Starbucks Corporation (Starbucks Coffee Company), examined in this SWOT analysis, positions itself as the biggest coffeehouse chain in the world through innovative strategies that employ business strengths to overcome weaknesses, exploit opportunities, and protect the business against threats and barriers to success in the coffee industry environment. The SWOT Analysis model is a strategic management tool for assessing the strengths, weaknesses, opportunities, and threats (SWOT) relevant to the business and its internal and external environments. This SWOT analysis of Starbucks Coffee considers the strengths and weaknesses (internal strategic factors) inherent in coffee, coffeehouse, and related businesses. This business analysis case also considers the opportunities and threats (external strategic factors) related to the competitive landscape, which involves the strong force of competition, as determined in the Porter’s Five Forces analysis of Starbucks Corporation. This competitive environment requires that the company continuously improve its business strengths to optimize its financial performance and growth trajectory.
Starbucks operates in various industries that have different challenges to business growth. The variety of these industries has increased over time, as the company develops more products to complement its core coffeehouse business. For example, Starbucks Corporation’s marketing mix or 4P indicates product mix expansion to include tea, food, and merchandise, in addition to coffee. Within the SWOT analysis framework, this business condition creates a challenging environment where the company needs to use different sets of strategies and competencies that match various industries. Strategic planning that accounts for the internal and external factors shown in this SWOT analysis can increase Starbucks Coffee’s success in competing against various coffeehouse firms and other food service businesses, such as Dunkin’, McDonald’s, Burger King, and Wendy’s.
Starbucks Coffee’s Strengths (Internal Strategic Factors)
This component of the SWOT analysis model deals with the internal factors that the company can use as strengths to address weaknesses and protect the business against competition. Starbucks Coffee’s main strengths are as follows:
- Strong coffee and coffeehouse brand image.
- Effective capabilities for managing a global supply chain of coffee and related materials.
- Moderate diversification through various subsidiaries and products, including merchandise.
Starbucks Corporation has one of the world’s strongest and most popular brands. The company has a growing population of loyal customers, which adds to the stability of the coffeehouse business. In the SWOT analysis model, effective capabilities for managing a global supply chain strengthen Starbucks by supporting operations that connect production (e.g., Arabica coffee beans in plantations) to consumption (e.g., caffeinated drinks in coffeehouses). Also, the company gradually diversifies its business through new products and new subsidiaries, resulting in the current product mix and brands of Ethos Water, Seattle’s Best Coffee, Teavana, and others. Diversification makes the effects of market and industry risks on the coffee business more manageable. The internal strategic factors identified in this part of the SWOT analysis of Starbucks Corporation show that the business has strengths that promote resilience through diversification and a global supply chain.
Starbucks’s Weaknesses (Internal Strategic Factors)
Business weaknesses are identified in this component of the SWOT analysis. Weaknesses are internal factors that reduce or limit the capabilities of the coffeehouse company. Starbucks Corporation’s weaknesses are as follows:
- Pricing strategy for high price points
- Generalized standards for most products
- Imitability of products, especially beverages
Starbucks has high price points that maximize profit margins but reduce the affordability of its products. The related pricing strategy, an internal strategic factor, is a weakness because it limits the coffee company’s market share, especially in areas with relatively lower disposable incomes. Also, this SWOT analysis considers generalized standards a weakness that limits the flexibility of the coffeehouse chain business organization. For example, the company’s generalized standards for crafted beverages reduce these products’ cultural alignment with local target markets and consumer preferences. In addition, many Starbucks products are imitable. For instance, small local competitors can develop beverages similar to the company’s products. Even the design and ambiance of the company’s cafés are imitable. Imitability is a weakness that empowers competitors. The internal factors in this part of the SWOT analysis of Starbucks Coffee Company show that the business must develop strengths to reduce the adverse effects of imitation and high price points on the company’s market share in the global industry.
Opportunities for Starbucks Corporation (External Strategic Factors)
This part of the SWOT analysis model focuses on external factors that present opportunities for business growth and development. In this case, the main opportunities available to Starbucks are as follows:
- Further expansion in developing markets.
- Higher business diversification to include operations related to food, beverages, and merchandise.
- Stronger market position through additional partnerships or alliances.
Starbucks Corporation can increase its revenues by further expanding in developing markets, many of which have high economic growth rates. This opportunity draws attention away from the U.S. market, where most of the coffeehouse company’s revenues are generated. Also significant in this SWOT analysis is higher business diversification, which can improve Starbucks’s long-term stability. For example, further diversification can reduce the coffee company’s dependence on a single market, market segment, or industry, thereby reducing risks and improving revenue growth opportunities. Diversification is currently a minor growth strategy as shown in Starbucks Corporation’s generic competitive strategy and intensive growth strategies. The industry environment also presents the opportunity to strengthen the company’s market position through additional partnerships or alliances with other firms. For instance, additional or reinforced alliances with major retailers can improve the distribution and market share of the company’s consumer goods, such as ready-to-drink coffee. The external strategic factors in this part of the SWOT analysis show that Starbucks can improve its industry position by exploiting the opportunities, such as through diversification and alliances in the global industry environment.
Threats Facing Starbucks (External Strategic Factors)
Threats against the coffeehouse business are identified in this part of the SWOT analysis. These threats are external factors that reduce or limit business performance. In this company analysis case, the following are the main threats relevant to Starbucks Coffee Company:
- Competition with low-cost coffee sellers
- Imitation of name, design, or recipes
- Independent coffeehouse movements
Starbucks Corporation competes against a variety of firms in the international market. For example, the company competes against major restaurant chains that offer lower-cost coffee products, such as McDonald’s and Dunkin’. This external strategic factor threatens Starbucks because such competitors can reduce the company’s market share by competing based on low prices. Also, this SWOT analysis considers imitation as a major threat against the coffeehouse business. In light of the company’s weaknesses, the threat of imitation involves firms that try to copy the taste, look, and feel of Starbucks products. In addition, the industry environment is subject to independent coffeehouse movements. These movements are sociocultural efforts that support the operations of small independent local coffeehouses, and oppose the expansion of multinational coffeehouse chains. Such sociocultural trends influence consumer perception and purchasing behaviors, as shown in the PESTEL/PESTLE analysis of Starbucks Corporation. Successful marketing campaigns and branding strategies are needed to counteract the effects of these trends. This part of the SWOT analysis of Starbucks Coffee Company identifies external strategic factors that impose challenges to international expansion and market penetration.
Some Recommendations – SWOT Analysis of Starbucks Corporation
The industry environment of Starbucks involves diverse challenges, especially because of the company’s moderate diversification. The coffeehouse chain business faces issues such as competition, imitation, and social trends that oppose international players in local markets. Based on the current condition of the business, some of the most notable strategic management concerns enumerated in this SWOT analysis of Starbucks Coffee Company are the imitability of products and the corresponding threat of imitation, the threat of competition involving low-cost sellers, and independent coffeehouse movements.
A recommendation to protect Starbucks’s business against imitation is to aggressively innovate, especially in the area of product development. Innovation can make the company’s products more difficult to imitate. It is also recommended that Starbucks Corporation consider pricing strategies that attract more customers. For instance, bundle pricing can help address the threat of competition involving low-cost sellers. Furthermore, a suitable recommendation in this case is to implement creative marketing and branding strategies that build Starbucks’s corporate image as a contributor to community development. Such an image can help reduce sociocultural opposition against the company’s expansion. These recommendations focus on minimizing the negative impacts of the internal and external factors enumerated in this SWOT analysis.
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