Name: Nida Barros

SWOT of Starbucks

Strengths
Precise segmentation
Targeted the right segment which is the premium one.In order to target a premium segment,
the company has focused on providing comfort, convenience and value-added services which
make the customer feel that it is worth what is being paid for

Suitable for all kinds of people

Although the core product is coffee, Starbucks has a number of other items in its menu which
makes it suitable for all types of people and of all age groups e.g. flavored coffees, various
types of tea, varieties of baked and non-baked snacks and flavored drinks

‘Starbucks Experience’
Starbucks has been successful in positioning its coffee chains as a ‘third place’, away from
work and home, where people can spend quality time with a company or alone, enjoying
‘Starbucks Experience’. Relaxed and creatively decorated environment and exceptional
customer services increase the value and attractiveness of Starbucks Experience

Strong Branding
Starbucks is a well-recognized brand throughout much of the world and most recognizable
brand in the coffeehouse business. The Starbucks logo is easily identifiable.

Location
The stores located in some of the most prime and strategic locations across the globe. They
target premium, high-traffic, high-visibility locations near a variety of settings, including
downtown and suburban retail centers, office buildings, university campuses, and in select
rural and off-highway locations across the world. This has earned them a significant
competence and advantage to be able to penetrate prime markets and tap into customers
convince factor. 

Human Resource Management

Starbucks is known for its highly knowledge base employees. Employees are provided with
great benefits like a stock option, retirement accounts and a healthy culture. This effective
human capital management translates into great customer services. It was rated 91st in the
100 best places to work for by Fortune Magazine.

Customer base loyalty

Loyalty-based programs to drive loyalty with the Starbucks Rewards programs and Starbucks
Card. The Starbucks Card is a value card program that provides convenience, support gifting,
and increases the frequency of store visits and integrated with their mobile application
Extensive global supply chain
the extensive global supply chain strengthens Starbucks by supporting operations e.g.
supplier of Arabica coffee beans

Extensive brand portfolio 

Starbucks portfolio includes Teavana, Tazo, Seattle’s Best Coffee, Evolution Fresh, La
Boulange and Ethos are popular non-alcoholic drinks and beverages of premium class. The
company also sells merchandise products such as coffee and tea-brewing equipment,
Verismo® System by Starbucks, mugs and accessories, packaged goods, books, and gifts. 

Strong R&D
Solving their cup problem by investing $10 million to create new, sustainable cup and
continues research into a bio-liner solution

Costa Rican Coffee Farm

A farm that has served as a global research and development facility for Starbucks since
2013. Now open to the public, visitors will have the chance to experience coffee from seed to
cup and see firsthand the agronomy work 

Weaknesses
Imitability of products
Competitors could develop beverages that are not the same as but similar to Starbucks’s
products. The business must develop strengths to reduce the adverse effects of imitation

A lack of overly unique products

While Starbucks might be known for their frappucinos, pumpkin spice lattes, and big
chocolate chip cookies, they don’t exactly have the most unique market. Plenty of other
coffee shops, chains may provide similar products and only lose out to Starbucks’ big name.

Slow Expansion in Europe: 

Europe, Middle East, and Africa segment only contributed 6% to revenues in fiscal 2015.
Sales to China/Asia Pacific are more than double that of Europe. Part of the problem may be
the coffee culture in Europe. Coffee drinkers in Italy or France, for example, may not take
Starbucks seriously as a seller of coffee

Heavily depends on coffee

Starbucks’s main product is coffee. It is still heavily dependent on consumers' love of coffee
as other consumers who do not drink coffee will not necessarily come in the store for a snack
or sandwich.

Expensive Products
Starbucks pricing is high and is often criticized for that reason when there are other coffee
retailers out there that offer much lower prices for a comparable quality product.
While Starbucks does differentiate their products with being high-quality coupled with the
whole ‘Starbucks Experience’, in times of economic sluggishness, consumers have to switch
costs to competitor’s products with lower prices. These premium prices could also pose some
weakness for it to succeed in developing countries.

