World’s largest American coffeehouse with over 87,00 drink varieties available at Starbucks. The company operates a mighty setup of 17,133 company-operated and 16,700 licensed stores worldwide. Their products range from beverages, fresh food items and non-food items like packaged goods and accessories. The company is capable of addressing its weaknesses and opportunities due to its solid global position. The threats posed to the external business environment should be tackled by the company’s innovative and competitive strategies.
The SWOT Analysis is conducted here to identify the company’s strengths, weaknesses, opportunities, and threats which are prevailing conditions and environments of business. It also examines the internal and external factors that shape the company’s overall performance and effectiveness. This analytical model reveals the strengths and weaknesses which are inherently present in coffee business operations and acts as internal strategic factors.
Furthermore, to handle the competitive environment of the market, this SWOT model gives opportunities and threats. Opportunities are the possible strategies that Starbucks can adopt to handle the competition effectively. Threats are the external factors that contain potential harm if they are left unmitigated. Therefore, the company needs to consider the SWOT Analysis model in order to optimize financial performance and steady growth.
Starbucks has incorporated more items in addition to coffee. Tea, food, and merchandise are added to assist the coffee business more effectively. For instance, Starbucks Corporation’s marketing mix or 4P revealed that the company had increased its product list. Another challenge is the presence of other industries that offer a variety of food. Several food brands like Dunkin’ Donuts, McDonald’s, Wendy’s, and Burger King are determining a series of competitive factors. It has created a competitive business environment, and the company must use diverse strategies to hold its position in the competitive market.
Starbucks Coffee’s Strengths (Internal Strategic Factors)
This segment reveals the internal factors which are contributing positively to growth and performance. These are the strengths on which the corporation depends to prosper. They can also be utilized to eliminate the weaknesses prevalent in business.
Extensive Brand fondness
It is the most pleasant brand around the globe in the food and beverage industry. The company is growing in its scope, capacity, and number of customers steadily. According to the Interbrand ranking, the company holds a brand value of $13.01 Billion in 2021.
Strong International Supply Chain
Starbucks has an extensive and robust supply chain network around the globe. Raw material or coffee beans are purchased from Latin America, Africa, and Asia-Pacific. Around 32,000 stores of the company are operated in over 80 countries. The company’s Strong international supply chain has enabled it to serve worldwide.
Increasing Stores and Strong Financial Performance
Starbucks increased its operation around the globe by opening more stores. Starbucks’ growth is deeply rooted in the incrementation of stores. From 1998 to 2021, the company has been able to expand from 1,886 to 33,833 stores. These stores promise high business growth and fiscal gains. The company generated around $29 billion in annual revenue in the fiscal year 2021. Therefore, Starbucks has successfully grasped a strong financial position.
Provision of Quality and Taste with effective Loyalty Programs
Starbucks is appreciated worldwide due to its delicate taste and quality assured products. It provides excellent quality services and premium taste. Moreover, it has a great reward system for its customers. For every 150 stars, a customer gets a free drink, and one dollar is equal to one star. This loyalty program gives access to other facilities like mobile payment, pre-order, etc.
To add more, Starbucks has acquired several companies like Seattle’s Best Coffee, Tazo, Ethos Water, and more. It has provided a healthy working environment and wages for employees. Starbucks has a fixed starting wage for Baristas to $12/hour. Gender-neutral restrooms are introduced in response to Anti-LGBTQ bills.
Starbucks’s Weaknesses (Internal Strategic Factors)
Weaknesses are the second component of SWOT Analysis. It invariably includes the internal factors that limit business growth and performance. The following are the weaknesses which Starbucks must address in order to increase performance and resources
Sky-rocketing Prices
Although Starbucks provides quality, its high-priced products are a serious limit to potential buyers. The middle working class and consumers found it difficult to consume Starbucks products. Its products are higher than other outlets like MacDonalds or Dunkin Donuts.
