Starbucks is the world’s largest American coffee brand with 32,938 location points globally as of the 2021 first quarter. The company started its business in Seattle, Washington in 1971 and incorporated in 1985.
The visionary leadership of Howard Schultz made the coffeehouse more than just a coffee brand. It has become a central place between your home and work. Along with offering the services of hot and cold beverages, the company also offers branded items like presents, mugs, coffee makers, and bagged coffee beans.
Some of the main products and services of Starbucks are gifts, mugs and accessories, packaged goods, non-food items, fresh food, handcrafted beverages, and coffee. The main competitors of coffeehouse brands are Panera Bread, Costa, Tim Horton, Café Coffee Day, Dunkin Donuts, Mcdonald’s McCafe, and Costa Coffee.
Today, we’ll study the Starbucks SWOT analysis. It’s going to focus on the internal strengths and weaknesses; and external opportunities and threats.
Here’s the swot analysis of Starbucks as follows;
Table of Contents
Strengths of Starbucks
Strong Financial Growth
Starbucks has grown a solid financial performance over the years, with annual revenue of $29.061 billion in 2021, higher than the previous year.
Over the year, the company has built a loyal customer base and generated slide sales numbers that allowed Starbucks to expand its presence and business operations.
Approximately 383,000 people are working for the company.
| Year | Revenue (Billion) |
|---|---|
| 2017 | $22,387 |
| 2018 | $24,720 |
| 2019 | $26,509 |
| 2020 | $23,518 |
| 2021 | $29,061 |
Unisex Restrooms
In order to avoid conflict and community harassment, Starbucks has installed gender-neutral restrooms at its location points for LGBT (lesbian, gay, bisexual, and transgender). The law also prohibits discrimination of any type.
Reinvestment Strategy
Starbucks follows the excellent business strategy of investing its profits and revenue back into the company’s business. It helps the company in various ways like making effective decisions and effective operations.
Quality/Taste/Standardization
The coffee of Starbucks has achieved the status of excellent quality coffee in the global market. The company manages to offer quality products consistently at all stores and location points.
Loyal Customers
Starbucks provides incentive programs in order to make them repeat customers. For instance, customers would receive 3 points for every purchase, and 3 stars mean one dollar. The person would receive one free drink after earning 150 stars. However, the company also offers birthday beverages, pre-ordering complimentary and mobile payment.
Product Diversity
Starbucks has diversified its focus from the traditional coffee offer and included additional flavors like strong coffee and coffee-flavored ice cubes. The company offers hundreds of exclusive beverages that are relevant to the company’s offers like pumpkin spice latte and others. According to an estimate, the company has sold approximately 350 million cups of pumpkin spice lattes
Taking Care of Employees
Along with offering quality products and services, Starbucks is also a very good employer. In fact, Fortune has named Starbucks one of the top 100 companies to work for. The company manages its operations very well and treats its employees with care and respect. Often, the company makes the headline by taking care of its employees and offering better compensation and benefits.
Starbucks Acquisition
Starbucks has strengthened its market position by acquiring various other growing startups and businesses like Ethos Water, Torrefazione Italia coffee, Tazo, Evolution Fresh, Seattle’s Best Coffee, and Teavana.
The acquisition of these brands has made a significant contribution to the success of the company. However, the net worth of the company’s assets is over $19.22 billion.
Supply Chain
Starbucks operates its supply chain system through large business volumes and volumes of goods. The brand purchases coffee beans from various sources in order to meet the demands of customers. The company has a global supplier network for coffee beans sourcing and it ranges from Asian-Pacific, Africa, Pacific Island, south-Central, and Latin America.
Strong Public Image
The company has established a strong brand image in the global market. The total number of the company’s customers, its volume, and size have been growing to a great extent. According to the ranking of Interbrand in 2019, the brand worth of the coffee chain company is 11.7 billion dollars.
Weaknesses of Starbucks
General Standards
Starbucks follows the general standard in the preparation of its products and they contain higher and high calories. Both elements aren’t good for your health. However, the company uses these elements to give an additional flavor to its products. Instead, the company should shift towards healthier options.
Some of the products and services of Starbucks do not conform to the local cultures of different countries. When a product/service doesn’t conform to the local norms, then people won’t accept it.
Ignoring Taxes in Europe
Starbucks has been facing public relations issues by failing to pay taxes in Europe, which would badly impact the reputation of the company in the long term. A few little problems are negligible in the long term, but you can’t avoid the major problem and their cost is much higher. Financial researchers claim that the company failed to pay taxes on the sale comprising 1.2 billion pounds during the period 2011 to 2012.
Product Recall
If the company doesn’t manage its products well, then it has to recall its offers and it turns out disastrous for the food and beverage company. For instance, if a product is spreading the allergic virus to any foreign country, and then it would result in the form of public relations disaster.
Starbucks has a history of recalling its products and services. It can have a very bad impact on the brand image of the company, and you would lose customers ultimately. For instance, Starbucks recalled two of its products because of allergic contamination in 2016.
