Starbucks SWOT Analysis: The Best Coffee Makers

The world’s largest coffeehouse business, Starbucks (NASDAQ: SBUX), are known as
the best coffee makers.
Founded in 1971 in Seattle, Washington, Starbucks has more than 23,445 locations and
above 191,000 employees.
Now, enough with the history and statistic things. That’s not why you’re here. Plus, it’s
boring and no one likes it.
So, let’s do some serious business and talk about Starbucks.
If you ask anybody of the age above 50, “who invented coffee” the chances are that they
will answer it was Howard Schultz.
The best part?
They will only be exaggerating, slightly.
This statement above might be a bit confusing, so it’s time for a history lesson:
If you’re from the United States, you might remember the “Cup of Joe”, which tasted like
battery acid. And to make it drinkable, you had to add 5 kilos of sugar, loads of cream
and gallons of milk.
At that time, only the fortune and small number of Americans had the chance to travel to
Italy, Germany and other countries where you could taste the real thing.
Then, a miracle happened and in 1971 Howard Schultz “democratized” the access to
great coffee.
Starbucks was quickly gaining popularity and in no time, American people went from
being provincials to sophisticated coffee drinkers.
This were the times, when everything went smoothly and Starbucks was a heavenly place
to work.
But, in 2007, when Starbucks hit the wall; sales rapidly declined. In 2008, Wall Street was
predicting
STARBUCKS DOOMED
That’s exactly when Starbucks Competitors come into play. And that’s exactly why we
need Starbucks SWOT analysis. To properly understand what happened in those dark
years and which qualities made Starbucks’ failure possible.
We need Starbucks SWOT analysis to clearly see how they reinforced their weaknesses,
how they used opportunities, eliminated their threats and what was the strongest weapon
in Starbucks’ arsenal.
After that disastrous year, Starbucks came back stronger than ever and more profitable
than ever.
And that was only possible because the company saw everything clearly and acted,
accordingly.

Starbucks SWOT Analysis: The Best Coffee Makers

A definition for novice readers: SWOT is an acronym
for Strengths, Weaknesses, Opportunities and Threats related to organizations. SWOT is
also referred, as the “SWOT Matrix”.
Like every other brand, Starbucks has its weak and strong parts. With the help of SWOT
analysis of Starbucks, we can easily identify the obstacles the company is facing, the
opportunities they have, things Starbucks has to improve and strengths the
organization has.
Strengths
Starbucks Coffee Company, in a very unique way, not better than any other company,
set out to build a different business model. And that business model was based
on core values that was specifically designed to achieve the fragile balance between
profitability and a social conscience. It’s important to know that the company’s foundation
was created in a very unique way and the uniqueness is linked with the founder of the
company, Howard Schultz.
1. Uniqueness and Being First – I want this part of chapter to stand out, because it’s
really important (read it thoroughly). Howard Schultz, at the age of 7, literally witnessed
the fracturing of the American Dream. When his father, a blue-collar worker, broke his
ankle and got dismissed from work. Without any compensation and health insurance.
That’s when Howard felt, what’s it like to be left behind and after founding Starbucks,
Howard Schultz knew that the moment from his childhood had to be linked with something
at the company. So, he built a company that his father never got the chance to work for.
Almost 30 years ago, Starbucks became the first company in America to
provide comprehensive health insurance to every single employee.
2. Starbucks’ Values – With our partners, our coffee and our customers at our core, we
live these values:

 Creating a culture of warmth and belonging, where everyone is welcome.

 Acting with courage, challenging the status quo and finding new ways to grow our
company and each other.
 Being present, connecting with transparency, dignity and respect.
 Delivering our very best in all we do, holding ourselves accountable for results.
 3. Innovation – Today, we have to understand that innovation is less about
technology and is lot more about giving consumers novel and valued experiences.
Starbucks gets this part perfectly. Starbucks is a place, where innovation is always
brewing.
 4. Strong Market Position and Global Brand Recognition – Starbucks has
operations in more than 60 countries and is the most recognized coffeehouse
brand. Plus, Starbucks is the #52 most valuable brand in the world (value: $10.5B).
 5. High Quality Products – One of the things that Starbucks cares the most, is
the quality of their products.

