Starbucks Strengths – Internal Strategic Factors
1. Strong brand image – Starbucks Corporation is the most popular and strongest brand in the food
and beverage industry. Its size, volume, and the number of loyal customers have kept growing
over time. It has a brand value of $11.7 Billion as per 2019 Interbrand ranking.
2. Strong financial performance – With an annual revenue of $26.5 billion and profit of $3.6 Billion
in fiscal year 2019, Starbucks has a strong financial position in the market.
3. Growth in stores: It increased its number of stores from 1,886 to 31,256 between 1998 and
2019.
4. Extensive international supply chain – Starbucks is known to have an extensive global network
of suppliers. Starbucks sources its coffee beans from three coffee producing regions, LatinAmerica, Africa, and Asia-Pacific.
5. Acquisitions – Company has acquired top 6 companies including Seattle’s Best Coffee, Teavana,
Tazo, Evolution Fresh, Torrefazione Italia Coffee, and Ethos Water. These acquisitions have
proven quite successful for Starbucks.
6. Moderate diversification – Starbucks has also diversified its business operations by introducing
innovative merchandises and food items. One such example is the addition of ice cubes made of
Coffee which results in a stronger Coffee flavor.
7. Quality, Taste and Standardization – Due to its premium blends and delicious coffees, Starbucks
has extended globally. It offers excellent quality and consistently standardized products in all
the locations.
8. Efficiency, Strategic Planning, and Reinvestment Strategy – Starbucks reinvests its profits in
expanding its business in different locations. Its efficient operations and well-planned strategic
decisions have produced many advantages for the company.
9. Employee treatment –It treats its employees very well which eventually translates into happier
employees serving customers well. Starbucks has been consistently listed as one of the
Fortune’s Top 100 Places to Work for.
10. Strong Loyalty Program – Starbucks has a great reward program that keeps customers addicted
to its coffee. For every $1, you get 3 stars ($1 = 3 stars). When you collect 150 stars, you get a
free drink (150 stars = 1 free drink). In addition, reward members get the convenience of mobile
payment, pre-order, free birthday drinks, etc.
11. Gender Neutral Restrooms – Starbucks has introduced gender-neutral restrooms to protect
Lesbian, gay, bisexual, and transgender (LGBT) community against discrimination. It is in
response to Anti-LGBTQ bills that discriminate against specially transgender people.
Starbucks Weaknesses – Internal Strategic Factors
1. High prices – For many middle tiers and working consumers, Starbucks’ offerings are more costly
than McDonald’s and other coffee outlets. Its high prices reduce affordability for the consumers.
2. Imitability of products – Starbucks doesn’t own the most unique products in the market. This
makes the imitability of products quite easy for other companies. Other coffee shops and food
chains like McDonalds McCafe and Dunkin Donuts offer almost the same products.
3. Generalized standards for most products – Some of its product offerings are not aligned with
the cultural standards of other markets. For example, in some areas, its crafted beverages do
not associate with the consumer preferences.
4. European Tax avoidance – Due to its tax avoidance in the UK, it faced several controversies and
criticisms. Reuters’ investigation found out that it didn’t pay tax on its £1.3 billion of sales in
three years prior to 2012.
5. Procurement Practices – Many social and environmental activists criticized the company for
their unethical procurement practices. They claimed that it procures coffee beans from
impoverished third world farmers. It has also been accused of violating “Fair Coffee Trade”
principles.
6. Recall of Products – Over the years Starbucks has recalled a lot of in-demand products. This can
negatively affect the brand image of the company and lead to the loss of customer base.
In March 2016, Starbucks recalled two products. One was the sausage, egg, and cheddar breakfast
sandwich and the other was cheese and fruit bistro box. The reason for recalling these products was
the threat of contamination and allergens.
During routine testing, it was revealed that the facility that manufactured the breakfast sandwiches
had the presence of Listeria Monocytogenes on the contact surface.
The 250 stores in Arkansas, Texas, and Oklahoma that showcased these sandwiches had to remove
them. The cheese and fruit bistro box was recalled because it contained the almonds found in the
box contained traces of undeclared cashew nuts.
There was no warning label that highlighted the presence of cashew nuts. This could be potentially
life-threatening for people with cashew allergies.
Starbucks Threats – External Strategic Factors
1. Competition with low-cost coffee sellers – Many coffeehouses offer products at an affordable
rate. This can threaten the future’s stability of Starbucks which offers higher prices.
2. Competition with big outlets – Aggressive competition with multinational companies like Dunkin
Donuts and McDonald’s can also pose a threat to its market position.
3. Imitation – Products can be imitated by both new and old rivals.
4. Third-party Delivery Suppliers (union) Strike– Starbucks’ supply chain consists of many thirdparty contractors and stakeholders, which makes it difficult to manage the entire chain
effectively. In 2019, Starbucks coffee houses in the Mid-West grappled with shortages after
employees of a major supplier went on strike.
5. Independent coffeehouse movements – There are many sociocultural threats for Starbucks.
These sociocultural movements support small independent and local coffeehouse and oppose
the expansion of large multinational chains.
6. Controversy on California warning rule – A California judge ruled Starbucks and other companies
in March 2018 to provide warning labels on all their coffee products. This was about preventing
a violation from chemical use that may cause cancer.
7. Philadelphia arrests – April 2018, two African-American men were arrested at Starbucks that
caused quite a controversy on social media against Starbucks. Starbucks employees refused
them to use the restroom because they didn’t purchase anything. The CEO Kevin Johnson issued
an apology to both men eventually.
8. Coronavirus – Starbucks has temporarily closed estimated 2000 stores in China due to the
outbreak of coronavirus. Considering Starbucks has 4123 stores in China, and almost half the
stores are closed, it will have negative impact on their financials in 2020.
9. Global Recession – Experts are predicting the ongoing recession would be worse than previous
economic downturns. Starbucks’ revenue has already dropped. Compared to last year, the
revenue of the fiscal year 2020 in quarter 2 is down by 5%, and quarter 3 is down by 38% due to
pandemic.
10. Rising Prices of Raw Coffee Beans – the price of raw coffee beans – Arabica, the world’s mostproduced coffee (representing over 60% of the world’s production), has increased drastically
during the pandemic due to concerns over its availability, hoarding, and supply chain disruption.
Any additional dollar channeled to purchase raw coffee beans at an increased price reduces
Starbucks’ profitability.