Starbucks
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The SWOT analysis refers to the analysis of the internal environment of Starbucks against its external environment, which provides some relativity on how the management is progressing with the threats and opportunities of the external environment. Based on the table above, this shows that there are many strengths compared to weaknesses, and similar amounts of threats and opportunities. (Refer to Appendix 2 for SWOT Analysis Matrix).
Strengths. Some of the major strengths of Starbucks include (1) high numbers of stores nationwide and worldwide, (2) survivor of economic downturn, (3) strong brand image, (4) good strategy of clustering stores, (5) being free of debt, (6) have no nationwide competitor and (7) ahead of technology and keeps up to trends. These strengths indicate the stability of the business, which is a strong foundation for international business and globalisation.
Having a high number of stores, in strategic locations around metropolitan areas as well as highly visited areas serving a highly consumed beverage through all cultures and status is certainly an advantage. In addition, to minimize threats from competitors the domination of an area or building is very strong that gives consumers very little to choose from for a coffee break. Consumers choose Starbucks for their obvious strengths – good ambience, good service, good variety, strong brand image, availability, good quality coffee and other products.
In terms of advertising and promotion, Starbucks allocates about 1% of their total revenue for advertising and promotion. With less money allocated towards advertising fees, more money is spent towards strengthening their brand and passive advertising through clustering and locating itself in many and various places. Hence, consumers and potential consumers are constantly reminded of the brand and its products without the usual media communication tools, such as television, radio or printings. Also, upgrading services by providing automatic espresso machines and options to pre-order and pre-pay Starbucks coffee through their website prior to collection are strengths of Starbucks in selling their main product – coffee.
Weaknesses. The weaknesses of Starbucks identified included (1) High priced coffee, (2) failure in product diversification, (3) long and odd working hours for employees and (4) not anticipating the effects of clustering stores – “self-cannibalisation”. Pricing of their coffees has caused disagreements among consumers, as well as a potential threat for their potential markets. Consumers perception of coffee prices at Starbucks can discourage consumers from purchasing the coffee often, or as “staples”. On the other hand, pricing the coffee slightly higher can create a premium image of Starbucks products.
According to the case study, Howard Schultz offered US$8 sandwiches, dessert and CDs in Starbucks cafes but these new additions were not as profitable as expect. The reason behind the lack of reception is due to a lack of focus, whereby the food was complimentary to the coffees and hence, the risk of failure is higher and does not correlate with Schultzs expectations.
Employee working hours that led to discontentment was discussed as a large issue in the case study. Employees were constantly asked to work long and odd hours, with no pay for overtime. Nonetheless, employees are paid high salaries and are one of the best paid in this industry in the United States. This is viewed as a weakness to create a healthy working environment for their employees.
Clustering of stores is another unanticipated failures of Starbucks, which the corporation had aggressively opened many stored within close proximity to engulf a large portion of market share. To explain further, it is a success on a larger picture that it manages to attract large amounts of consumers but can destroy the popularity of close-by stores. Therefore, the higher the amount of stores does not equate higher profitability or success.
Opportunities. Opportunities are part of external environment analysis, which Starbucks as a corporation can take advantage of. The opportunities presented in the case study included (1)opportunities in different countries, (2) areas in home market without Starbucks, (3) Rationing