SWOT Analysis of Starbucks, the

Worlds Leading Coffeehouse Chain

Thomas Bush Apr 20, 2016

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Starbucks (formally known as Starbucks Corporation) is the worlds largest

coffeehouse chain, operating over 20,000 locations worldwide [1]. Since the chains
foundation in Seattle in 1971, Starbucks has been serving up hot and cold beverages
(primarily coffee) as well as snacks. More recently, this transnational company has
expanded into selling branded products such as packaged coffee beans, coffee
machines, mugs and other gifts [2]. Analysing Starbucks with the help of a SWOT
matrix will show what the future might have in store for this world-famous corporation.

Recommended: PESTLE analysis of Starbucks

Strengths
Starbucks must be doing something right if they manage to take home billions of
dollars every year, after expenses. Whats more, the profits seem to keep growing from
year to year [3]! Here are some of their greatest strengths:

Quality, profitability and ethicality: Starbucks have established themselves as a

premium coffeehouse chain, despite their huge worldwide presence comparable to that of
most fast food chains. Their products are of excellent quality, seemingly environmentally
friendly, and relatively consistent between locations. As a result, they can afford to charge
customers high prices, which most people are willing to pay. Not only does this mean large
profits, but also has them globally recognised as one of the best coffee shop chains.
Efficiency and reinvestment strategy: Most of the profits that this company makes go
straight back into expanding the business. This is evident in the ever-increasing number of
locations that Starbucks boasts [4]. Its clear that this corporation has a well-planned
growth strategy, which seems to be working well for them.
 Employee treatment: Starbucks is known for treating its hundreds of thousands of
employees very well, and has previously been listed as one of Fortunes Top 100 Places to
Work For.

Weaknesses
Like every company, Starbucks does have some weaknesses. The most important are:

High price point: While their high price point was a strength in the previous paragraph, it
is also a weakness. The hefty price tags on some of their products (starting even with their
most basic coffee options) deter plenty of customers who might otherwise make Starbucks
a part of their daily lives. While their premium quality and good ethical values might be
attractive, some just dont have that much money to spend on a cup of coffee.
A lack of overly unique products: While Starbucks might be known for their
frappucinos, pumpkin spice lattes, and big chocolate chip cookies, they dont exactly have
the most unique market. Plenty of other coffee shops, chains or otherwise, provide similar
products and only lose out to Starbucks big name.

Also read: Understand Vertical Integration with Starbucks

Starbucks SWOT analysis 2017

Ovidijus Jurevicius | February 1, 2017 Print

Company Background

Key Facts

Name Starbucks Corporation

Logo
Industries
Restaurants (Coffeehouses)
served

Geographic Worldwide (25,085

areas coffeehouses in 75
served countries)

Headquarter Seattle, Washington, United

s States

Current CEO Howard Schultz

US$21.316 billion (2016)

Revenue 11.2% increase over
US$19.163 billion (2015)

US$2.818 billion (2016)

Profit 2.1% increase over US$2.757
billion (2015)

Employees 254,000 (2016)

Caribou Coffee Company,

Costa Coffee, Dunkin'
Brands Group, Inc., Green
Main Mountain Coffee Roasters,
Competitors McDonald's Corporation,
Nestl S.A. and many other
restaurant chains and
coffeehouses.

Starbucks Corporations business overview from the companys financial report:

Starbucks is the premier roaster, marketer and retailer of specialty coffee in the
world, operating in 75 countries. We purchase and roast high-quality coffees that we
sell, along with handcrafted coffee, tea and other beverages and a variety of fresh food
items, through company-operated stores.
We also sell a variety of coffee and tea products and license our trademarks through
other channels such as licensed stores, grocery and national foodservice accounts. In
addition to our flagship Starbucks Coffee brand, we also sell goods and services under
the following brands: Teavana, Tazo, Seattles Best Coffee, Evolution Fresh, La
Boulange and Ethos.

Our objective is to maintain Starbucks standing as one of the most recognized and
respected brands in the world. To achieve this, we are continuing the disciplined
expansion of our global store base, adding stores in both existing, developed markets
such as the U.S., and in newer, higher growth markets such as China, as well as
optimizing the mix of company-operated and licensed stores in each market.

In addition, by leveraging the experience gained through our traditional store model,
we continue to offer consumers new coffee and other products in a variety of forms,
across new categories, and through diverse channels. We also believe our Starbucks
Global Responsibility strategy, commitments related to ethically sourcing
high-quality coffee and contributing positively to the communities we do business in,
and being an employer of choice are contributors to our objective.

Starbucks company-operated stores are typically located in high-traffic,

high-visibility locations. Our ability to vary the size and format of our stores allows us
to locate them in or near a variety of settings, including downtown and suburban retail
centers, office buildings, university campuses, and in select rural and off-highway
locations. We are continuing the expansion of our various store formats, including
Drive Thru and express stores, to provide a greater degree of access and convenience
for our customers.

Starbucks employed approximately 254,000 people worldwide as of October 2,

2016.[1]

Starbucks SWOT Factors

Strengths

1. Operating efficiency and strong growth leading to superior financial

performance.

2016 marked continuing Starbucks growth both financially and physically. The
company had yet another great financial year. The companys revenue grew by 11.2%
and 2,042 new stores were opened. Starbucks operating profit margin increased and
its cash flow grew to a record high of US$4.575 billion, despite the companys
enormous expansion.

Figure 1. Starbucks consolidated revenue 2011-2016

Source: Starbucks financial report[1]

Figure 2. Starbucks operating profit margin 2012-2016

Source: Starbucks financial report[1]

Figure 3. Starbucks store count 2011-2016

Source: Starbucks financial report[1]

Starbucks balance sheet has remained strong. In 2016, debt-to-asset ratio remained
the same, while cash reserves increased significantly. The companys net profits
increased only slightly from US$2.757 billion to US$2.818 billion, but the operating
profit margin grew to 19.6% highest in Starbucks history. Overall, Starbucks
financial position has never been stronger.

What does this mean for the company? Despite its huge growth, growing the
operating profit margin while also increasing its net profits means that Starbucks is
managing its operations very efficiently. In addition, the companys healthy financial
numbers provide confidence for investors and allow the company to engage in
speculative investments that wouldnt otherwise be feasible.

2. Fast growing store network in China.

Currently, Starbucks has 2,382 restaurants in China, which is more than Dunkin
Donuts (22) [2] and Costa Coffee (383)[3] combined, and second only to McDonalds
(2,640).[4] The number of Starbucks locations has grown significantly over the past
few years. In 2011, the company had only 570 coffeehouses in China. Since then it
grew its presence by 1,812 locations or 418% in just 5 years.

Figure 5. Number of Starbucks locations in China 2011-2016

201 2012 2013 2014 2015 2016

1

Number of 570 700 1,01 1,36 1,81 2,38

locations 7 7 1 2

Growth over - 22.8 45.2 34.4 32.5 31.5

previous year % % % % %

Source: Starbucks financial report[1]

China is the second fastest growing Starbucks market behind the U.S. and the
company is well positioned to compete in it. For years Starbucks has been
strengthening its tea offerings, which is the favorite Chinese drink. The company
currently owns 2 tea brands, Tazo and Teavana, and serves brewed tea, single-serve
tea, packed tea and other related tea products. Therefore, unlike its rivals, Starbucks is
better prepared to satisfy Chinese tastes and to attract Chinese customers to its
coffeehouses.

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