Starbucks Coffee SWOT Analysis

UPDATED JAN 31, 2017 JESSICA LOMBARDO

A Starbucks caf in
Seoul, Korea. Starbucks Coffees SWOT analysis shows a strong global position to
address weaknesses and opportunities. However, the firm must innovate to address
threats in its external business environment. (Photo: Public Domain)
Starbucks Coffee Company stands as the biggest coffeehouse business in the world. The
firms competitive advantage is based on its strengths, as shown in this SWOT analysis. In
SWOT analysis, business strengths are evaluated to determine the ability to address
weaknesses, opportunities and threats. This SWOT analysis of Starbucks Coffee presents
the internal factors and external factors significant to the firm. Even though Starbucks is
already a strong global brand, various factors threaten the business. As such, the firm must
innovate its approaches to overcome these threats. The result of this SWOT analysis shows
that Starbucks is strong, but it constantly faces major threats in various markets around the
world.

Starbucks Coffees SWOT analysis shows that the companys strengths far outweigh its
weaknesses. However, this SWOT analysis also points to major threats that could prevent the
success of new Starbucks cafs in markets outside the United States.

Starbucks Coffees Strengths (Internal Strategic Factors)

This component of the SWOT analysis model deals with the internal factor of business or
organizational strengths. Starbucks Coffees main strengths are:

1. Strong brand image

2. Extensive global supply chain
3. Diversified business through subsidiaries
Starbucks has one of the worlds strongest and most popular brands. The company also has
a growing population of loyal customers who prefer Starbucks based on quality and the
brand. In addition, the company has a global network of suppliers. The firm has also
acquired businesses as subsidiaries, such as Ethos Water, Seattles Best Coffee, and
Teavana. This part of the SWOT analysis shows that Starbucks is resilient through
diversification and a global supply chain.

Starbucks Coffees Weaknesses (Internal Strategic

Factors)
This dimension of the SWOT analysis model indicates internal factors like inadequacies
that present challenges to business development. Starbucks Coffees main weaknesses are:

1. Higher price points

2. Generalized standards for most products
3. Imitable products
The relatively higher prices of Starbucks products make them less accessible to the large
population of lower-middle class and lower class consumers. Most Starbucks products are
also based on generalized corporate standards that make the products less aligned with
cultural demands in some markets. Also, Starbucks Coffees business is imitable in terms of
products and caf ambiance. This part of the SWOT analysis shows that Starbucks must
innovate to overcome its weaknesses, especially the imitability of products.

Opportunities for Starbucks (External Strategic Factors)

This component of the SWOT analysis model focuses on external factors that a firm can use
to grow its business. Starbucks Coffees main opportunities are:

1. Expansion in Asia, the Middle East, and Africa

2. Diversification of product mix
3. Partnerships or alliances with other firms
Starbucks has the opportunity to expand in the Middle East and Africa, where the firm
currently has minimal presence. The company also has the opportunity to expand in Asia,
where economic growth rates are high. In addition, even though Starbucks already has a
considerably diverse product mix, further diversification can help improve its competitive
advantage. Partnerships and alliances can also strengthen Starbucks Coffees competitive
position. This part of the SWOT analysis shows that Starbucks has major opportunities for
global growth.

Threats Facing Starbucks (External Strategic Factors)

In this aspect of the SWOT analysis model, the focus is on external factors that could reduce
business performance. The main threats to Starbucks Coffees business are:

1. Competition from low-cost coffee sellers

2. Imitation
3. Independent coffeehouse movements
Low-cost coffee from firms like McDonalds and Dunkin Donuts effectively compete against
the more pricey Starbucks products. Also, other companies can imitate the business. Many
competitors have already imitated Starbucks and succeeded, such as Stars and Bucks, a
coffeehouse in the Palestinian Territories. There is also a growing social movement
supporting independent coffeehouses and opposing large coffeehouse chains like
Starbucks. This part of the SWOT analysis shows that Starbucks must ensure competitive
advantage amid potential negative effects of the identified threats, especially imitation and
competition.

