Future Focused Strategy for Starbucks, SWOT analysis Example

SWOT Analysis

Danca (2012) defines a SWOT Analysis as a basic straight forward model used in business organizations to provide directions and to develop cutting edge strategic business plans to chart their future success in their respective operating environments.

The analysis according to Danca (2012) engages an organization’s strengths, weaknesses, opportunities, and threats collectively called SWOT Analysis, to assess their positions internally and externally, and to use the information to craft strategies which will enable them to achieve competitive positions in the market place.

Starbucks Case

Starbucks is the premier roaster, retailer of specialized coffee in the world with operations in at least 50 countries since it open doors for business in 1985. The company according to Starbucks 2010 Annual Report (2010) trades under the symbol SBUX on the NASDAQ Global Select market, purchases and roast high quality coffee beans and sells them in complementarity with handcrafted coffee and tea beverages as well as a variety of fresh food items, through company operated stores and other franchise specialty entities.

The company portfolio brands Tazo Tea, Seattle Best Coffee, and Starbucks VIA Ready Brew are all marketed with the coveted flagship Starbuck brand  to enable the organization to fulfill its major objective which is the maintenance of its standing as one of the  most recognized and respected brand in the world (Starbucks, 2010).

SWOT Analysis of Starbucks

STRENGTHS

  • Three reportable operating segments namely United States, International and Global Operations
  • Portfolio Brands Tazo Tea, Seattle Best Coffee, Starbuck VIA Ready Brew and Starbuck flagship marketed in 50 countries
  • Revenue from company operated stores accounts for 84% of total revenue in 2010 fiscal period
  • Excellent mission statement : To be the leading retailer and brand in target markets by selling the finest coffee and related products , as well as delivering unique Starbuck Experience to customers at the same type
  • Experience significance reduction in stores open/close in 2010 over 2009 (371 in 2009 versus 72 in 2010)
  • Inherent capacity to vary product mix to fit the size of stores as well as locations
  • Provides free wireless internet access to US customers
  • Employ strategic use of Starbucks Card top increase customer loyalty and frequency of store visits
  • Utilization of various forms of licensing including the traditional franchising to attract high quality and well experienced licensees
  • Exercise excellent management  strong control on coffee purchasing, roasting and packaging and global distribution to ensure delivery of premium quality coffee beans to locations
  • Instituted Farmers Support Centers which are staffed with qualified agronomist and sustainable experts to ensure the achievement of best practices
  • Purchase coffee through fixed price and price to be fixed commitment to ensue price stability  and consistency of finish products delivered to consumers globally
  • Owns numerous trademarks which are valid and renewable in US and throughout the world
  • Has ownership of copyrights on items such as product packaging, promotional materials , in-store graphics and training materials
  • Increasing expenditure on R&D since 2007, with $9 m in 2010, up from $7m the previous year.
  • Exceed EPS or Earning per Share by over 100 % in 2010 over 2009 – an indication of profitability despite global economic recession
  • 137, 000 strong labor force worldwide
  • Revenue Earnings of $8.96b in 2010
  • Highly stable, experience, diverse and knowledgeable management structure in place with mean age below 50 years old (Starbucks 2010 Annual Report, 2010).

WEAKNESSES

  • Primary competitors are in coffee beverage sales, restaurants and specialty coffee services
  • Poor corporate image in areas where massive staff dismissals and store closures occurred – negatively impacting sales
  • Seasonality in cash flows , with first season achieving highest revenue turnovers
  • Possible staff terminations and layoffs in down periods
  • Low union involvement with no protection for workers rights
  • No mention of staff morale and productivity status in reports
  • Negative impact of store closure on company’s goodwill

OPPORTUNITIES

  • High revenue growth expected from proposed opening of 500 pus new stores in 2011 and beyond
  • Excellent growth potential predicted for Starbucks Blonde roast, which is a new roast profile that has been added to the company 40 year heritage (Starbucks Newsroom, 2011)
  • 40 % of US coffee consumers has strong preference for lighter roast , which will facilitate rapid take off of Starbuck Blonde Roast
  • Reliable consumer trust in company’s brand for delivering quality from its 80 variations of taste
  • Well positioned to exploit consumer behavioral patterns towards coffee. According to Jeff Hansberry, President of Chanel Development for Starbucks, customers spends 60 seconds in the company coffee aisle to make a decision base on taste and intensity (Starbuck Newsroom, 2011)
  • Extraction and delivery of benefits from partnership with African Coffee Producers. Room exists for greater production of coffee From Africa, because coffee producers; with their large expanse of under-utilized farm lands, only account for 12% of global supply, and this amount contribute significantly to the GDP these countries. Ethiopia is currently achieving 94 % of GDP from coffee beans export.
  • Starbucks has been achieving significant cost reductions  from the use of green buildings, energy and water conservation and   is poised to achieve 100% recycling and re-use of coffee cups by 2015

