Starbucks is a global coffee company based in Seattle Washington. They are the largest coffee company in the world with approximately 21 thousands stores worldwide to include countries like Canada, Japan, China, and the United Kingdom. Starbucks was founded in 1971 by Jerry Baldwin, Gordon Bowker, and Zev Siegi. The partners did not know it but what they would create would be a 4 ‘ star branded establishment with an estimated net value of 4 billion. This company has ascended to preemptive dominance in only 43 years- that is a feat within itself. Being successful is one thing, but being the number one coffee company in the world is another. With great success also comes the need to maintain that which you have attained, so the question most of us ask about this company is; ‘Is the Best Yet To Come’? The partners have garnered the number one spot in 43 years, how will they revolutionize how we drink coffee in the next few decades?
To understand and analyze the more important aspects of the business itself as well as the environmental factors that play a part in both the company’s success and at time setbacks we use what is known as a S.W.O.T (Strength, Weaknesses, Opportunities, and Threats) Analysis. A S.W.O.T Analysis can be defined as a tool to assess an organizations capabilities and what environmental factors both internally and externally have an impact on the organizations desired results.
Starbucks SWOT Analysis:
Strengths
- Major National and International marketing/Advertising
- Strong online, Social Media presence
- New president of global development is attempting to revamp the homogenous image of Starbucks by designing each store to distinctly reflect its local community
- Ending the needless opening of stores on every corner, while investing more in the ones underperforming.
- Good report with its employees- Good Place to work!!
- Offers healthcare benefits and a atmosphere that is easy going.
- Ensure future top executives come from within the Starbucks brand
- Starbucks is increasing its footprint in the needs of the local community which its stores are located.
- Create jobs helping out the State and Local Government Jurisdictions.
- Global Brand
Weaknesses
- Customer satisfaction at times takes a back-seat due to overwhelming demand on the quality of the product.
- Products tend to be overpriced considering the economics of today.
- Majority of Starbucks business derives from the US Market. Does not have a large global footprint.
- Large corporate image- this comes with great responsibility to the local economy and sometimes at a loss of the company’s bottom line.
- Company beginning to lose its star-power, as customers begins to prefer their local mom & pop local coffee shops over the more overpriced, long line, at times not so friendly customer service.
Opportunities
- Large social media footprint
- A lot of cross-promotion opportunites with companies that market products to the 23 ‘ 60 demographic.
- Opportunity to enhance its global footprint in new markets overseas, specifically emerging markets (Brazil, India)
- Continue to provide a variety of products that compliment the coffee, such as teas and pastries.
- Could benefit by selling Starbucks coffee and products in grocery stores and places readily accessible outside of the Starbucks store.
Threats
- Fellow competitor’s prices are cheaper, however quality has yet to match Starbucks- in time this will be a threat to the business model.
- Dunkin Donuts, McDonalds, continually improving and jocking for position in the coffee industry.
- Consumers are spending less on luxury products and more on necessities
- Independent coffee shops pose an immediate threat- as in a niche market the company with the best product typically wins. Independent shops have rare variety of coffee strands hurting Starbucks.
- How do you continue to grow and manage demand, supply-chain management, distribution, marketing and advertising without watering down your product to stay competitive.
The company has some very fierce rivals and there are many alternatives for any consumer to consider. Caribou Coffee, Dunkin Brands, and McDonalds all have very well established brands of coffee that can cut into Starbucks market share and can potentially lure away customers. Overall the company has good financials and the stability to continue to improve. Based on the charts below, courtesy of Google Finance ‘ – the one critical improvement I would pay close attention to would be the company’s investments.
Looking specifically at Starbucks cash flow chart investments have decreased over a 3 year period. Considering that the company has a huge disparity between its net income and revenue they have income to funnel into investments. I would also recommend bringing down their operating cost by potentially making processes more streamline, re-evaluate their supply chain management and the total number of personal it actually takes to run a shop with no impact to business operations.
Balance Sheet Cash Flow
Income Statement
Courtesy of Google Finance ‘ https://www.google.com/finance?q=NASDAQ:SBUX&fstype=ii#
The company overall has the best system in place for making the world’s best coffee. Starbucks loyal customers do not mind paying that absorbent amount for one Venti cup of coffee, even if it means waiting in a long line on a very cold morning while already late for work. The upside of the company is great, they still have global markets that have yet to tap. As long as they can manage to deal with the culture difference in how coffee is viewed, the company shall continue to grow and expand continuing to make it one of the premier American Businesses of its time.
References
Marcus, A.A. (2011). Management Strategy: Achieving Sustained Competitive Advantage (2nd ed.). New York: McGraw-Hill Irwin. ISBN: 9780078137129.
Google Finance ‘ (2014), https://www.google.com/finance?q=NASDAQ:SBUX&fstype=ii#
(I) Investopedia.com (2014), http://www.investopedia.com/
Starbucks Inc (2014), http://www.starbucks.com/?gclid=CI2M_sfv2L0CFWxp7AodUQgA3A
McDonalds Inc. (2014) http://www.mcdonalds.com/us/en/home.html
Dunkin Brands Inc. (2014) http://www.dunkinbrands.com/
Caribou Coffee Inc. (2014) https://www.cariboucoffee.com/