbucks-quest-for-healthy-growth-an-interview-with-howard-schultz
Starbucks – The Best Coffee and Espresso Drinks. (n.d.). Retrieved from https://www.starbucks.com/
All products require an annual contract. Prices do not include sales tax (New York residents only). (n.d.). Starbucks: Revenue worldwide 2017 | Statistic. Retrieved from https://www.statista.com/statistics/266466/net-revenue-of-the-starbucks-corporation-worldwide/
Company Information. (n.d.). Retrieved from https://www.starbucks.com/about-us/company-information