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Swot Starbucks

Essay by   •  October 6, 2010  •  Case Study  •  1,223 Words (5 Pages)  •  3,060 Views

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Starbucks has become a well-known company for selling the highest quality coffee beans and best tasting coffee products. It was one of the first companies to realize that the real money to be made was in beverage retailing, not just coffee beans. Starbucks created a coffee for the coffee connoisseurs and go to great lengths to acquire only the highest quality of coffee beans. They have set new precedence by outbidding the European buyers for an exclusive crop of coffee beans, which produces one of the best coffees in the world. Roasters of Starbucks coffees are extensively trained for one year. Starbucks has the distinction of being the public's educator on Expresso. They have also recently started to expand to packaged and prepared tea in response to the growing demand for this product. There are no other national coffee bar competitors in the same scale as Starbucks. Starbucks is the only competitor in the coffee bar market that has a recognized brand image. The difference between Starbucks and other coffeehouses is that they own all their stores and do not franchise. Starbucks stores operates in most metropolitan areas of the United States and also has a direct mail business to serve customers in every state. They have introduced gourmet flavored decaffeinated coffees as well as specialty flavors and whole bean coffees for the faithful coffee drinkers. They have also added light lunch fare to their menu. Starbucks had recently expanded its emphasis internationally. There are opportunities waiting in possible joint ventures with other corporations to design new product associations with Starbucks' coffee.

Although Starbucks has enjoyed tremendous success in the past few years, there are a few obstacles looming. Since the popularity of the coffee house idea has grown, some cities wish to issue regulations on the coffeehouses due to complaints of late night patrons becoming uncontrollable. The cost of coffee beans is expected to rise in the future due to lower supply, which may tighten the margins on coffee merchants. The higher costs have cut into markets, which have heightened the competition in a crowded market. There is an enthusiasm of health consciousness growing in the United States. People are cutting down on caffeine but the consumption of decaffeinated coffee has not seen an increase. Although Starbucks does not have major national competitors, they do have regional ones. Tourists become confused when ordering, since they cannot simply order a cup of coffee. Although Starbucks is interested in gaining recognition and growth in Europe, they will not be pioneers in the European coffee market as they were in the United States.

Internal Strengths and Weaknesses

Strengths Weaknesses

Brand name recognition Non-pioneer in global market

Quality Products Narrow Product line

Potential Internal Strengths Complicated Products

Good Marketing Skills

Well Developed Corporate strategy

Location

Visionary leader

Distribution

Manufacturing competencies

Exclusive marketing rights

Environmental Opportunities and Threats

Opportunities Threats

Expand into Foreign Markets Change in consumer tastes

Widen Product Range City regulations

Diversify into new Growth Businesses Increase in domestic competition

Apply brand name capital in new areas Changes in economic factors

Downturn in economy

Specialty Operations

Starbucks specialty operations strive to develop the Starbucks brand outside the Company-operated retail store environment through a number of channels. Starbucks specialty operations include retail store licensing agreements, wholesale accounts, grocery channel licensing agreements and joint ventures. Starbucks specialty operations also include direct-to-consumer marketing channels. In certain licensing situations, the licensee is a joint venture in which Starbucks has an equity ownership interest. During fiscal 2000, specialty revenues (which include royalties and fees from licensees as well as product sales) accounted for approximately 16% of the Company's net revenues.

Although the Company does not generally relinquish operational control of its retail stores in North America, in situations in which a master concessionaire or another company controls or can provide improved access to desirable retail space, the Company may consider licensing its operations. As part of these arrangements, Starbucks receives license fees and royalties and sells coffee and related products for resale in the licensed locations. Employees working in the licensed locations must follow Starbucks detailed store-operating procedures and attend training classes similar to those given to Starbucks

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