Starbucks SWOT Analysis: The Best Coffee Makers

The world’s largest coffeehouse business, Starbucks (NASDAQ: SBUX), are known as the best coffee makers.

Founded in 1971 in Seattle, Washington, Starbucks has more than 23,445 locations and above 191,000 employees.

Now, enough with the history and statistic things. That’s not why you’re here. Plus, it’s booring and no one likes it.

So, let’s do some serious business and talk about Starbucks.

If you ask anybody of the age above 50, “who invented coffee” the chances are that they will answer it was Howard Schultz.

The best part?

They will only be exaggerating, slightly.

This statement above might be a bit confusing, so it’s time for a history lesson:

If you’re from the United States, you might remember the “Cup of Joe”, which tasted like battery acid. And to make it drinkable, you had to add 5 kilos of sugar, loads of cream and gallons of milk.

At that time, only the fortune and small number of Americans had the chance to travel to Italy, Germany and other countries where you could taste the real thing.

Then, a miracle happened and in 1971 Howard Schultz “democratized” the access to great coffee.

Starbucks was quickly gaining popularity and in no time, American people went from being provincials to sophisticated coffee drinkers.

This were the times, when everything went smoothly and Starbucks was a heavenly place to work.

But, in 2007, when Starbucks hit the wall; sales rapidly declined. In 2008, Wall Street was predicting

STARBUCKS DOOMED

That’s exactly when Starbucks Competitors come into play. And that’s exactly why we need Starbucks SWOT analysis. To properly understand what happened in those dark years and which qualities made Starbucks’ failure possible.

We need Starbucks SWOT analysis to clearly see how they reinforced their weaknesses, how they used opportunities, eliminated their threats and what was the strongest weapon in Starbucks’ arsenal.

After that disastrous year, Starbucks came back stronger than ever and more profitable than ever.

And that was only possible because the company saw everything clearly and acted, accordingly.

Starbucks SWOT Analysis: The Best Coffee Makers

A definition for novice readers: SWOT is an acronym for  Strengths, Weaknesses, Opportunities and Threats related to organizations. SWOT is also referred, as the “SWOT Matrix”.

Like every other brand, Starbucks has its weak and strong parts. With the help of SWOT analysis of Starbucks, we can easily identify the obstacles the company is facing, the opportunities they have, things Starbucks has to improve and strengths the organization has.

Strengths

Starbucks Coffee Company, in a very unique way, not better than any other company, set out to build a different business model. And that business model was based on core values that was specifically designed to achieve the fragile balance between profitability and a social conscience. It’s important to know that the company’s foundation was created in a very unique way and the uniqueness is linked with the founder of the company, Howard Schultz.

1. Uniqueness and Being First – I want this part of chapter to stand out, because it’s really important (read it thoroughly). Howard Schultz, at the age of 7, literally witnessed the fracturing of the American Dream. When his father, a blue-collar worker, broke his ankle and got dismissed from work. Without any compensation and health insurance.

That’s when Howard felt, what’s it like to be left behind and after founding Starbucks, Howard Schultz knew that the moment from his childhood had to be linked with something at the company. So, he built a company that his father never got the chance to work for.

Almost 30 years ago, Starbucks became the first company in America to provide comprehensive health insurance to every single employee.

2. Starbucks’ Values – With our partners, our coffee and our customers at our core, we live these values:

  • Creating a culture of warmth and belonging, where everyone is welcome.
  • Acting with courage, challenging the status quo and finding new ways to grow our company and each other.
  • Being present, connecting with transparency, dignity and respect.
  • Delivering our very best in all we do, holding ourselves accountable for results.

3. Innovation – Today, we have to understand that innovation is less about technology and is lot more about giving consumers novel and valued experiences. Starbucks gets this part perfectly. Starbucks is a place, where innovation is always brewing.

4. Strong Market Position and Global Brand Recognition – Starbucks has operations in more than 60 countries and is the most recognized coffeehouse brand. Plus, Starbucks is the #52 most valuable brand in the world (value: $10.5B).

5. High Quality Products – One of the things that Starbucks cares the most, is the quality of their products.

TO ESTABLISH STARBUCKS AS THE PREMIER PURVEYOR OF THE FINEST COFFEE IN THE WORLD WHILE MAINTAINING OUR UNCOMPROMISING PRINCIPLES WHILE WE GROW.