Alien Products to some Regions
Starbucks products are alien to people of some remote cultures and regions. Its products don’t align to their developed taste. Starbuck’s generalized standards for many products have become a weakness.
Imitability of Products
Starbucks products are not limited to the company. Many other competitors provide the same at a lower price tag. MacDonald McCafe and Dunkin Donuts offer a near match to their products. Therefore, Starbucks is prone to imitability of its products.
Recall of several Products
The tendency to recall the product after the customers widely use it is a threat to the integrity of in-demand products. For instance, Starbucks recalled the cheddar breakfast sandwich due to threats of contamination and allergens. This practice could lead to the loss of brand image and customers.
These internal factors clearly indicate that Starbucks must develop strategies to handle these weaknesses to foster growth, strength, and financial gains on a long-term basis.
Opportunities for Starbucks Corporation (External Strategic Factors)
This segment highlights the opportunities available to business growth and development.
Exploring the Developing Markets
Starbucks is operating in developed states, including Europe and the US. The potential lies in developing markets of developing nations living in Africa and Asia, including India, China, etc. These emerging economies are new opportunities to explore.
Diversification of Business and Product Preferences
Starbucks can further classify its business based on newer demands and rising competition. Besides, it can manufacture the products according to the diversity of its customers and their specific preferences.
Benefiting from other Firms
Starbucks can benefit itself by making alliances and partnerships with other firms. In this way, Co-branding can help to stabilize Starbucks with increased revenue and a competitive edge.
Price Differentiation Strategy
Starbucks can streamline more customers by adopting this technique. If there are two product prices available, regular, or premium, middle-class customers can be aligned with the premium members. Therefore, this strategy can help us to compete with other firms in the long run.
These external strategic factors can help Starbucks to generate more revenue and stand firmly in the competitive market. Therefore, Starbucks must adopt a comprehensive strategic plan based on the Opportunities revealed in this SWOT segment.
Threats Facing Starbucks (External Strategic Factors)
This section of the SWOT Analysis model presents the external factors which are threats to the company. The following main threats are identified in this SWOT segment.
Competition with Low-Cost and Big Outlets
The coffeehouse industry provides a variety of products at different prices. Some companies offer coffee and related products at a low price which can threaten the company’s competitive position. Furthermore, aggressive competition with other giants like MacDonald or Starbuck can undermine the market position of Starbucks.
Third-Party Presence in Company’s Supply Chain
Many contractors are assigned to work in the supply chain of the company. These stakeholders are difficult to manage when they go on strike. Therefore, the company should advise policy in managing the entire supply chain effectively.
Small-Scaled, Independent Coffeehouses’ Intervention
The new sociocultural trend of supporting independent coffeehouses is gaining momentum. People are supporting microscale and local coffeehouses and oppose the hegemony of large multinational brands. The company needs an effective policy to deepen its roots in local cultures.
Pandemic Shocks
The outburst of coronavirus has affected the overall growth and development of industries. Starbucks is no exception to it. During lockdowns, for instance, the company’s 2000 stores out of 4123 in China were closed. It means half of the Starbucks stores were closed. The organization should devise a policy to regain losses and to make itself resilient against unwanted events in the future.
The above-mentioned external factors should be addressed to preserve the company’s legacy and increase its growth and resources. These factors draw a clear picture of the external factors that hinder the company’s global expansion and market penetration.
Recommendations for Starbucks
Starbucks, a leading industry in food and beverages, should adopt comprehensive strategic planning and implementation of this SWOT Analysis. The significant recommendations include:
- Diversification in products and services is required to pursue the company’s goal of long-term prosperity and growth
- The competition and imitation in the market are increasing day by day. Starbucks must introduce tech-based innovations to tackle them.
- Starbucks must ingrain itself at the local and regional levels. In this way, the company can address the issues of product preferences and social activism.
- Advertising markets are generating a lot of revenues for businesses. Starbucks must incorporate rigorous marketing and advertising strategies.
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