Recommendations based on Starbucks Coffees SWOT

Analysis
Starbucks Coffees SWOT analysis shows that the firm has the business strength to
maintain competitiveness. However, the company must exploit opportunities for global
expansion as soon as possible, to gain advantage over other firms also attempting to
globally expand. To address the issue of competition with low-cost coffee products,
Starbucks can emphasize quality and uniqueness in innovation of products to differentiate
them. Starbucks can also increase efforts for trademark and intellectual property
protection to reduce the threat of imitation.

References
Helms, M. M., & Nixon, J. (2010). Exploring SWOT analysis-where are we now? A review
of academic research from the last decade. Journal of Strategy and Management, 3(3),
215-251.
Hill, T., & Westbrook, R. (1997). SWOT analysis: its time for a product recall. Long Range
Planning, 30(1), 46-52.
Jackson, S. E., Joshi, A., & Erhardt, N. L. (2003). Recent research on team and
organizational diversity: SWOT analysis and implications. Journal of Management, 29(6),
801-830.
Koehn, N. F. (2002). Howard Schultz and Starbucks Coffee Company. Harvard Business
School.
Piercy, N., & Giles, W. (1989). Making SWOT analysis work. Marketing Intelligence &
Planning, 7(5/6), 5-7.
Smith, M. D. (1996). The empire filters back: consumption, production, and the politics
of Starbucks Coffee. Urban Geography, 17(6), 502-525.
Starbucks Coffee Company (2015). Company Information Starbucks Coffee Company.
TAGS:
CASE STUDY & CASE ANALYSIS, STARBUCKS COFFEE, SWOT ANALYSIS

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Starbucks (formally known as Starbucks Corporation) is the worlds largest

