Starbucks Company
Starbucks Coffee Company is probably one of the organizations that stand as the most significant coffee-house enterprises in the globe. The firm has a significant competitive advantage that is majorly based on its strengths. In a typical SWOT analysis, the strengths of a business are effectively evaluated to determine the ability to sufficiently address the weaknesses, opportunities, as well as threats. As such, a company's SWOT analysis refers to the process where the management team identifies both the internal and external factors that will influence the future performance of the business (Manic, 2016). It is important to realize that firm's strengths, and weaknesses are the internal factors while the opportunities and threats are the external factors that will influence the future performance of a business. Thus, it is important to conduct a SWOT analysis to establish the position of a business in terms of its ability to cope with weaknesses, opportunities, and threats as they present. Typically, a company's SWOT analysis is often done as part of the overall corporate planning process that involves setting financial and operational goals, as well as the creation of strategies to accomplish the set goals. Dealing with risks, competitive positioning, improving operations and discovering opportunities are of the typical organizational goals.
Starbucks SWOT Analysis
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Strengths Strong market position Products of the highest quality Location and aesthetic appeal of the company’s sores Human resource management Customer base loyalty |
Weaknesses Expensive products Self-cannibalization Overdependence on the US market The American coffee culture |
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Opportunities Expansion into emerging markets Product mix expansion Technological advancement New distribution channels |
Threats Increased competition Price volatility in the global coffee market Market saturation in developed countries Changing consumer tastes and lifestyles. |
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Strengths
Strong market position
Starbucks boasts of a significant geographical presence across the world. The company maintains 36.7 percent market share in the US and has operations in over sixty countries. Besides, Starbucks is perhaps the most recognized brand in the coffee house segment. In fact, Starbuck was ranked 91 st in the best global brands category in 2013. This shows that the company enjoys significant brand equity around the globe. The company effectively leverages its rich brand equity by licensing its logo out and merchandising products. Such a strong market position allows the company to further expand into international markets due to the great competitive advantage it enjoys.
Products of the highest quality
Starbucks Company gives the highest importance to the quality of the products they offer customers. Additionally, Starbucks has avoided standardization of their quality to increase production output. The high quality of the company's products attracts more customers.
Location and aesthetic appeal of the company’s stores
Starbucks’ stores are located in some of the most prime and strategic places across the world. The company targets premium, high visibility, high traffic locations that attract more customers who can purchase their products.
Customer base loyalty
Starbucks customers are very loyal. As such, the company is able to maintain or even increase sales revenue. The company has implemented customer loyalty programs including the Starbucks Reward program and the Starbucks Card.
Weaknesses
Expensive products
Starbucks prices are very high as they are associated with both quality and the remarkable Starbucks experience (Wen, 2016). Thus, customers tend to consume cheaper products from competitors during hard economic times. The premium prices charged on products has made it difficult for Starbucks to become successful in developing economies.
Self-cannibalization
Through aggressive expansion that causes overcrowding in the market, Starbucks ends up doing self-cannibalization. This diminishes long-term growth as it will eventually compete against itself.
Overdependence on the US market
The company has concentrated heavily on the US market, with a huge percentage of their total revenue from the US market. This makes the company very sensitive to prospects of the US economy and growth.
The American coffee culture
The Starbucks coffee culture is representative of the US culture. Such a culture may not be accepted in some countries. This may affect it expansion prospects.
Opportunities
Expansion into emerging markets
The company's increase in self-cannibalization makes it necessary to expand to international markets. The company has huge growth potential, particularly through international expansion considering the fact that it has already made inroads to India (Wen, 2016).
Product mix expansion
The company could increase its revenue by expanding their product offerings to include tea and fresh fruit juices. Such a strategy provides a significant opportunity for Starbucks.
Technological advancement
The company could invest more in advance technology to increase customer convenience. Through the development of smartphone apps, the company can attract more customers.
New distribution channels
Starbucks recently introduced a revolutionary delivery system known as the Mobile Pour. Through such an initiative, the company could drive more revenue hence facilitating growth and competitiveness.
Threats
Increased competition
The fact that the prices of Starbuck products are high makes it vulnerable to price competition. Dunkin Brands, Costa Coffee, Pete Coffee, and MacDonalds are some of its fiercest competitors.
Price volatility in the global coffee market
Significant fluctuations in the worldwide coffee market could adversely affect the company's profitability.
Market saturation in developed countries
The market saturation in developed countries could soon impact Starbucks sales negatively. This may deter its further growth.
Changing consumer tastes and lifestyles
Currently, consumers are increasingly focusing on healthy diets. Besides, there is the risk of coffee culture being just a fad. These may have adverse effects on the company’s growth and sustainability.
Recommendation to Management
Based on the SWOT analysis of Starbucks, the management should consider making some important decisions regarding the direction of the company. Starbucks has significant strengths that should be utilized. The management should take advantage of the company's strong brand to expand into new international markets and expand its product mix. This will reduce its overdependence on the US market. The management should also consider segmenting its market to serve both high end and low-income customers, particularly in emerging markets. The company should also invest in technology to enhance the Starbucks experience and improve customer loyalty. This will ensure that the company sustains its profitability and growth.
References
Manic, S. (2016). Economics Imperialism: SWOT Analysis. Asian Economic and Financial Review , 6 (3), 151.
Wen, S. (2016). Marketing strategies: Starbucks in China.
