SWOT analysis of Starbucks
This SWOT analysis examines Starbucks, a global roaster of coffee beans and retail coffee house chain with locations in countries all over the world. This U.S.-based company has been doing more to expand its product and service offering, diversifying into new areas and experimenting with products that complement their coffee product focus. To help shape recommendations on strategic changes, this analysis looks at the strengths and weaknesses of Starbucks as well as where it has opportunities and threats to consider.
- Starbucks is the number one specialty coffee retailer in the world with the most market share and strong brand recognition for quality coffee and an exceptional service experience, which provides it with brand equity unmatched by any competitor.
- Its profitability continues to rise and far surpasses that of any of its competition in terms of revenues and overall financial performance.
- The Starbucks experience provides a comfortable ambiance, delicious product selection, attention customer service and complementary products in its retail format for practical use and gift giving.
- The company is known for treating its management and employees well, including numerous benefits and a higher pay rate than the competition offers.
- The expanded food offering has provided a way to make Starbucks an attractive spot for breakfast, lunch, and snacks.
- Starbucks pricing is high and is often criticised for that reason when there are other coffee retailers out there that offer much lower prices for a comparable quality product.
- It is viewed as an American brand that offers no real diversity in its stores around the world to recognise local cultural tastes.
- It is criticized for not using more free trade products and being more thoughtful about corporate social responsibility, including poor efforts about being environmentally sound, poor treatment of suppliers from emerging countries, and tax evasion charges. This negative publicity positions Starbucks as an unethical company in many respects.
- 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.
- There is some saturation in the coffee market to the point where Starbucks has had to close some locations that were too close to each other as they were competing against themselves.
- Threats from activist stakeholders include further damage to the company's reputation by pointing out their poor stance on labour relations, fair trade, and environmental impact, so Starbucks would need to focus on clarifying its stance on these points and show social responsibility.
- Starbucks' profitability can be threatened by economic downturns when consumers have less discretionary income to buy their coffee drinks out and immediately cut this type of expense out of their budget. They will either go to a competitor that charges less or simply not buy coffees during the recessionary period.
- 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. Since Starbucks cannot necessarily control these prices on raw materials, they have to find other ways to make their business efficient so as to offset the rising material costs.
- There are legal threats in the form of trademark issues and other types of lawsuits that can tarnish the brand as well as create unnecessary costs for Starbucks.
- There may also be political, environmental, and social threats in the form of weather or natural disasters, political unrest, and labour strikes that disrupt supply of raw materials.
- There are significant opportunities for strategic partnerships outside of the U.S. in emerging markets where Starbucks could introduce its products in pubs and bars, restaurants and cafes, and supermarkets and retail shops. This could include countries in Latin America as well as the growing economic powers of China and India.
- There are opportunities to further diversify the food and beverage range, including cross-selling some of its retail products like its ice cream available in U.S. grocery stores and putting it in the coffee houses for sundaes or ice cream cones. There has been some discussion about adding beer and wine to encourage visits to Starbucks in the evening and make it more of a social gathering spot. Product diversification might also include a range of coffee makers to compete with Keurig or other pod coffee makers as well as other strategic partnerships to offer more music, book, and other types of entertainment products.
- Starbucks could also license its name with other retailers for other types of products, including the aforementioned pod coffee makers.
- Because loyalty club cards work so well in the retail format, Starbucks might consider this and tie it to its social media and CRM efforts.
- There are many ways that Starbucks can be more socially responsible and anchor their strategy to socially responsible actions that also may address some of the threats and improve their brand reputation at the same time.
- Starbucks can 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 minimise the supply disruptions.