Coffeehouse chain Starbucks (formerly Starbucks Corporation) operates over 20,000 stores worldwide.
Analyzing Starbucks using a SWOT matrix can reveal the future of this world-famous business.
This Starbucks SWOT analysis illustrates how its largest coffee business leverages its competitive advantages to maintain its successful global expansion.
Starbucks' business history
Giornale purchased Starbucks' assets in 1987, and the Company was renamed Starbuck Corporation. By the end of the year, the Company had raised its shop count to 17 and expanded its geographic reach by opening locations in Chicago and Vancouver. After three years, circa 1990, Starbucks expanded its Seattle headquarters and increased its resources with the inauguration of a new roasting factory. During the early 1990s, Starbucks formed alliances and other initiatives as it sought development groups to help it advance. By 1995, Starbucks had truly made a reputation for itself with the opening of its 676th shop and expanding its product line with the inclusion of compact CDs, books, and other items as a consequence of a previously successful trial with in–house music. Starbucks expanded its reach in subsequent years by entering overseas markets like Japan, Singapore, and Hawaii.
Starbucks had advanced so far by 2000 that it had already established 3300 outlets, and the corporation had expanded into nations ranging from England to China and Australia.
Starbucks Process International shops now number 5113 in the United States and 11567 in Canada. Schultz returned to Starbucks as CEO in early 2008 to pursue a recovery strategy for the floundering company after Starbucks failed to respond quickly enough when the US and global economies started to deteriorate.
An overview of Starbucks
Starbucks is one of the world's biggest food service enterprises and one of the most known brands. It has come to be associated with high-end coffee-based beverages and wealthy living. It has undergone tremendous expansion in recent decades and has continued to consolidate its market position via its premium beverage variety, marketing expertise, and strong customer loyalty.
Starbucks' vision of becoming a global brand seems to be working in its favor, attracting the attention of many prominent corporations interested in forming a collaboration. This method provides a stronger foundation for future foreign market expansion, which further enhances the aim to become one of the world's top specialty coffee merchants.
Starbucks, the world's biggest retailer, roaster, and brand of specialty coffee, has been battling a weakening economy, its fast development (international expansions and a rising presence in 44 countries), and greater competition from cheaper competitors. The net profits of the Company in the first quarter of 2008 was $108.7 million, a 28 percent decrease from the same time in 2007. Starbucks' stock has plummeted in the last two years, and the firm has struggled to preserve its distinction in the face of increasing competition. It has also suffered from the consequences of the property market crisis, which has hampered sales. The Company has also suffered as the cost of storefront space and wholesale pricing for coffee, and dairy items have risen.
Starbucks' strengths
Starbucks' strengths are as follows:
1. Strong brand association and public perception
There is a strong association between brands and public perception, and Starbucks Corporation is the most well-known and strong brand in the food and beverage business.
Its size, volume, and number of committed clients have all increased progressively over time. According to the 2019 Interbrand assessment, it has a brand value of $11.7 billion.
Starbucks is one of the market's most trusted consumer brands. Many locations around the nation and huge queues for most drive-throughs illustrate this Company's loyalty to its clients, ensuring the Company's existence.
It was partially responsible for changing coffee from a commodity to a "luxury" product.
Furthermore, it maintains a significant brand presence via popular goods and intensive public relations initiatives. Starbucks is among the world's top five most admired companies.
Starbucks has mastered supply chain management by using large quantities of items and significant business volumes.
It sources coffee beans from all around the globe to guarantee that client demand is met consistently.
Starbucks is well-known for its extensive global supplier network. Starbucks sources its coffee beans from Latin America, Africa, and Asia-Pacific.
Starbucks sources coffee beans from 30 different countries throughout the globe, including Central and South America, Asia, and the Pacific Islands.
3. Outstanding financial performance
Starbucks maintains a strong financial position in the market, with $26.5 billion in yearly sales and a $3.6 billion profit in 2019.
This consumer enthusiasm has resulted in good sales figures year after year, enabling Starbucks to increase the number and density of stores in its key locations.
Starbucks would regularly open hundreds of stores in a single year, dominating the market and forcing rivals out.
Even emerging nations like China have seen remarkable development in recent years. Starbucks operates around 31,000 stores worldwide.
4. Well-liked Purchases
Starbucks is no exception to the norm that good corporate acquisitions may help an already successful company.
Among the top six companies it has acquired are Teavana, Seattle's Best Coffee, Evolution Fresh, Tazo, Torrefazione Italia Coffee, and Ethos Water.
