Starbucks is the major coffee brand in the world. Over the past few years, its revenue has increased steadily. The company has been restructuring recently to focus on its core business area and make it more profitable. During the year 2019, Starbucks has seen an impressive financial performance. By the end of the year 2019, the total revenue of the brand was about $19.8 billion.
Being the premium coffee brand, Starbucks is popular for the following:
- Premium quality coffee
- Customer service
- Organizational culture
It has a great focus on the product quality and service that is blended with its international expansion make its growth better in the industry. The largest market for Starbucks is the United States and it generates the largest Starbucks revenue. The United States has the highest number of Starbucks outlets. Over the past few years, Starbucks has managed a global supply chain smartly to get their raw materials timely and of high quality.
The SWOT analysis of Starbucks differentiates all the main strengths, weaknesses, opportunities, and threats that give guidance to the company to grow to a better position. Readout this article, to get an understanding of where Starbucks stands.
Before we begin in-depth on the SWOT analysis of Starbucks, let us understand a bit of the background of the company Starbuck.
The following points provide you a bit of Starbuck’s background:
- The company is known with the name Starbucks Corporation
- Starbuck was established during the year 1971 and is headquartered in Washington, United States.
- The company logo is shown in Image 1.
- The company has generated a revenue of about $ 26 billion during the year 2019.
- A few of its main competitors are Costa Coffee, Caribou Coffee Company, Dunkin Brands, Luckin Coffee, Green Mountain Coffee Roasters, Nestle, McDonald’s Corporation, and many other coffee houses and restaurant chains.
- Starbucks operates in about 81 markets. The company purchases and roasts superior quality coffees that are being sold and handcrafted coffee, tea, and other kinds of beverages. It also has superior quality food items that include snacks through the various company-operated stores.
The SWOT analysis of Starbuck highlights the strengths that the company uses to avoid its weakness. It also throws light on the threat that the business can encounter to get the maximum benefit from the various opportunities in the international market.
To make sure that Starbucks meets the longstanding competitive advantage it must address the various alarms being projected in the SWOT analysis of Starbucks.
Let us discuss on the SWOT analysis of Starbucks.
Strengths in the SWOT Analysis of Starbucks
- Strong Brand Image – Starbucks Corporation stands the brand by itself. It is the most common and toughest brand in the food and beverage industry. The company size, number of customers who are loyal to the brand, number of outlets keep growing over a period. It has a strong brand value and its coffee is much liked by all.
- Strong Financial Situation – Starbucks has a strong place in its finance. With respect to the financial market, it has a strong stand on it. During the year 2019, Starbucks has seen annual revenue of about $26.5 billion and a profit of about $3.6 billion. This is a huge strength for the brand, and it does highlight its performance. Starbucks coffee is strong, and it has many factors behind it. It has excellent international growth, its quality all together has made Starbuck sustain its growth.
- Starbucks Outlets – The company has seen an enormous increase in its outlets all over the world. Currently, it has about 31,256 outlets across the world. An increase in stores leads to more revenue and thereby Starbucks has more customers to depend on their business.
- International Supply Chain – Starbucks has an extensive international network of suppliers. It has a proper process of its supply chain that takes care of supplying its raw materials. Timely delivery and enough raw materials at all outlets have made Starbucks serve its customers to a large extent. Starbucks sources its coffee beans from the three main regions where coffee is produced largely. The regions are Africa, Latin America, and the Asia Pacific.
- Acquisitions – Starbucks has gained a lot of business by acquiring the top six companies. Its acquisition with them has led to enhancing its business to a great level. The companies that were acquired by Starbucks are Teavana, Seattle’s Best Coffee, Torrefazione Italia Coffee, Evolution Fresh, Tazo, and Ethos Water. Due to the acquisition of these top companies, Starbucks has proved itself to be successful.
