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Swot Analysis of Starbucks

Essay by   •  February 23, 2018  •  Case Study  •  782 Words (4 Pages)  •  1,699 Views

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SWOT Analysis of Starbucks

Strength:

  • Strong brand image and awareness: Starbucks is one of the internationally known, valuable, and most popular brands. It enjoys a dominant position in the worldwide market for coffee and beverages, and also has a growing population of loyal customers who prefer Starbucks based on its quality and the brand. The logo is easily identifiable, and attracts both new and repeat customers
  • High quality of product and service
  • Extensive global supply chain which is effective and efficient.
  • Easy to access (positional advantages): Starbucks operated stores are typically located in high-traffic, high-visibility locations. Especially in big cities, such as New York or Shanghai, people can see it all around the city.
  • Providing unique experience and atmosphere: Not only does Starbucks offer premium, high-quality coffees, but it also provides the customer with the “Starbucks Experience”, which includes excellent customer service, clean and well-maintained stores that offer a comfortable setting, good music, a warm atmosphere, and free wireless Internet. These factors have built a high degree of customer loyalty, which has helped to drive same-store sales and earnings over the years.
  • Extensive customer loyalty program: The thorough customer loyalty system allows consumers earn loyalty points with each purchase that can be redeemed for free products.
  • Perpetual innovations: New varieties of coffee, desserts, and simple snacks. New Mobile Order and Pay program allows customers to place orders in advance for pick-up at certain participating locations in the U.S., has been a hit with younger consumers who don’t want to wait on line.

Weakness

  • Expensive products (High price strategy): The relatively higher prices of Starbucks products make them less accessible to the large population of lower-middle class and lower-class consumers. While its premium quality and friendly service might be attractive, some just don’t have that much money to spend on a cup of coffee.
  • Heavily rely on the relationship with suppliers: The company is heavily dependent on its main and key input coffee beans, hence it irresistibly relies on its suppliers. Because the price of coffee beans is the determinant of its profitability.
  • Depend on US operating segment and imbalanced global development: 75% of total revenues were generated in the Americas region in 2015, primarily in the United States. The Europe, Middle East, and Africa segment only contributed 6% to revenues in 2015.
  • Imitable products: Because the quite simple and not diverse enough, so that it can be imitated easily by the competitors.

Opportunity:

  • Global expansion and development: Most of Starbucks coffeehouses are located in the US. There are plenty of regions where profitably branching out is a possibility, such as India, Central Europe, and some regions in Africa. However, Starbucks should also try to align its products to suit the cultural standards of these markets
  • Introducing new products and diversification of product mix: Currently, the brand is mainly known for its premium quality coffee. It can add other products including beverages and snacks to its product line to provide its customers with variety.
  • Co-branding or partnership with other brands: The brand can partner with snack brands or regional stores to sell its own products which can help the brand improve its brand presence and get closer to its customers.
  • Developing its supplier network: it will diversify the sources of its inputs and will also help the company to become less sensitive to the prices of coffee beans and make it resilient against supply chain risks.

Threat:

  • Rising prices of coffee beans and supply chain risks: The fluctuations in the prices of this key input coffee beans and complement dairy products will impact its profitability.
  • Intense competition from cheaper alternatives: In the US, large companies in the quick-service restaurant sector have been increasing efforts to sell high-quality specialty coffee beverages. For example, Dunkin Donuts and McDonald are two huge multinational companies which directly compete with some of the products that Starbucks sells. While these companies don’t pride themselves entirely on their coffees and teas, they offer products of a similar quality for a fraction of Starbucks’ prices. Starbucks also has competition from smaller, local, specialty coffee shops around the globe that may offer a more intimate setting but available at much lower prices. The lower end consumers are attracted towards the rivals for the lower costs of their products.
  • Changing customer trend: In recent years, people are more likely to look] for healthier products. The sales of juices and other healthy drinks has gone up. While Coffee is not considered an unhealthy drink, still its sales are slightly affected. To a great extent, Starbucks’ success can be attributed to the popularity of coffees and teas in today’s society. If consumers were to shift away from these products, it would leave Starbucks to a struggling condition.

Reference:

http://www.valueline.com/Stocks/Highlights/SWOT_Analysis__Starbucks_Corp_.aspx#.WeE1bxNSyTc

https://www.cheshnotes.com/2016/09/starbucks-corporation-swot-analysis-2016/

https://www.fool.com/investing/general/2015/06/19/analysis-of-starbucks-corporation-sbux.aspx

https://www.strategicmanagementinsight.com/swot-analyses/starbucks-swot-analysis.html

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