With these acquisitions, Starbucks has had a lot of success. Its purchase of existing brands enables it to effortlessly integrate existing brands into the corporate fold, offering new revenue streams and product possibilities across several product categories in its shops. Starbucks has a total asset value of $19.22 billion.
5. Providing excellent care to staff
Starbucks compensates its workers well, which leads to happy employees who give good customer service. Starbucks has been awarded one of Fortune's Top 100 Companies to Work For.
Starbucks is one of the most well-known businesses. The Company is well-known for treating its workers with dignity and regard for their welfare.
It has garnered industry acclaim for its employee care and has repeatedly made headlines for its quest for higher pay for its frontline employees.
6. A wide range of products
Starbucks has also expanded its commercial activities by offering new products and culinary items. The inclusion of coffee-flavored ice cubes, for example, leads to a greater coffee taste.
For such a basic food item as coffee, Starbucks has created hundreds of distinctive beverage options firmly tied to the whole Company, such as the ever-popular pumpkin spice latte.
Customers may further boost their brand loyalty by purchasing branded things. Customers could now bring their favorite mixes to their homes or workplaces rather than relying just on the café, thanks to the Company's growth into grocery items. Starbucks has sold over 350 million cups of pumpkin spice lattes.
7. Loyalty Program for Customers
Starbucks has a fantastic reward scheme that keeps customers returning for more. Every dollar earns you three points ($1 equals three stars).
When you collect 150 stars, you will get a free drink (150 stars = one free drink). Furthermore, reward members benefit from mobile payment, pre-ordering, special birthday drinks, and other perks.
8. Standardization, taste, and quality are all important considerations.
Starbucks has expanded globally due to its expensive beverages and great coffee. It offers high-quality, consistently standardized goods throughout all of its locations.
9. Strategic Planning, Reinvestment Strategy, and Efficiencies
Starbucks reinvests its profits by expanding its business into new markets. Its efficient operations and well-thought-out strategic choices have resulted in some advantages for the Company.
10. Restrooms for both sexes
Starbucks has installed gender-neutral restrooms in order to protect the Lesbian, Gay, Bisexual, and Transgender (LGBT) population from discrimination. The measure responds to laws that discriminate against transgender people, particularly anti-LGBTQ legislation.
1. Volatile supply prices
Starbucks' pricing is closely related to the price of coffee beans. Because it bills itself as a purveyor of good coffee products, it presumably acquires higher-quality beans and must pass on any rise in the cost of getting raw coffee beans to the user in some manner. Continued price rises in coffee may result in even higher pricing at the register, which may deter some consumers.
Coffee bean prices have risen considerably over the years, with a 164 percent increase from 2007 to 2011 and a 20 percent increase overall from 2007 to 2021.
2. Expensive product pricing
Even a basic cup of coffee is far more costly than at rival establishments, and there are dozens of beverages and customization choices to choose from. Furthermore, making coffee at home or in the workplace is far less expensive for people who consider coffee a need rather than a pleasure. Beating this notion and justifying high costs may be tough, and it is a challenge that Starbucks faces on a daily basis.
Starbucks goods are typically 38% more expensive than rivals' items.
3. The product is readily copied.
Despite its tight link with coffee, the commodity is seen as a necessity in many regions of the globe. Coffee is drunk almost everywhere, with dozens of big chains and hundreds of smaller eateries providing coffee as part of their menus and individuals buying straight from a supermarket.
In this approach, Starbucks must try harder to position itself as the preferable option over alternatives that may be significantly less expensive or might not appeal to consumers who just want a "regular" cup with no modifications.
Starbucks controls two-thirds of the specialty coffeehouse industry.
4. Unhealthy options
Many Starbucks beverages are heavy in calories and sugars, making them extremely harmful if drunk regularly. Customers might choose a product with fewer ingredients, but the corporation has built its name on flavored and sweetened items that appeal to consumers' taste buds. Providing healthier options and changing its recipes will be critical in avoiding this issue.
A Cinnamon Roll Frappuccino from Starbucks has 510 calories and 85 grams of sugar.
5. Recalls of products
Product recalls may be disastrous for any food and beverage business if they are not handled quickly and appropriately. Selling a product that contains foreign pollutants or allergies might not only cause damage to its consumers but can also result in a public relations catastrophe. Error prevention and correction are critical action measures to avoid additional damage to the brand's image.
In 2016, Starbucks recalled two food items due to allergy contamination. (CNN)
6. Failure to pay European taxes
Starbucks has been chastised for failing to pay product taxes in many European regions. This resulted in a tremendous public relations disaster that may have had long-term consequences for the Company's brand name. While there were no long-term consequences that damaged the corporation as a whole, other, more serious blunders might lose the organization substantial social and financial capital. Starbucks has paid no taxes on £1.2 billion in sales in the United Kingdom.
