Starbucks SWOT Analysis

A SWOT analysis of Starbucks Corporation 2016 with infographics

 Go to STARBUCKS SWOT ANALYSIS 2018

Background: Starbucks (NYSE: SBUX) is the biggest Coffeehouse chain in the world based on its number of operating stores. It had 22,557 stores operating in the year 2015 . Its closest competitor is McCafe with 5044 stores open in 2015. However, Starbucks is not just the largest but also the most successful. Its first store opened in Seattle in 1971. In less than 50 years, the chain has expanded to become the world’s biggest. Apart from ethical business, Starbucks is also known for its premium coffee and excellent customer service. From its supply chain to other aspects of business, Starbucks ensures ethical practices in all part of its business.

Rather than being just a coffee house, it strives to be a relaxation joint for its customers. The customers can find a relaxing ambience and friendly staff as well as premium quality coffee here. However, premium quality also means higher costs. Starbucks’ products are generally costlier than its competitors. Its focus on quality and great service differentiate it from the other coffee brands. It sources the best quality cocoa from various parts of the world. The brand also does a lot for the farmers who are an important part of its supply chain, under its CSR program. Starbucks is a strong and well established brand which has the opportunity to further improve its brand awareness and presence in various parts of the world.

– Strengths:

  • Brand image
  • Premium quality
  • Excellent customer service
  • Known for ethical business
  • well managed supply chain

Starbucks has become a well-known brand with its more than 22000 stores in various corners of the world.  It has become the best coffeemaker by focusing on the quality of its products. Its products are of premium quality. Apart from it, Starbucks is known for excellent customer service. The staff at Starbucks is customer friendly. It does everything to make the customers feel at home. Starbucks also strives to provide the customers with a friendly and homely environment. Ethical business is another area that has given Starbucks a special image. From sourcing of raw materials to sales and marketing, it strives to follow ethical practices in all its business areas. Apart from that a key strength of Starbucks is its well managed supply chain.

[Check out a TOWS analysis of Starbucks here]

 – Weaknesses:

  • High priced products
  • Imitation by others

The high price of Starbucks products is a major weakness of the brand. While its products are premium in quality, they are higher priced than most competitors. This is an important factor since Starbucks loses a large number of customers for its high prices. The products it sells are also imitated easily by the competitors who sell them at lower prices. These are the two major weaknesses of Starbucks. Only if Starbucks could bring the prices of its products lower, it could attract customers in larger numbers. Its quality rich coffee and excellent service come at a price that is not affordable for all.

– Opportunities:

  • Expansion in the emerging markets
  • Diversification of the product mix
  • Cobranding or partnership with other brands

Starbucks has a significant opportunity before it in the form of the large and untapped emerging markets. Markets like India and China can prove important sources of customers and revenue. However, Starbucks should also try to align its products as per the cultural standards of these markets. Diversifying its product line can also help the brand grow and improve its brand value. Currently, the brand is mainly known for its premium quality coffee. It can add other products including beverages and snacks to its product line to provide its customers with variety.  Its assortment of products is limited.

Another major area of opportunity for the Starbucks brand exists in the form of cobranding or partnership. The brand can partner with snack brands or regional stores to sell its own products. Imagine someone having a big fat burger with coffee. Coffee tastes better with snacks. Such partnerships can help Starbucks improve its brand presence and get closer to its customers. It will find a huge source of revenue by tapping into the customer base of the partner brands in this way. Apart from that it could sell its coffee through local stores or the big retailers as well. Such strategic partnerships will not only increase its customer baser but also improve its brand awareness.

 – Threats:

  • Heavy competition from the rival brands
  • Consumer trends
  • Imitation of its premium products

The Starbucks brand is facing heavy competition from its rivals. Particularly, it is the smaller competitors whose products are available at much lower prices that pose a major threat. The lower end consumers are attracted towards the rivals for the lower costs of their products. The changing consumer trends have also affected its business to a small extent. The people are looking for healthier products. The sales of juices and other healthy drinks has gone up. While Coffee is not considered an unhealthy drink, still its sales are slightly affected. Another major threat comes from the imitation of the products. Starbucks sells premium quality products. However, they are not inimitable. The rival brands make the same products available at lower costs. It increases the competitive threat for Starbucks.

Recommendations:

Starbucks should focus on improving its brand awareness. In this regard, it can form strategic partnership with the other brands. However, it can also tap into a larger customer base by lowering the prices of its products or by making lower priced product variants available throughout its stores.  Its premium image also hurts its sales. Currently, it has a major opportunity in the emerging Asian markets which are largely untapped. It can expand its brand to these parts to generate higher revenue. Simultaneously, it can benefit by expanding its product line and including new snacks and beverages.

Starbucks Annual Reports

Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.