SWOT Analysis of Starbucks Coffee

Starbucks is a coffee chain company which started its business in Seattle which is situated in Washington, United States. Now, Starbucks is recognized as an International Organisation which is famous all over the world for its quality coffee. It has almost 16,120 stores in 49 different countries which makes it the largest coffee company in the world. Apart from coffee Starbucks serves snacks with soft drinks and also espresso based hot drinks. It has also started supplying some fancy items like coffee mugs with Starbucks logo on it. Later on with the brand name of Hear Music Starbucks entered into music division. It has also started selling some books and movies related to the locality of the stores along with some seasonal and specific company products. Also in many countries at various grocery shops Starbucks has started selling ice-cream with its brand name. Today the Starbucks has become the power brand for its coffee all over the world and is famous for its Italian style of coffee, espresso beverages, teas and pastries.

SWOT Analysis of Starbucks Coffee

SWOT Analysis of Starbucks

SWOT analysis is used for assessment of the strategic position of the company in the current environment. The SWOT framework consists of four elements called strengths, weaknesses, opportunities and threats. The strengths and weaknesses are the internal factors while opportunities and threats are considered as external factors. It is widely used strategic framework due to its simplicity and convenient application in almost every situation.

Strengths:

The biggest strength enjoyed by the Starbucks is that it is a brand name and highly recognized worldwide. Almost 70 percent of world’s population know about this company and their products. In 40 countries Starbucks have 15,000 stores and all the services and products offered by the Starbucks are accepted by the consumers. This increases the potential customers and sales for the company and is considered as the biggest advantage. The other strength of the company is that among the people they have a good impression. Starbucks respect his employees and provide them good working environment. Starbucks is able to reach the global market by globalization. Starbucks is successful to satisfy the market needs and changing demands through new innovations and by establishing new products. Starbucks maintains good relations with their suppliers and are loyal to their customers. Starbucks always provide their customers good quality services and products which have helped them to achieve the good reputation in the market. Starbucks provide pleasant environment for the people to hangout, socialise and talk with each other while enjoying their coffee.

Weaknesses:

With the increase in the number of stores all over the world the Starbucks Company is also lacking its internal focus. Also its pricing policy is considered as a major weakness. People find the prices of the company really high as compared to its competitors and usually consider Starbucks as a luxury item. Also the prices of the Starbucks are similar irrespective of the different locations. The Starbucks depends heavily only on its coffee business and therefore now they are required to look for other related products too. The parent company which is in US controls all the stores as the company doesn’t have any franchisee system. The variety of coffee provided by Starbucks is fever as compared to their competitors and therefore sensible growth policy should be applied instead of aggressive expansion. Next weak point is that currently, there are higher turnover rate of partners (employees) that some caused by company restructuring and others by the heavier load in the stores, less connection or relation between managements and partners also causing by the fast expansion and the large number of partners. Additional, Starbucks has high cost of productions especially for the coffee bean that normally 15% higher than the market price to maintain the business strategy which aim to improve quality of farmers or workers life- fair wages and research and development for the best quality of coffee beans. Furthermore, there is not too nimble to make decision and execution together with struggling in the business strategy so there are lacks of new distribution channels, partners and networks.

Opportunities:

Starbucks has many opportunities.  There is the growth trend of specialty coffee as the demand of more people drinking coffee and the trend of flavor to have a coffee at coffee house. There are International market gap that still available to fulfill the demand of coffee drinking, especially in the emerging country like Russia, India and China. Another good sign is that the economic recession seems to be at the lowest point and starting to recovered. And with the new technology arrival, Starbucks can improve IT system from back-end processes that can provide faster and precising information helping management to react or make immediate decision to the market situations and competitors including using IT to improve the supply chain management, factory/warehouse automation or even the operation processes at the stores to improvement customer ordering process such as billing and information gathering to expand customers network and distribute information through digital media and social network like Facebook or iPhone Apple online store. Additional condition of the global warming and climate change situation has bring the social concern and that can make more reputations to the Starbucks as the leader in environment friendly which is one of their mission and business strategy.

Threats:

The economic crisis and recession change the way of consuming and spending of customers and also high rivalry in the coffee house industries in which the competitors can provide similar products and services with difference values and strategies like fast-food chain restaurant such as McDonalds and Dunkin’ Donut in addition with new entrances which have expertise of coffee brew or experienced barista in the local brand stores. Another threat is the new technology of automatic coffee machine that can provide similar quality or taste with cost competitive and convenience as the coffee house provided. One of the most important threat is the Demographic changes which the reduce of the growth rate in number of young and teenage compare the baby boomer ages that become more and more that are not Starbucks’ target market and not match with their strategy. The company also have to be inflexible with its pricing strategy especially in developing countries. There are also chances that the price of products and services can be affected if there is an increase in the price of raw material and dairy products. The last threat may include the concern of the health of the people to drink coffee that has caffeine, lots of sugar and fat and this issue can become the significant threat of customers switching to the substitute more healthy products.

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