coffeehouse chain, operating over 20,000 locations worldwide [1]. Since the chains
foundation in Seattle in 1971,Starbucks has been serving up hot and cold beverages
(primarily coffee) as well as snacks. More recently, this transnational company has
expanded into selling branded products such as packaged coffee beans, coffee
machines, mugs and other gifts [2]. Analysing Starbucks with the help of a SWOT
matrix will show what the future might have in store for this world-famous
corporation.
Recommended: PESTLE analysis of Starbucks
Strengths
Starbucks must be doing something right if they manage to take home billions of
dollars every year, after expenses. Whats more, the profits seem to keep growing
from year to year [3]! Here are some of their greatest strengths:
Quality, profitability and ethicality: Starbuckshave established themselves as
a premium coffeehouse chain, despite their huge worldwide presence
comparable to that of most fast food chains. Their products are of excellent
quality, seemingly environmentally friendly, and relatively consistent between
locations. As a result, they can afford to charge customers high prices, which
most people are willing to pay. Not only does this mean large profits, but also
has them globally recognised as one of the best coffee shop chains.
Efficiency and reinvestment strategy: Most of the profits that this company
makes go straight back into expanding the business. This is evident in the ever-
increasing number of locations that Starbucks boasts [4]. Its clear that this
corporation has a well-planned growth strategy, which seems to be working
well for them.
Employee treatment: Starbucks is known for treating its hundreds of
thousands of employees very well, and has previously been listed as one
of Fortunes Top 100 Places to Work For.
Weaknesses
Like every company, Starbucks does have some weaknesses. The most important are:
 High price point: While their high price point was a strength in the previous
paragraph, it is also a weakness. The hefty price tags on some of their products
(starting even with their most basic coffee options) deter plenty of customers
who might otherwise makeStarbucks a part of their daily lives. While their
premium quality and good ethical values might be attractive, some just dont
have that much money to spend on a cup of coffee.
A lack of overly unique products: While Starbucks might be known for their
frappucinos, pumpkin spice lattes, and big chocolate chip cookies, they dont
exactly have the most unique market. Plenty of other coffee shops, chains or
otherwise, provide similar products and only lose out to Starbucks big name.
Also read: Understand Vertical Integration with Starbucks
Opportunities
This multinational coffee chain does have several opportunities for the future, though,
which are as follows:
Global expansion: While Starbucks does have many coffeehouses across the
globe, most of them are located within the US [5]. There are plenty of regions
where profitably branching out is a possibility, including India, Central Europe,
and some regions in Africa.
Introducing new products and co-branding: Starbucks products would be
welcomed in supermarkets across the world, something which has already
begun. Selling their own branded products in stores other than their own would
be a great way to maximise the value of their big reputation. They also have the
opportunity to team up with other companies and co-brand imagine the
introduction of Starbucks products in McDonalds Restaurants (something
which will quite possibly never happen)!
Threats
As a company, Starbucks does have a few threats which need addressing if they want
to keep growing and remain the worlds leading coffeehouse chain. They are as
follows:
Fierce competition from cheaper alternatives: Dunkin Donuts
and McDonalds are two other huge multinational companies which directly
compete with some of the products that Starbucks sells. While these companies
dont pride themselves entirely on their coffees and teas, they offer products of
a similar quality for a fraction of Starbucks prices. Who can tell what consumer
forces will favour in the future?
A specific market: Starbucks success can be partially attributed to the
popularity of coffees, teas and convenient snacks in todays society. If
consumers were to shift away from these products (perhaps one day relying on
caffeine pills instead of caffeinated beverages), it would
 leave Starbucks struggling to stay afloat. They are also very prone to feeling the
effects of rises in coffee, tea, and dairy product prices.
Those are all of the major points in this SWOT analysis of Starbucks. To conclude, if
they can play their cards right, this companys massive brand and large capital should
help to carry them through any turbulence that the future might present. As with any
company, a clever approach to learning, developing, and evolving should cement their
survival. For now though, Starbucks has plenty of opportunities to take, and a few
threats to deal with.
Image Starbucks by Faye is licensed under CC BY 2.0
[1] http://www.therichest.com/business/companies-business/the-five-largest-
coffee-shop-chains-on-earth/?view=all
[2] http://store.starbucks.com/
[3] http://marketrealist.com/2014/12/starbucks-increases-leverage-fy-2014/
[4] http://blogs.wsj.com/numbers/new-york-has-nine-starbucks-for-every-square-
mile-in-manhattan-1647/
[5] http://www.statista.com/statistics/218366/number-of-international-and-us-
starbucks-stores/

Starbucks: A Short SWOT Analysis

Justin Hellman | May 12, 2014

Starbucks (SBUX) shares have been mild laggards thus far in 2014, in what is shaping up to be a choppy year for
the U.S. equity market. But we attribute the relative underperformance to investors profit-taking, rather than to any
deterioration in the companys fundamentals. On the contrary, Starbucks looks to be back in a strong growth mode
after struggling a bit (by its lofty standards) during the 2007-2009 recession. And prospects remain bright, with share
net now set to climb 19% in each of the next two years, to $2.68 and $3.20, respectively. (Fiscal years end on the
Sunday closest to September 30th.) Should investors take advantage of the current entry point to build positions in
this unique, well-run restaurant outfit? Or is the issue still too expensive to get excited about? In this article, we will
attempt to address these questions by taking a brief look at Starbucks business and performing an easy-to-follow
SWOT analysis of the company, evaluating its Strengths, Weaknesses, Opportunities, and Threats.