- Reasonable Expansion – Starbuck’s business operations have been expanded with the introduction of various food items and goods. Its expansions have led to more likes by the customers and kept using their products to a large extent. One example of its innovation and products are the ice cubes prepared from coffee, which when added to coffee results in a strong flavor of coffee, good for strong coffee lovers.
- Starbucks Coffee Taste, Quality, and Standardization – Starbucks has expanded its operations and increased its brand due to its finest blends and delightful coffees. Its coffees are of great quality and is a constantly standardized product in whichever locations you take it from. The process of blending the coffee is done with the utmost care and gives a unique taste to its coffee.
- Starbucks Strategic Planning, Efficiency, and Reinvestment Strategy – Starbucks invests its profit again to expand its business to many other locations. It includes new outlets in many locations that would also increase its brand. The company’s operations are efficient and well-planned in many strategic decisions. This has led to many advantages for the brand.
- Employee Treatment – Starbucks provides a good treatment for its employees which would be reflected in employee satisfaction. When employees are satisfied, then they serve customers well and this would arrive at customer satisfaction. Starbucks has been listed in the Fortune magazine in the top 100 list as the best place to work and rated high in employee satisfaction. This is a huge strength for the brand.
- Restroom for Gender Neutral – Starbucks has presented restrooms for gender-neutral to protect them against discrimination. This is yet again another strength of the brand.
- Excellent Business Model – Starbucks has an excellent business model that is quite stable leading the company to profit. During the past years, the brand had undergone some restructuring that had seen some update in its product offerings. The main business model is its premium coffee experience and its unique culture that makes the brand and it’s business a unique one.
- Price is High – Starbucks prices are at the high range as compared to the McDonald and many other coffee outlets. The Starbucks product is not affordable for many middle-tier people. Its high price has reduced the affording capacity for the customers.
- Product Imitation – Starbucks does not own any unique product for the market. This makes the products to be imitated by other companies. Other coffee shops and many food outlets like McDonald’s, Dunkin Donuts, etc. provide almost similar products. This is indeed a weak point for the brand and would impact the business as well.
- General Standards that do not suit the Geographical Area – Starbucks product offerings are mostly not in par with the cultural standards of the market. As the brand is spread across various locations across the world, its products do not fit into the market like it that geographical area. For example, it’s few areas, Starbucks crafted beverages are not associated with customer preference. This a weak point for the brand as few people would not prefer the standardized products as they prefer beverages that are common in the geographical area where they reside.
- Tax Avoidance in Europe – Starbucks has faced many criticisms and controversy due to its tax avoidance in the United Kingdom. It had not paid tax to about 1.3 billion pounds of sales in the past year. This is indeed a great weak point and might hit the brand’s image to a large extent.
- The practice of Procurement – There were many environmental and social activists that had criticized the company for its bad practices with regards to procurement. It is claimed that Starbucks has procured coffee beans from needy third-world farmers. It is also mentioned that the company has violated the principle of ‘Fair Coffee Trade’ principles. This is a very weak point for the brand as it is violating the basic principle and not trying to be honest with the customers.
- Product Recall – Over the past years, Starbucks has been recalling many products that are in great demand. This act has a negative impact on the company’s brand image, and it would also lead to customer base loss. During the year 2016, Starbucks had recalled two of its products. One product was an egg, sausage, and cheddar sandwich and the other one was cheese and fruit bistro box. The main reason to recall is the threat of contamination. This is a weak point for the brand as it would end up losing customers.
Opportunities in the SWOT Analysis of Starbucks
- Entrance into many Developing Markets – Starbucks has many coffeehouses in the United States. It has gained more business in setting up many outlets in the United States. However, its business operations could more improvise if it expands into many developing nations like China, India, and a few African regions. Investing to set up outlets in these regions would be a onetime affair, but once set up would flourish to a larger extent, thereby gaining more popularity. This would provide a chance for the brand to serve in many other developing nations thereby gaining more profit with the business sales as well.
- Diversification in business and Product Specifications – Starbucks can further indulge in diversifying its business operations. This would improve the overall revenue of the brand and increase its growth opportunities. Also, developing products that match each geographical region would lead to better opportunities for the brand.
