Starbucks SWOT Analayis
Furthermore, Starbucks provides new services for customers, such as the Starbucks cards,
high-speed wireless Internet access and CD burning facilities in the shops. All these factors give
a considerable competitive strength for the company. Strong ethical position Starbucks has many
community building programs, such as funding Seattle's library system and providing product
donations to local organizations, to contribute positively to the communities where employees
and customers live (Milmo, 2008). The company's strong ethical position with communities
makes Starbucks very attractive to many consumers. Well-seasoned management team and loyal
employees. Under the lead of Schultz, who is the present chairman of Starbucks, the company
has already developed a very strong supporting management team (Milmo, 2008).
Starbucks closely focuses on employees' loyalty; it offers health care benefits and stock
options to part-time employees who work more than 20 hours per week
(Milmo,2008)Therefore, Starbucks builds a base of happy and hard-working employees, who can
provide good services and benefits for customers. 3.2. Weaknesses Reliance on US market
Starbucks is a multinational company, but almost 70% of its outlets are in the United States and
approximately 85% of its profits come from its domestic US market (Milmo, 2008). Since
Starbucks is an international brand, it should generate more profits from overseas, not just rely
heavily on its domestic market. Otherwise, the market will mature quickly. Strong dependence
on partnership Starbucks uses joint ventures and licensing agreements, instead of franchising, to
enter overseas markets. Therefore the company is strongly dependent on its foreign partners, and
gets less control when it enters a new market. Also, the company loses huge margins in
international markets (Milmo, 2008). Labour disputes Starbucks starts to face an employee
burnout problem. On May 17, 2004, 12 Starbucks' workers submitted union cards to the National
Labour Relations Board (NLRB) in the United States, and complained about the low wages - a
starting wage of $7.75 an hour (Milmo, 2008).
This is a very serious problem, because employees' dissatisfaction on overtime works and
low pay might affect the quality of services and even the company's products. Culture Starbucks
has its strong corporate culture and ways of doing business. Therefore, the company might
become complacent, and will not change quickly to suit local culture environments when it
enters new markets. 3.3. Opportunities International market expansion In January 2005,
Starbucks had 2,573 outlets in other countries, accounting for about 30% of the total numbers
(Milmo, 2008). The company will build more outlets outside of the United States in the next few
years. Expanding international operations offer more opportunities for Starbucks to develop in
the future.
Growth in local market In the United States, the specialty coffee sector accounts for
about 15% of its retail coffee market. By 2005, it will grow to 41% of this retail coffee market,
which is expected to be worth $22 billion. Since Starbucks is the leading specialty coffee houses,
and its market share is over 40% in the existing market, there will still be an anticipated growth
for Starbucks (Milmo, 2008). Launch new products Since consumers' tastes become more
sophistication, more and more consumers prefer premium coffee rather than instant coffee,
which gives Starbucks more potential customers. If Starbucks can provide more new products,
such as new types of beverage, ice cream and food in shops, it can attract more consumers in the
future.
Threats Strong competition The international coffee market is a very competitive market.
There are increasing numbers of competitors, such as full service restaurants and other coffee
shops, entering the growing specialist coffee market in recent years. Starbucks must be aware of
this strong competition all over the world and try to maintain its operational advantages in order
to keep its leading position in the future (Diskienė, D., Galinienė, B., & Marčinskas, A, 2008).
Volatility of market Starbucks is heavily reliant on the supply and on the prices of coffee.
Although Starbucks has supply agreements with suppliers in advance, the company could still
face problems due to fluctuating coffee prices. Other factors, such as weather and economic
conditions in coffee producing countries, also affect Starbucks' operations (Milmo, 2008).
Decline consumption of young adults The 16-24 year-old age group of coffee consumption is
decreasing now, and this group prefers other drinks, such as soft drinks. These young adults will
be the key potential group for Starbucks' future market. The declining consumption of this group
will bring further problems to the company's future development (Milmo, 2008). Rising dairy
costs According to Starbucks' record, dairy costs rose about 40% year on year, and this might
affect the company's cost of goods. Milk and other dairy products account for around 3% and 5%
of company's sale. Now Starbucks might carry out its first systematic price rise on beverages in
the next four years (Milmo, 2008). Since the prices of Starbucks' products are more expensive
than other similar products, further price rising might affect the company's operations so the
company might lose some customers.
(S) STRENGTHS
(W) WEAKNESSES
(O) OPPORTUNITES
(T) THREATS
Strong ethical positon
Reliance on US Market
International Market
Storng competition
Expansion
Good reputation with
customers
Strongly dependent
More outlets can be
On foreign partners
Built.
Focuses on employee
Not making as much as
Business growth
loyalty
It should domestically
Weather will play a
factor in coffee
producing countries
Flucuation in coffee
prices
References
Milmo, S. (2008, March). It pays to serve. Chemical Engineer, Retrieved August 2, 2009, from
Academic Search Complete database.
Diskienė, D., Galinienė, B., & Marčinskas, A. (2008, September). A STRATEGIC
MANAGEMENT MODEL FOR ECONOMIC DEVELOPMENT. Technological &
Economic Development of Economy, 14(3), 375-387. Retrieved August 2, 2009