1. Business Expansion
The corporation may grow into places that it has not before explored. Countries such as India and China, for example, have relatively restricted access to Starbucks. Starbucks will gain at least a billion new customers if it expands alone in these two nations. However, in such a circumstance, Starbucks' price may become a source of worry.
2. New Product Introductions
As we stated in the last section, adding additional menu options would help Starbucks attract a far wider client base than they now have. People prefer to get their morning coffee and breakfast from the same seller rather than from separate vendors. As a result, by offering new food options, Starbucks may increase its profit margins.
3. Strategic Partnerships
Starbucks can collaborate with meal delivery services such as Uber Eats to give convenient home delivery choices as well as a variety of incentives. According to the current market trend, more customers choose to order their breakfast rather than eat it in a restaurant. As a result of granting such access to their goods, they will be able to sell more of them.
Starbucks' collaboration with Nestle is one of the greatest business partnerships that the Company has formed in recent years. The latter has acquired the rights to market, distribute, and sell Starbucks coffee goods in their shops. This transaction netted Starbucks a whopping $7.15 billion. Starbucks can make such arrangements feasible due to the scale of its business and the globalization element.
Starbucks' threats
Many coffee shops provide their wares at reasonable prices, and this may jeopardize the long-term viability of Starbucks, which charges higher pricing.
2. Competition from large retailers
Aggressive rivalry from global corporations such as Dunkin Donuts and McDonald's might jeopardize its market position.
3. Business Model Imitation
Newer firms are copying Starbucks' business approach to build a loyal consumer base. Because Starbucks' goods are very standardized, any other company may create a menu identical to theirs. And if a Starbucks location is not in a customer's immediate proximity, they are more likely to choose an alternate brand that provides a comparable product. Smaller imitative businesses also steal Starbucks' customers by providing comparable items at lower costs.
4. Strike by Third-Party Delivery Suppliers (union)
Starbucks' supply chain comprises several third-party contractors and stakeholders, making it challenging to properly manage the whole chain. Starbucks coffee shops in the Midwest faced shortages in 2019 when a major supplier's workers went on strike.
5. Movements for independent coffeehouses
Starbucks faces several socio-cultural threats. These socio-cultural groups advocate for the establishment of small independent and local coffeehouses while opposing the spread of giant international chains.
6. Disagreement on California's warning rule
In March 2018, a California court ordered Starbucks and other corporations to include warning labels on all of their coffee products. This was about avoiding a violation caused by the use of chemicals that may cause cancer.
7. Arrests in Philadelphia
In April 2018, two African-American males were detained at Starbucks, causing quite a stir on social media. Starbucks personnel denied them access to the toilet since they had not made a purchase. Kevin Johnson, the CEO, later apologized to both men.
8. Coronaviruses
The epidemic is projected to continue to have a substantial effect on Starbucks' financial performance owing to decreased consumer traffic and shop hours.
Starbucks, for example, was forced to temporarily down an estimated 2000 outlets in China owing to a coronavirus epidemic. Starbucks has 4123 shops in China, and over half of them were shuttered during the height of the epidemic.
9. A shift in consumer behavior
According to experts, the pandemic will continue to change consumer behavior and diminish discretionary spending. Furthermore, the restaurant industry's collapse and other macroeconomic issues may have a severe effect on Starbucks' expansion plans and operations.
10. Rising Raw Coffee Bean Prices
The price of Arabica, the world's most-produced coffee (representing more than 60% of worldwide production), has increased considerably throughout the pandemic due to concerns about its availability, hoarding, and supply chain disruption. Every extra dollar spent on acquiring raw coffee beans at a higher price reduces Starbucks' profitability.
11. Bargaining with Buffalo employees in support of unionization
Starbucks has scheduled negotiations with its Buffalo workers, who voted to unionize, for December 2021. The corporation indicated that they would negotiate with the voters in good faith in order to achieve a mutual agreement. Starbucks, on the other hand, said unequivocally in a letter to its US employees that it would not support the concept of unionization.
12. Starbucks is being investigated for nutritional racism.
Dietary racism entails forcing BIPOC (Black, Indigenous, and People of Color) populations to consume unhealthy diets by providing restricted food alternatives at lower prices. According to a Switch Good marketing campaign, the hoax successfully called out Starbucks' methods.
Conclusion
Starbucks has the potential to be the next great thing in the beverage sector if some of its flaws are addressed. The SWOT analysis assists the firm in making better decisions about its financial obligations and competitors. This also assists them in analyzing and rethinking their prior and present plans, as well as all of their ins and outs.
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