Opportunities

New distribution channels: Starbucks introduced a beta version of a delivery system called
Mobile Pour. This presents a great opportunity for the future by expanding their end product
distribution systems and could drive more revenue if the implementation is successful.

Technological advances: Starbucks has leveraged the use of mobile applications and has an
investment partnership with Square, a mobile payments app that is integrated with its
Starbucks app. Starbucks has already set the bar in the industry with this advancement and
about 10% of its transactions in the US have been made using mobile applications.21 This is
a growing field and would drive more business to their stores as technology advances.

Product Expansion In and Out of Their Stores: Every loyal Starbucks customer knows
that Starbucks comes out with new flavors of coffee every year. They also rotate their popular
flavors during the holidays, like pumpkin spice, gingerbread, peppermint, etc. 
Starbucks products outside of their own stores. Starbucks coffee can be bought in retail
spaces such as Costco, most grocery stores, Target, and Walmart.

Organic coffee
Another trend that has surfaced in the past has been consumer requests for organic coffees 

Growing popular support for environmentally friendly products

Starbucks also has the opportunity to offer more of its products in recyclable packaging.

Partnerships or alliances with other firms

Partner up with other firms in order to strengthen the company’s presence and market share
e.g. alliance with major retailers improves distribution and market share of the company’s
consumer goods, partner with Closed Loop Partners to create a sustainable cup 

Extend supplier network 

To extend its supplier network so it can have better options on raw materials like coffee
beans, which could essentially help them gain more control over raw materials pricing and
minimize the supply disruptions.
Threats 

Market Challenges
Each country has its own culture and lifestyle. Although Starbucks flourishes in Western
countries, not all of them greet the chain with open arms. In 2001, Starbucks set its sights on
Israel, they opened 6 locations in Tel Aviv, and hired 120 employees to run the stores. Within
a year, the decline was so great that future projects, such as opening a store in Jerusalem,
were withdrawn and the following year, all 6 locations were closed.

The possibility of a recession

The 2007–2009 global recession negatively affected the specialty coffee industry

Rising availability of specialty coffee machines for home use

The rising availability of home-use specialty coffee machines is a threat to Starbucks because
it increases the availability of substitutes to Starbucks products.

Saturation point for a coffee market

There is some saturation in the coffee market to the point where Starbucks may have to close
some locations that were too close to each other as they were competing against themselves. 
In some countries as well that coffee market reaches saturation point e.g. UK in 2017

The rising cost of raw materials and ingredients 

The cost of raw materials and ingredients are rising, along with volatile exchange rates, can
also threaten Starbucks in terms of profitability and may force the company to raise prices,
which could lead to more customer migration to the competition. E.g.droughts or disaster in a
country where caused a coffee production to lost revenues

A specific market
Starbucks’ success can be partially attributed to the popularity of coffees, teas and convenient
snacks in today’s society. If consumers were to shift away from these products to an
alternative product e.g.caffeine pills instead of caffeinated beverages, it would leave
Starbucks struggling to stay afloat.

Cheaper alternatives product

Dunkin’ Donuts and McDonald’s are two other 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. 

Coffee Culture
American/European coffee culture clashes with that of other countries: Starbucks coffee
culture may not widely be accepted in some countries The American cultural habit of sitting
in a Starbucks may also not be as appealing to a European who wants to sit at a nice, local
coffee shop.
Changing Consumer tastes and lifestyle choices
The shift of consumers toward more healthy products and the risk of coffee culture being just
a fad represent a threat for Starbucks going into the future.

Increased Competition
The biggest threat that Starbucks faces with the market being at a mature stage, there is
increased pressure on Starbucks from its competitors like Dunkin Brands, McDonalds, Costa
Coffee, Pete’s Coffee, mom and pop specialty coffee stores. Dunkin Brands had at its main
threat in the US market by trailing Starbucks with a 24.6% share. (second place, Starbucks at
36.7%)
References:
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