Starbucks SWOT Analysis

Starbucks is the Largest Coffeehouse Chain in the World

Starbucks is the largest coffeehouse chain in the world with presence in 50 countries and about 15000 stores (Starbucks, 2010). The Seattle based company sells espresso based hot drinks; drip brewed coffee, coffee beans, snacks, Panini and pastry (Starbucks, 2010). The company also sells items such as tumblers and has an entertainment division which markets music, books and films. The company has diversified on its product range in order to gain a competitive advantage over other similar companies. This paper gives a comprehensive SWOT analysis of the Starbucks coffeehouse chain. A SWOT analysis is a comprehensive survey of the company's strengths, weaknesses, opportunities and threats of a company.

Starbucks Mission Statement

Starbucks has a simple but strong mission statement which is "to inspire and nurture the human spirit -one person one cup, and one neighbor at a time" (Starbucks 2010). Starbucks employees receive high level training to ensure that they provide quality products. As a result Starbucks over the years has become a market leader in the production of innovative coffee products (Hanft, 2010). Their employees are also highly motivated which has lead to the creation of an amicable and differentiated work environment. The company has also diversified its products thereby producing a wide range of products suitable for different markets hence gaining a competitive advantage (Hanft, 2010).

Although Starbucks has diversified its product range it relies on coffee and coffee based products for its revenue. However, there are other competitors such as Costa coffee and MacDonald's who are providing low priced coffee products hence stealing customers away from the company (Tanser, 2008). Diversification of products has also made the company deviate from its mission statement which states that the company produces and sells coffee related products. Starbucks was viewed as a traditional coffee house. However with the sale of products such as pastries the company has damaged its brand image. The company in the recent years has laid more focus on its expansion thereby decreasing its focus on internal improvement (Bussing-Bucks, 2009).

Starbucks Saturation Strategy

The company also adopted a saturation strategy which aims at edging out competitors and increasing the visibility of their stores among customers (Tanser, 2008). However, this strategy has led to increased cannibalization whereby Starbuck's coffee shops are competing with one another. In addition to this the company has priced its products expensively as compared to its competitors. The company has also been involved in various controversies relating to fair-trade coffee whereby it was reported that coffee farmers were treated unfairly (Bussing-Bucks, 2009).

There are a lot of opportunities that could be taken up by Starbucks to expand its growth and investments. The company could expand into new and emerging markets, as opposed to investing in the US market (Hanft, 2009). The company has a positive global reputation which will enable it penetrate other markets easily. Starbucks can also diversify its distribution channels by adopting new channels for distributing its products. The company should also adopt new technologies which will reduce the cost of production. The company can also adopt a less expensive pricing strategy which will help it regain its customers in the domestic market (Bussing-Bucks, 2009). Starbucks could also introduce more fair trade products in order to improve on its reputation.

Summary

One of the most significant threats to Starbucks market dominance is the emergence of new competitors. For example McDonald's launched its own premium coffee which did fairly well in the US market especially during the recent global financial crisis due to its low cost and good quality (Tanser, 2008). There has also been volatility of the overall coffee price within the producing countries thereby increasing the cost of production for the company. The company has also suffered negative publicity due to unfair treatment of farmers in the coffee growing regions. This in some cases this has led to increased political influence on the operations of the company. The emergence of new beverages could reduce the preference of coffee thereby reducing the overall coffee consumption. Politics could also influence the way the company operates in foreign markets.