THREATS

  • Arabic Coffee prices from Columbia trending upwards due to the recurrence of the coffee berry borer
  • High number of competitors coffee beverage , quick service restaurants and specialty shops competing for prime locations as well as qualified personnel for both new stores and existing locations
  • Possibility of creating excess capacity in the opening of new stores should economic downturns occur in 2012-2015 period
  • Company reports cites lower customer traffic as a threat to average value per customer transaction
  • Shifting demands of competitors prices may cause market to become unfavorable globally
  • Litigations may develop to suppress the company revenue
  • Material interruptions especially via shipping routes due to acts of terrorism and wars
  • Unexplained and unexpected technological cost may reduce profits (Starbucks Corporation Fiscal 2009 Annual Report, 2010)

Future Focused Strategy

Starbucks strategic objectives for 20112 -2014, should be tied to its mission statement which is concerned with the maintenance of the most strategic and respected brand in the world, can be achieved by a collective effort, in which all major players and stakeholders are made to pull the same rope at the same time in the same direction (Shariff, Abington, 2012/

Recommendations

Starbucks, with its currently imposing brand strength should add Starbucks Blonde roast to the portfolio as its strive to develop over 500 stores in the 2012-2014 financial period, and employ a Strategic Canvass Approach, in which values are delivered to customers to ensure the achievement of shared success, through the delivery of strategic packages through single pictures that are unique to the market (Shariff, Abington, 2012).

The  continued use of Farmers Support Centers in established and new farming locations  to ensure loans are distributed and technical advice  imparted in a timely manner to facilitate the use of right practices, should begin the delivery of value process, as this will ensure quality coffee beans are produced for processing and consumption by global consumers. This strategy will ensure other farmers in other locations are attracted to the package delivered, due to the financial rewards and support offered and further drives the Starbuck Strategic Canvass Approach in the market place.

Starbuck will also be well advised to continue with cultural, modifications all its newly recruited manages and franchises in locations the best represent its model for meting customers globally, so that the same set values and practices can be replicated and enable customers to look forward to the Starbucks Experience, even when they are tourists in other countries.

Financial downturns was a significant threat to the company success in the 2007-2009 period, but it can hedge against this by extending its purchase of coffee at fixed price and to price to be fixed commitments, as well as acquiring greater storage capacity in centralized strategic locations. This will enable it to deliver its brands at competitive prices that also meet the budget of its customers.

Finally, Starbucks must realize that values and benefits must also be aligned with its internal stakeholders or employees, and must conduct timely job evaluations, job satisfactions surveys, in order to promote and other wise reward these important players, so that it can maintain the excellent, experienced, diverse and stable organizational structure it has attained and used skillfully to generate revenues as high the $8.96 b in 2010.

 

Reference

Danca, C.A. (2010). SWOT Analysis

www.stfrancis.edu/ba/ghkickul/stuwebs/btopics/works/swot.htm , 01/23/12

Starbucks Newsroom (2010). Starbucks Aim Innovation at Multi-Billion Dollar Global Coffee Market Starbucks www.newstr=arbucks.com/article_display.cfm?aticle_id=578 , 01/25/12

African Development Bank Group Chief Economist Complex (2010) Coffee Production in Africa and The Global Market Situation Commodity Market Brief Vol.1 Issue 2 www.afdb.org/fileadmin/uploads/afdb/documents/publications/4-coffee%20Production%20in%Africa.pdf , 01/25/12

Starbucks Global Responsibility Report (2010). Goals and Progress Report Environmental Stewardship www.starbucks.com/responsibility/learn-more/goals-and-progress/environment-stewardship , 01/25/12

Starbucks Corporation (2009). Fiscal 2009 Annual Report www.media.corporate-ir.netmedia_files/irol/99/99518/SBUX_AR.PDF , 01/25/12

Shariff, A., Abington, A. (2012). Solution Focused Strategy Canvassing: An Approach to Enabling Collective Effort in Making Strategic Happen Inter Action Vol.2 Issue 1 Ashridge Business School www.ashridge.org/UK , 01/25/12

Starbucks Corporation (2011). Fiscal 2010 Annual Report www.phx.corporate-ir.net/External.File?item…t=1 , 01/25/12