The Business
Starbucks, founded in 1971 and based in Seattle, Washington, is the largest coffee retailer in the world,
with over 20,500 locations in 62 countries, about half of which are company-owned and half of which are
licensed. The restaurant chain also sells a variety of coffee and tea products, and licenses its trademarks,
through other distribution channels, including grocery and foodservice accounts. Apart from the
recognizable Starbucks label, products are marketed under the Teavana, Tazo, Seattles Best Coffee,
Starbucks Via, Starbucks Refreshers, Evolution Fresh, La Boulange, and Verismo brand names.
Strengths
Industry Leading Comps: Starbucks greatest strength, we think, is its ability to deliver robust (and
consistent) same-store sales growth, even against a sometimes-challenging consumer spending
backdrop. This is especially true in the core U.S. market, where comps advanced a better-than-expected
6% in the March interim. We see the momentum persisting well into the future, too, as the company
focuses on product innovation, and leverages its digital payment/advertising capabilities and customer
loyalty programs. New products, partially aimed at boosting traffic during slower daytime parts (e.g.,
evenings), are apt to include hot meals, new teas and carbonated beverages, and select beer and wine
offerings. A further national rollout of La Boulange baked goods, which have been very well received, is
also planned. And an extension of the Evolution Fresh juice brand, acquired in 2011, is also in the works.
Excellent Finances: The company, thanks to those impressive comps and an effective leveraging of fixed
overhead costs, like rent and labor, maintains robust free cash flow and a first-rate balance sheet. This
supports product development and aggressive unit expansion, both at home and abroad. It also enables
Starbucks to pay a modest dividend, with the yield typically hovering around the 1.5% area.
Weaknesses
Big Investment Spending: The company spends a lot of money to develop new products, build out its
infrastructure abroad, and penetrate new distribution channels. This has not been a notable problem
during past years, but it means that a profit squeeze would be quick to materialize if same-store sales
growth slows considerably. The high spending levels may also explain why Starbucks does not pay
shareholders a heftier quarterly dividend.
Uneven International Profitability: Some of the companys overseas territories have yet to reach critical
mass, and are not nearly as profitable as the core domestic market. Starbucks has also had some
struggles in Europe, where the sovereign debt crisis and ensuing belt-tightening measures have taken a
toll on sales.
Opportunities
New Distribution Channels: While the retail business is humming along, Starbucks is endeavoring to
leverage its brand and push deeper into new distribution channels by expanding its consumer packaged
goods (CPG) operations. In particular, the company is getting a lift from brisk K-cup growth, which is
helping it gain ground in the booming single-serve coffee segment. (K-cup single-serve brewing machines
are the main product line of Keurig Green Mountain (GMCR).) Starbucks is also benefiting from an
acceleration in packaged coffee sales, something that has been noticeable since the company took
control of that business from Mondelez International (MDLZ) -- then Kraft Foods -- in 2010.
Overseas Expansion: Starbucks still has plenty of room to grow at home, though its current development
pace is not as rapid as it was before the recession, when site selection appeared to get a bit sloppy. That
said, the international opportunity is the more attractive one at this point. And we believe that Starbucks
could eventually have a global scale on par with fast-food heavyweight McDonalds (MCD - Free
McDonald's Stock Report), which has a base of over 35,000 locations worldwide. Much of the growth we
envision will likely be in China, given its vast population, burgeoning middle class, and healthy appetite for
foreign brands. Starbucks has been successful in China, where its been fairly active since the late 1990s,
by adding a little local flavor to its beverages, such as with its red bean frappuccinos. Its also opened
more large-format stores in that country, since, more so than on-the-go Americans, Chinese consumers
tend to prefer wide open spaces where they can sit and relax.
Threats
Heightened Competition: The coffee wars have been heating up in recent years, with Starbucks most
significant rivals being McDonalds and Dunkin Donuts (DNKN). Those outfits, both relatively aggressive
on the price and advertising fronts, are scoring some points with price-conscious consumers, which seem
to have increased in rank since the recession. Starbucks does not appear to be losing market share,
however, as evidenced by its solid comp trends. And the company maintains good pricing power, a
testament, we believe, to its high brand equity and effort to sell customers an entire experience, rather
than just individual food and beverage items.
Commodity Pressures: Coffee costs, a major input for Starbucks, have been a welcome tailwind of late.
But they look set to rise before too long, because of coffee rust (a disease that makes coffee trees less
productive) and severe weather conditions that have hampered coffee crops in Central and South
America. This will likely weigh on the bottom line, perhaps as early as 2015. And other commodity
headwinds may well emerge, especially with the company adding more food items to its menu.
Conclusion
In sum, we believe that there are many chapters yet to come in Starbucks compelling growth story. The
equity, while not a steal at recent levels, seems appealing relative to its prospects, too, trading at about
25 times forward share earnings. With this in mind, we think that long-term investors with an eye toward
2017-2019 would do well to accumulate the stock. The recent share-price malaise will likely prove to be a
blessing in disguise.
At the time of this articles writing, the author did not have positions in any of the companies mentioned.