- Include New Products – Starbuck by itself is a popular company. People love its products and come in large groups to its outlets to have it. It would even make more sense for the brand to introduce new products and many holiday flavors like Eggnog Latte, Peppermint Mocha, Gingerbread Loaf in its name. Introducing new products would make Starbuck’s business to flourish and new products would always be a big yes from the customer’s angle.
- Partnerships and Agreements with other Firms – For a business to flourish more, co-branding is always the best and benefits the brand more. Starbucks should take up more opportunities to advance its business by having partnerships and agreements with other brands. This would be a big success for Starbuck, and it would increase its market share to a great value.
- Digital Marketing – Starbuck has not entered into paid marketing techniques to increase its customer base and market share. But over the years, it started to invest in paid advertising in a dotted line. As we are aware that the world of digital marketing is being expanded over the years for any domain, be it food, fashion, and beverage brands. There has been a lot of opportunities that include blogging, social media promotions, and video advertising. For beverage brands, a social media account is one of the most engagement channels. Starbucks should make use of these channels and enhance its followers and for promotions. With this, the brand would be reachable to many people thereby increasing its customer base to a larger extent.
Threats in the SWOT Analysis of Starbucks
- Competition from low-cost Coffee Sellers – Coffee is being sold in many outlets and is a product that is easily available anywhere. Many other coffees brand exist that provide affordable rates. This is a big threat for the brand as when coffee is being sold at a lesser rate, people might hesitate to come to Starbucks or think twice before entering the outlet. Getting customers into the brand and making them aware of the unique quality of coffee that Starbuck provides is a challenge.
- Big Outlet Competition – Similar coffee brands are being owned by many top companies in the world like McDonald’s and Dunkin Donuts. These types of big companies are a big threat to the brand and might impact its business operations to a large extent. When customers can choose one of the top brands, then Starbucks tend to be one among them in the list. So, the probability of choosing the brand would below. Hence, big coffee brands are a big threat to the company. This would naturally affect its profits as well.
- Copying the Product – Starbucks does not have any specific unique product offering for the market. All its products can be easily copied by other companies. Other coffee shops and many food outlets like McDonald’s, Dunkin Donuts, etc. provide almost similar products. This is indeed a threat to the brand and would impact the business as well.
- Separate Coffee House Outlets – Many sociocultural threats exist for Starbucks. These kinds of sociocultural movements have many small local and independent coffeehouse and is a big threat for large brands like Starbuck.
- Controversary Warning Rule in California – In the recent past, a California judge had ruled the brand and many other companies and given warning labels for their coffee products. This was to prevent the use of a chemical in coffee that may cause serious diseases like cancer. These kinds of the threat occurring during the prime of the business growth would impact the brand to a larger extent.
- Philadelphia Arrests – During the recent past, two men of African and American were arrested at the Starbuck outlet that had caused triggers and had bought in a lot of controversy on social media. The controversy was highlighted against Starbuck. The reason being that Starbuck employees had not permitted them to make use of their outlet restroom as they had done any purchase. Later, the CEO had to intervene and apology them personally. These kinds of issues hearing time and again is not a good sign for the brand’s growth.
- COVID 19 – The recent global issue COVID 19 has made Starbuck close its outlets and is estimated that almost more than 2000 stores in China and other places have been closed due to the outbreak of this virus globally. As this is a global issue, it does impact the brand’s financial condition.
There is no doubt that Starbuck as gained fast growth in recent years by means of its expansion and various partnership. The SWOT analysis of Starbucks mentioned in this article has highlighted the main strengths of the brand that comes up from its brand image, financial condition, many outlets, acquisitions, coffee quality, and its various unique features incorporated in its business model.
The major weakness is its price, copying its product by other companies, and its product recall. Starbucks sees a huge opportunity in the industry by expanding its products and entering its business operations to other developing nations.