 TO ESTABLISH STARBUCKS AS THE PREMIER PURVEYOR OF THE FINEST

COFFEE IN THE WORLD WHILE MAINTAINING OUR UNCOMPROMISING
PRINCIPLES WHILE WE GROW.
 6. HR Management – Starbucks is widely known for its outstanding Strategy and
highly educated (in their fields of work) employees. Starbucks employees are
provided with great perks. For instance, retirement accounts and a healthy culture.
 7. Starbucks Product Mix – Starbucks continues to introduce new products and
steadily captures the attention of all age groups. For now, Starbucks’ product line
includes: Coffee, Tea, Pastries, Frappuccino beverages, Smoothies.
 8. Advertising – Starbucks was one of the first companies to use social media as
a way to advertise. Plus, they were the first company to get 10M likes on Facebook.
Besides social media, Starbucks’ commercials are always fun to watch.
Weaknesses
 For 15 consecutive years as a public company, Starbucks was on a magical carpet
ride, in which, everything they literally touched turned to gold. Every new product
they opened, every new city they opened, every new country they opened,
everything they did was becoming successful.
 But, somewhere along the line, a virus entered the company and the virus was
entitlement. It began to surface as a sense of invincibility.
 As the idea spread, Starbucks’ success was covering up the mistakes company
made and somehow, the company started rewarding and admiring the wrong
things, eventually leading to crisis (2007). Though, Starbucks did manage to
reinforce these weak spots, but they still got things to work on.
 1, Product Expensiveness – Starbucks always says, that their products are the
highest quality and the ‘Starbucks Experience’ is something unforgettable, which
is 100% true, but in times of economic sluggishness, the price of Starbucks
products became really unattractive. I mean, people can’t afford to pay $4 for a
single cup of coffee. So, consumers started to leave Starbucks and shifted to
Dunkin’ Donuts and McCafé (they’re relatively cheap). As a result, Starbucks’
premium prices can prevent the company’s development in developing countries
and lose the competition to Dunkin’ and McCafé.
 2. Cannibalization – In the US, Starbucks is aggressively expanding, leaving no
place for future growth targets. Starbucks operates 8078 stores in the United
States and if the company continues to expand this fast, self-cannibalization is
inevitable.
 3. Clash Of The Coffee Cultures – Starbucks coffee culture isn’t widely accepted
in Europe and Asia. The company might find it hard to become an international
industry leader.
 4. US Market Dependence – A big part of Starbucks’ annual revenue is generated
from the US market. Considering the possibility of cannibalization, Starbucks must
act really careful not to harm its revenue.

Opportunities
 1. Expansion into Emerging Markets– The self-cannibalization of the US market,
indicates how important it is for Starbucks to expand the brand, internationally.
Starbucks had already started the process (the latest country that joined the list
was, India) and they have great growth potential in the emerging and developing
markets.
 2. Expanding Product Mix and Offerings – Lately, Starbucks started to expand
its mix by adding Tea and fresh juice products. Though, they still have a lot of room
left.
 3. Technological Advances – Starbucks has leveraged the use of mobile
applications. The “Starbucks App” provides reward programs and creates a
friendly, comfortable environment for the customers. Today, 10% of transactions
in the US are being made through mobile apps and Starbucks App will surely be
effective.
 4. New Way of Distribution – Starbucks introduced a new delivery system called
“Mobile Pour”. This is a great opportunity to improve their distribution system and
drive more revenue.
 5. Expansion in Asia, the Middle East, and Africa – Starbucks just opened its
1,600th store in China. It’s essential to use this popularity and expand in the Middle
East and Africa, where the company currently has minimal presence.

Threats
 1. Increased Competition – This is by far the biggest threat for Starbucks. Dunkin’
Donuts and McDonald’s are the companies, trying the minimize Starbucks’ market
share and they have already shrink it by 26%.
 2. The Price of Coffee Beans – Lately, there have been talks that the price of
quality coffee beans might increase. And if this happens, the overpriced Starbucks
coffee will get even pricier.
 3. Economy of the Developed Country – If a crisis like 2008 somehow repeats,
it will severely damage Starbucks revenue. Moreover, the company will lose a
significant amount of customers because they’ll shift to cheaper brands.
 4. Change of Lifestyle and Preferences – The shift of customers toward
healthier products and the risk of coffee culture vanishing, represents a future
threat for Starbucks.
 5. Brand Imitation – If big brands like McDonald’s and Dunkin’ Donuts decide to
imitate the brand strategy of Starbucks and introduce the same product they have,
with lower prices, will definitely harm the company.

 The Verdict
 The SWOT analysis of Starbucks showed that the brand has the power to
withstand the competition and overcome the toughest obstacles.
 Starbucks might experience some sales problems in Europe, due to a strong
dollar, and unstable coffee prices. But I believe the company’s impressive
management and ability to consistently grow will cover up the weaknesses and
threats.