6. HR Management – Starbucks is widely known for its outstanding HR strategy and highly educated (in their fields of work) employees. Starbucks employees are provided with great perks. For instance, retirement accounts and a healthy culture.

7. Starbucks Product Mix – Starbucks continues to introduce new products and steadily captures the attention of all age groups. For now, Starbucks’ product line includes: Coffee, Tea, Pastries, Frappuccino beverages, Smoothies.

8. Advertising – Starbucks was one of the first companies to use social media as a way to advertise. Plus, they were the first company to get 10M likes on Facebook. Besides social media, Starbucks’ commercials are always fun to watch.

Weaknesses

For 15 consecutive years as a public company, Starbucks was on a magical carpet ride, in which, everything they literally touched turned to gold. Every new product they opened, every new city they opened, every new country they opened, everything they did was becoming successful.

But, somewhere along the line, a virus entered the company and the virus was entitlement. It began to surface as a sense of invincibility.

As the idea spread, Starbucks’ success was covering up the mistakes company made and somehow, the company started rewarding and admiring the wrong things, eventually leading to crisis (2007). Though, Starbucks did manage to reinforce these weak spots, but they still got things to work on.

1, Product Expensiveness – Starbucks always says, that their products are the highest quality and the ‘Starbucks Experience’ is something unforgettable, which is 100% true, but in times of economic sluggishness, the price of Starbucks products became really unattractive. I mean, people can’t afford to pay $4 for a single cup of coffee. So, consumers started to leave Starbucks and shifted to Dunkin’ Donuts and McCafé (they’re relatively cheap). As a result, Starbucks’ premium prices can prevent the company’s development in developing countries and lose the competition to Dunkin’ and McCafé.

2. Cannibalization – In the US, Starbucks is aggressively expanding, leaving no place for future growth targets. Starbucks operates 8078 stores in the United States and if the company continues to expand this fast, self-cannibalization is inevitable.

3. Clash Of The Coffee Cultures – Starbucks coffee culture isn’t widely accepted in Europe and Asia. The company might find it hard to become a international industry leader.

4. US Market Dependence – A big part of Starbucks’ annual revenue is generated from the US market. Considering the possibility of cannibalization, Starbucks must act really careful not to harm its revenue.

Opportunities

1. Expansion into Emerging Markets – The self-cannibalization of the US market, indicates how important it is for Starbucks to expand the brand, internationally. Starbucks had already started the process (the latest country that joined the list was, India) and they have great growth potential in the emerging and developing markets.

2. Expanding Product Mix and Offerings – Lately, Starbucks started to expand its mix by adding Tea and fresh juice products. Though, they still have a lot of room left.

3. Technological Advances – Starbucks has leveraged the use of mobile applications. The “Starbucks App” provides reward programs and creates a friendly, comfortable environment for the customers. Today, 10% of transactions in the US are being made through mobile apps and Starbucks App will surely be effective.

4. New Way of Distribution – Starbucks introduced a new delivery system called “Mobile Pour”. This is a great opportunity to improve their distribution system and drive more revenue.

5. Expansion in Asia, the Middle East, and Africa – Starbucks just opened its 1,600th store in China. It’s essential to use this popularity and expand in the Middle East and Africa, where the company currently has minimal presence.

Threats

1. Increased Competition – This is by far the biggest threat for Starbucks. Dunkin’ Donuts and McDonald’s are the companies, trying the minimize Starbucks’ market share and they have already shrink it by 26%.

2. The Price of Coffee Beans – Lately, there have been talks that the price of quality coffee beans might increase. And if this happens, the overpriced Starbucks coffee will get even more pricey.

3. Economy of the Developed Country – If a crisis like 2008 somehow repeats, it will severely damage Starbucks revenue. Moreover, the company will lose a significant amount of customers because they’ll shift to cheaper brands.

4. Change of Lifestyle and Preferences – The shift of customers toward healthier products and the risk of coffee culture vanishing, represents a future threat for Starbucks.

5. Brand Imitation – If big brands like McDonald’s and Dunkin’ Donuts decide to imitate the brand strategy of Starbucks and introduce the same product they have, with lower prices, will definitely harm the company.

The Verdict

The SWOT analysis of Starbucks showed that the brand has the power to withstand the competition and overcome the toughest obstacles.

Starbucks might experience some sales problems in Europe, due to a strong dollar, and unstable coffee prices. But I believe the company’s impressive management and ability to consistently grow will cover up the weaknesses and threats. 

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