Starbucks SWOT - Strengths Weaknesses Opportunities and Threats
A SWOT analysis will help emphasize exactly what Starbucks is doing right or wrong. It will provide us an insight on what the company is good at, and in what areas Starbucks could use assistance. Strengths, Weaknesses, Opportunities, and Threats (SWOT) are described below:
Starbucks SWOT Analysis
o It is a global coffee brand built upon a reputation for fine products and services
o It has almost 17,000 stores in 49 countries.
o The organization has strong ethical values, commitment to the environment, and community activists.
o The organization has a strong presence in the United States of America with more than three quarters of its cafes located in the domestic market. In order to reduce business risk, expansion is needed.
o Starbucks has a reputation for new product development and creativity. However, they remain vulnerable to the possibility that their innovation may falter over time, and product acceptance will come to a halt eventually slowing growth.
o The company has the opportunity to expand its global operations. New markets for coffee such as India and the Pacific Rim nations are beginning to emerge.
o Co-branding with other manufacturers of food and drink, and brand franchising to manufacturers of other goods and services both have potential.
o Starbucks' success has lead to the market entry of many competitors and copycat brands that could pose potential threats. How they combat these threats will determine their future.
o Starbucks is exposed to rises in the cost of coffee and dairy products.
Starbucks is a large company with a competitive advantage that is shrinking because of its huge success. This is because Starbucks model has been copied successfully by its competitors and this poses a serious threat to the company. If Starbucks cannot retain its differentiator strategy, it is doomed to fall out of popularity, as it would end up being a store that is selling nothing more than a cup of coffee.
With majority of its stores concentrated in United States, Starbucks is also limiting its growth and exposing itself to risk. Any negative changes in the domestic market could severely hurt Starbucks viability as a firm. If Starbucks can retain its strengths and build on opportunities, while suppressing weaknesses and extinguishing threats, it will be able to grow throughout the world market.
The SWOT analysis also gives a starting point for a discussion on what Starbucks can do to reduce its weaknesses. Due to its large size, Starbucks sets trends for the industry that can be backed up by the volume of their delivery. Exactly how long Starbucks can dominate the market depends on Starbucks itself. Starbucks has a large number of stores for coffee outlets, all of which are owned outright by the corporation and no franchisees. Minimal revenue requirements have been placed on each store, and those that fall short are closed. The company closed down over 600 stores that fell short of its revenue requirements ("Fiscal 2008 Annual Report"). The large number of stores is a huge asset or a liability, depending on how one assesses the situation. If there is a strong economy and people have disposable income, then there is a benefit on having so many stores to generate revenues. On the other hand, during economic downturns, the vast number of stores will become a huge financial liability. By consistently enforcing revenue requirements for each store, Starbucks will able to maintain or increase its same store sales, and while at the same reducing one of the weaknesses of being so large.
The company has managed to maintain the competitive advantage because it has offered conveniences and an atmosphere customers can enjoy. As long as Starbucks fulfills its customer's wants and needs, Starbucks will continue to be a leading force in the market. Starbucks should continue to create more value at its stores. Starbucks has created a perception that it is focused not just on profits, but also on societal agendas. The company's stores have become a medium for people and communities to come together and promote a better place to live in an environmentally conscious society. Starbucks found a niche market where it identified what makes its customers happy, and has delivered it to them. Continuing to accomplish this will allow Starbucks to maintain its competitive advantage for years to come.