SWOT Analysis
Strengths

1. Starbucks is the leading retailer and roaster for brand specialty coffee in the world.
2. Strong brand image with the motto The Starbucks Experience.
3. Starbucks is a global organization with more than 16.000 retails in 48 countries in the entire world.
4. One of the strongest franchises in the world with more than 6500 licenses shops in the world.
5. Starbucks is known for providing superior products and services.
6. Starbucks offered both functional and emotional benefits.
7. Starbucks is number 7 on Fortune Magazine's "100 Best Companies to Work For" for 2008.
8. Have loyal customers in all of Starbucks existing countries.
9. High quality control in all Starbucks retails.
10. Have a consistent high quality of service.
11. Sophisticated atmosphere typical of the Italian Coffee houses, music, interior design and
artwork.
12. Outlets positioned in high street locations, malls, within other businesses areas like offices
building.
13. Wi-Fi Internet service in all of Starbucks retails.
14. Fast coffee serving.
15. The process of preparing the product does not need highly sophisticated technology.
16. Have a lot of flavors variation.
17. Limited number of strong competitors.
18. High market share and market growth.
19. Always aim to help support environment, ex: by using recyclable tissue.
20. Always treat the employees as a partner not just as employees.
21. Welcome all questions, comments and feedback where customers could send it by email, sms or
just inform it in Starbucks retails.
22. Have a Starbucks Workers Union which helps employees to inform their thoughts to
management.

Weaknesses
1. High pricing which cost not all kind of market could buy Starbucks products.
2. Starbucks considered American Global which cost sentimental issue for customers in some
countries.
3. Too focus on US domestic market.
4. Starbucks refuses to guarantee that milk, beverages, chocolate, ice cream, and baked goods sold
in the companys stores are free of genetically-modified ingredients.
5. Because of its perfectness of employees service, some employees complaints about the
management which push them to always be perfect. That is why they make Starbucks Workers
Union.

Opportunities

1. The potential employees are educated people which make it easier to train them.
2. Customer is not price sensitive.
3. Could be able to change negative image of coffee into positive one.
4. High consumerism in Indonesia.
5. Easier to penetrate market because what it sells is the fulfillment of self esteem and need to be
love or to belong to community which is the major reason why peoples buy a product.
6. Strong financial support.
7. High growth of economy and market in Indonesia, especially in urban areas.
8. The democratic economy policies in Indonesia make it easier for Starbucks to expand their
business.
9. Peoples in Indonesia positioned Starbucks places as one of the best meeting point.
10. Could diverse their product not only in coffee.
11. Many of Starbucks coffee are using organic beans.
12. Some of Starbucks beans are harvested in Indonesia island of Sumatra and Sulawesi. Starbucks
purchasing high quality beans in these island at premium prices to help farmers to support their
families and invest in a sustainable production. Starbucks paid an average price of $1.20 per pound
against the commodity average price of $0.40-0.50 per pound
Threats

1. Global financial crisis which make peoples tend not to spend too much money.
2. Low income in Indonesia makes it hard for Starbucks to penetrate more market segmentation.
3. Sentimental issue to the bad effect of coffee from society.
4. Some people believes that Starbucks turning the world into a giant corporate generic mess.
5. Critics said that it exploits farm workers in third countries.
6. It said that Starbucks domination driving small cafes out of business.
7. Issues stated that Starbucks exploit their workers by paying a very minimum wage with a very
high standard of work they need to fulfill.
8. Threats of substitute products and services include other drink items such as colas, teas or juices
that are sold in retails.