Imitation
Coffee is not a rare commodity and almost everyone uses it in their daily life. Many worlds’ leading retail brands and small hotels and cafes are also offering coffee with similar tastes. Customers can purchase coffee from anywhere. What Starbucks offers, it’s not much different than the offer of other brands like Dunkin Donuts, McCafe, and McDonald’s.
Supply Costs
The coffee beans price is increasing consistently. When a company’s focus is on offering excellent quality service, then it prefers to buy quality beans. However, when the cost of raw coffee material is higher, then it would impact the retail price of the product. A small change in price badly affects the sale and it lowers the motivation level of customers.
High Prices
The retail price of coffee cups at Starbucks is much higher than other competitors. When it comes to the purchase of coffee cups, then customers have got a lot of options available to them. In fact, some people consider coffee a necessity rather a pleasure, and they prepare it in their houses. The company has to defend its premium price options.
Opportunities of Starbucks
Online Platform
The pandemic and worldwide crisis have pushed many businesses and companies to bring their business online. Starbucks should focus on the growth and promotion and its online platform, and it would help the brand to amplify its sale.
Meal Delivery Service
Along with the growth of the online platform, Starbucks should follow in the footsteps of Uber Eats and Grubhub and offer meal delivery services. The growth of businesses and companies that offer food delivery services is increasing than those that do not. However, the coffeehouse brand offers the delivery service by employing Postmates, Grubhub, and Uber Eats. According to an estimate, the online delivery service would increase by approximately 97%.
Coffee Subscription
Other brands like Panera Bread offer the coffee subscription option to its customers. In order to increase its customer database, Starbucks should offer similar types of services.
Price Differentiation
Starbucks offers its products and services at premium prices, and some customers want to buy the less expensive products. The company should consider launching low-cost products to target the price-conscious segment of the market, instead of focusing only on the premium offers.
Some small businesses are amplifying their customer market by offering various types of products of different price ranges in order to target different types of customers. Starbucks should consider offering types of products with normal, medium, and premium price range.
Partnerships
Starbucks should develop partnerships and alliances with other complementary brands for cross-brand promotion. If businesses develop such types of partnerships properly, then it would amplify the sale and send a better public impression. For instance, when Nestle and Starbucks started collaborating with each other, then various coffee creamer products came under the roof of commercial shops.
New Coffee Trends
It’s no doubt that Starbucks has managed to meet the customer trends, but the expectation and market trends keep on changing. It’s challenging for the company to maintain its market position. In order to maintain its market position, the company should gather customer data, conduct thorough market research relevant to customers’ tastes and interests, and create something entirely new.
Developing Markets
The USA is the major market for Starbucks and the coffeehouse brand is gaining a foothold in the Chinese market. Chinese market would teach the company various valuable lessons that the brand would use for further market expansion. If we look at the company’s expansion history, then the brand has maintained its performance to a great extent. Now, Starbucks should expand its business into other growing economies like Africa, India, Latin America, and others.
Product Diversification
It’s no doubt Starbucks offers a wide range of products and services to its customers, but the company should diversify its product niche into new areas. For instance, the company should work on the development of the beverage category and experience new ideas with new flavors.
Starbucks has earned a great worldwide reputation with its brand name. Now, the company is launching different flavor products under sub-brands names. The company can offer the products with its own brand name in order to gain greater popularity.
Threats of Starbucks
Independent Coffeehouses
Starbucks is facing the challenge of socio-cultural movements and its focus is on the growth of small local businesses rather than big chain multinational brands. Such movements aren’t good for the company’s business.
High Prices of Beans
The pandemic and the worldwide lockdown have dramatically increased the price of unroasted Arabic coffee beans. It has happened due to various factors like disrupted supply chain, hoarding, and limited availability. It would badly impact the company’s financial performance.
Coffee Shop
Locally owned small businesses have the capability to develop close ties and connections with the local community. Big multinational brands with fancy hotels and restaurants have their own charm to attract the attention of customers. Therefore, the company should be familiar with its niche and know how to make them loyal users.
Recession
Economic recession is something that no business could find its way out of it and it impacts all of them equally. When the country’s economy is under recession, then people won’t have extra money to buy premium products. Their focus would be on meeting the daily items of everyday life.
Controversy
The judge of California States has ordered all companies including Starbucks to add a cancer warning label on all of their products. It should say that caffeine-based products aren’t good for your health, and the chemicals in them may cause cancer
Post Pandemic Issues
The wave of the pandemic has changed everything that we do in our lives like buying and spending money on various things. Its impact won’t go anywhere in the next few years, because hotels, restaurants, and other businesses remained closed for months. It has decreased their annual revenue to a great extent. In fact, some of them reached the level of extinction.
Low-cost Competitors
Many other brands and businesses are offering a similar type of coffee and taste at a very lower cost. Under the circumstances of economic recession, people are reluctant to spend their money on luxury items. It would remain a simple coffee no matter whatever fancy name or term they use, and price-conscious customers won’t pay for it.
Supply Chain Issues
Starbucks has been facing the supply chain issues like strikes, severe weather conditions, and a decline in coffee bean crops. Such supply chain issues put the company in a vulnerable position, and it’s not good for the company’s finances. Therefore, the company should look for creative
