SWOT analysis in practice – Starbucks

Starbucks is a globally recognized coffee and beverages brand that has rapidly made strides into all major markets of the world. The company has a lead over its nearest competitors including Barista and other emerging competitors. Indeed, Starbucks is so well known throughout the western hemisphere that it has become a household name for coffee.

Strengths

• The main strength of Starbucks is its strong financial performance which has resulted in the company occupying the number one spot among coffee and beverage retailers in the world
• The company is valued at more than $4 Billion which is a key strength when compared to its competitors
• The intangible strengths of Starbucks include its top of the mind recall among consumers and by virtue of its brand, which symbolizes excellence, and quality at an affordable rate, the company enjoys a dominant position in the worldwide market for coffee and beverages.
• The company is the largest coffeehouse in the world and because of its size and high volumes; it can afford to price its products in the premium as well as the middle tier range to attract more consumers.
• The company is known for its pioneering people management in an industry where people skills and soft skills make the difference between success and failure. In other words, Starbucks has actualized a positive and welcoming workplace for its employees, which translates into happier associates serving customers in a superior way leading to all round benefits for the company.

Weaknesses

• The company is heavily dependent on its main and key input, which is the coffee beans and hence, is acutely dependent on the price of coffee beans as a determinant of its profitability. This means that Starbucks is overly price sensitive to the fluctuations in the price of coffee beans and hence, must diversify its product range to reduce the risk associated with such dependence.
• The company has come under fire in recent times for its procurement practices with many social and environmental activists pointing to the unethical procurement practices of coffee beans from impoverished third world farmers. Further, the company has also been accused of violating the “Fair Coffee Trade” principles that were put in place a few years ago to tackle this precise problem.
• The company prices its products in the premium to the middle tiers of the market segment which places its products outside the budgets of many working consumers who prefer to frequent McDonald’s and other outlets for their coffee instead of Starbucks.
• The company must immediately diversify its product range if it has to compete with full spectrum competitors like McDonald’s and Burger King in the breakfast segment which is rapidly growing as a consequence of compressed schedules of consumers who would like to grab a bite and drink something instead of making it at home.

Opportunities

• The company has an opportunity to expand its supplier network and expand the range of suppliers from whom it sources in order to diversify its sources of inputs and not be at the mercy of whimsical suppliers. Further, this would also help the company in becoming less sensitive to the prices of coffee beans and make it resilient against supply chain risks.
• The company has a huge opportunity waiting for it as far as its expansion into the emerging markets is concerned. With a billion consumers likely to join the pool of those who want instant coffee and breakfast in China and India, the company can expand into these countries and other emerging markets, which represents a lucrative opportunity for the taking.
• Starbucks also has the opportunity to expand its product offerings to take on the full spectrum food and beverage retailers like McDonald’s and Burger King as the consumer segment which these retailers target is expanding leading to more business opportunities for Starbucks to take advantage of.
• The company can significantly expand its network of retail stores in the United States as part of its push towards greater market share and more consumer segments. This opportunity ties in with the other opportunities described above related to the expansion into newer markets, diversifying into newer consumer segments, and increasing its footprint across the US and globally.

Threats

• The company faces threats from the rising prices of coffee beans and is subject to supply chain risks related to fluctuations in the prices of this key input. Further, the increase in the prices of dairy products impacts the company adversely leading to another threat to its profitability.
• The company is beset with trademark and copyright infringements from lesser-known rivals who wish to piggyback on its success. As with other multinational retailers in the emerging markets, Starbucks has fought litigation against those misusing its brand and famous logo.
• The company faces intense competition from local coffeehouses and specialty stores that give the company a run for its money as far as niche consumer segments are concerned. In other words, the company faces a tough challenge from local stores that are patronized by a loyal clientele, which is not enamored of big brands.
• Starbucks has to expand into emerging markets as a necessity as the developed markets that it has traditionally relied on are saturated and given the fact that the ongoing recession has made the going tough for many retailers, it faces significant threats from this aspect.
• Finally, as mentioned earlier, Starbucks faces significant challenges because of its global supply chain and is subject to disruptions in the supply chain because of any reason related to either global or local conditions.