Strategy and Tactics for Starbucks

Strategy

Strategy for Starbucks in Indonesia for the next 1 year that we proposed is to make a campaign
called Starbucks for health. This campaign will focus on the health benefits that peoples will get from
drinking a cup of Starbucks. We will change people perception about coffee into positive one and
cooperate with other companies in Indonesia to show our support in people health.
The fact is that coffee actually one of the healthiest beverages billions of people consume regularly.

The average of 300mg coffee with exercise increase energy by 20% and decrease fatigue level
while burning fat increased 107% greater than without caffeine. This can be happened because
coffee contains hydroxycitric acid and chromium that can increase up to 30% in metabolic rate. It
might guard against gout, diabetes and Alzheimer's disease.
Studies has shown positive results that compare consumption with diabetes rates, including reports
that suggest people who drink two cups a day were 50 percent less likely to develop diabetes and
also has been proven by doctors. The trouble comes when people start adding sugar and cream to
their coffee, or even worse, buying thick, blended drinks with whipped cream on top.

Coffee when consumed in excess can be very addictive, stimulate, and a mood charger.
A large amount of coffee or caffeine consumed all at once can have a negative effect on blood. Too
much coffee over time can stain peoples health.
We believe that this negative perception of coffee could be a threat to Starbucks. But we also see
this as an opportunity when we can actually change people behavior in Indonesia to consume
healthy coffee and make it as part of their life.

Tactics
Product:
We will create a new flavor of Dark Coffee with Fruits topping. This coffee can also be added with
skim milk. Dark coffee is the best coffee for health considered it has not been mixed with full cream
milk, whipped cream, etc. Fruits topping in this product is a real fruit, not blended with the coffee but
just a complementary to add more vitamin while drinking the coffee. For people who want to add milk
in it, we will just add skim milk because it contains low fat rather than full cream milk which contains
fat for body.

This product will provide a free one fruit topping. But if people want to add more than one topping,
they could by add Rp 5.000, - for each coffee. The size of the product is the usual size of Starbucks
cup where a white cup for hot drinks and a transparent cup for cold drinks. This tactic will be launch
and develop for one year and continue to be one of Starbucks flavor for years after.

Price:

The price for this product is Rp 29.500, - for tall size, Rp 34.500, - for grande size and Rp 39.500, -
for venti size.

Place:

To support Starbucks for Health Campaign, more places will be a 24 hours Starbucks retails where
Starbucks will also open 10 retails per year. This will be a convenience to customers where they can
decide what time they would like to drink a hot or cold Starbucks coffee. Places that will be open for
24 hours are Starbucks Kemang Village, Citywalk, Rest area in Karawaci Freeway and Summarecon
Serpong. This will support some of Starbucks 24 hours store in EX and Sarinah. This tactic will start
immediately and finish in 2 months.

Promotion:

To communicate the message of healthy coffee we will use:

1. Advertising
Advertising for Starbucks will be done by advertising in magazines and newspapers. This will be
conduct by one advertising per month.
Another kind of advertising is by creating roll banner in retails. The message of the advertising is to
communicate the benefits of drinking a cup of coffee in daily life. The banner will be displayed for the
first 3 months and there will be a change in design and displayed for another 3 months and
continuously for one year.

2. Sales Promotion
Sales promotion that will be conduct is a buy one get one Starbucks Dark Coffee with toppings by
using BCA Credit Card. This will be implemented for one year.
Other tactic is cooperating with GNC, companies that produce vitamins for health. When customers
buy Starbucks for Rp 500.000, - by combining recipients in one month start from the first recipient,
they will get 10% discount when buying GNC product in any amount. This will be conduct for the first
6 months.

For the next 6 months, Starbucks will cooperate with Fitness First. If Starbucks customers buy a total
of Rp 100.000, - in one transaction, they will get a free trial voucher in any Fitness First. This tactic
will be implemented in 6 month after cooperating with GNC tactic.