SWOT Analysis of Starbucks
Starbucks, previously known as Starbucks Corporation, is a coffeehouse chain with approximately 20,000 locations across the world. Starbucks is known to be the largest American coffeehouse chain in the world, having 31,256 stores all over the globe. Starbucks is among the world’s largest food service businesses, as well as one of the most loved and well-known brands.
By using a SWOT method to analyze Starbucks will help indicate what the future holds for this renowned company. The SWOT analysis demonstrates how the world’s largest coffee business make the most of its competitive returns to retain its global expansion success. You can refer to it for writing your college essay on Starbucks.
It summarizes the company’s main strengths, weaknesses, opportunities, and threats. If you want to understand more about Starbucks’ SWOT analysis, you’ve come to the right place.
Starbucks SWOT Analysis
The SWOT Analysis of Starbucks is as follows:
- Strong brand image and correlation between brands: Starbucks is among the most well-known consumer brands available. So many locations across the country and world, as well as huge queues for most drive-throughs, reflect how people love the brand and its commitment to its clients. This ensures the company’s long-term viability.
Starbucks is the reason why coffee has turned into a “luxury” rather than a “necessity” product. It is considered to be a lux brand and has a strong presence due to the very popular products and heavy public relations efforts. Starbucks is indeed one of the top five most valued brands in the world.
- Excellent financial performance: Starbucks holds a strong financial position in the market, having an annual turnover of $30 billion and a profit of $4.5 billion in the year 2021. All this kind of consumer urge and demand has resulted in strong sales year after year, paving a way for expansion and the number of stores has incredibly increased in the last couple of years. Starbucks frequently launches tens of thousands of franchises in a single year, driving out the rivals and dominating the market. Starbucks had approximately 31,000 locations throughout the world.
- Extensive Global supply chain: Any large volume of business requires an equally large quantity of raw materials and products and Starbucks has made its supply chain management a perfection. Starbucks procures its coffee beans from several locations across the globe, ensuring that it always meets its customers’ demands and makes them happy. Starbucks procures its coffee beans from around 30 countries across the globe. This includes countries in Asia, Central and South America, and Asia-Pacific counties.
- A diverse range of products: Starbucks has added coffee-flavored ice cubes that add to a greater coffee flavor. Starbucks has expanded its product and food offerings, diversifying its business activities. For such a basic food item as coffee, Starbucks has created hundreds of exclusive beverage options strongly connected to the entire brand, namely the ever-popular pumpkin spice latte. Starbucks has sold more than 370 million beverages of pumpkin spice lattes.
- Acquisitions: Smart corporate acquisitions help reinforce and boost an already established company, and Starbucks here is no exception.
The company has acquired the top six companies namely, Seattle’s Best Coffee, Tazo, Evolution Fresh, Teavana, Ethos Water, and Torefazione Italia Coffee. All of these acquisitions have proven very successful for Starbucks. Starbucks’ total assets accounted for $19.22 billion.
- Employee treatment: Starbucks is a company that has been listed in the Fortune’s Top 100 Places to Work consistently. Starbucks is known to be customer and employee-centric and has a reputation for caring for its employees. It focuses on their respect, safety, and well-being. It has been garnering industry awards for its passion for its employees and has made headlines often for its quest to pay the frontline workers a higher wage.
- Quality and standardization: Starbucks is known for its quality and consistency. The premium blends and delicious taste, and high-quality coffee beans, all of these have led to its growth and expansion globally. Starbucks is reputed for its excellent quality and consistency in its taste and quality and standardized products in all of its locations.
- Higher prices as compared to competitors: The cost of Starbucks products on an average is 38% more than the products sold by its rivals. The price of a regular cup of coffee is quite steep as compared to other competing restaurants and cafés. On top of that, there are dozens of beverages and options for customization options that amount to higher costs. People who consider coffee a staple rather than a luxury will find brewing coffee at their home much more inexpensive.
- Replicability: Coffee is considered to be a staple and is consumed nearly everywhere. There are several leading retail brands, small restaurants, and cafes that are offering coffee with the same tastes. People can buy coffee from anywhere. They can even make their own. The products and the taste that Starbucks offers are not much different from what other famous brands like McDonald’s, McCafe, and Dunkin Donuts offer.
- Variable supply costs: The volatility in the supply costs directly impacts the prices of retail goods. Since Starbucks is a coffeehouse chain, the prices of the products are directly related to the cost of the raw coffee beans. Starbucks advertises itself as a purveyor of pure coffee products, therefore it acquires higher-quality coffee beans. When there is an increase in obtaining the raw coffee beans, the prices of finished products too increase and thus are passed on to the customers as well. If the price of raw beans and the corresponding supply costs increase then it will result in higher product prices that could drive customers away. The price of coffee beans has fluctuated dramatically and has seen an increase of 164% from the year 2008 to 2011 with an overall increase of 20% from 2008 to 2021.
- Product Recalls: Like in any food and beverages business, product recalls are absolutely devastating if they aren’t dealt with swiftly and correctly. This could have a detrimental effect on the brand image of the company and result in loss of customers. Selling products that contain allergens and foreign contaminants not only harms the people who are consuming them but also badly affects public relations. There was a case in 2016, where Starbucks had recalled two products because of allergen contamination.
- Unhealthy food choices: Most of the items offered by Starbucks have high calorie and sugar concentrations, which makes them very unhealthy if consumed on a daily basis. The brand has built its reputation on sweetened and flavored items that appeal to the customers’ taste buds. Yet, this remains quite harmful and unhealthy, so the brand must provide healthier alternatives and make some modifications to recipes to remove this problem.
- Product and business diversification: Starbucks can diversify its products and business operations for improving overall opportunities for revenue growth. By looking into other food and beverage options, it can modify and customize the base product. It can also investigate entirely different products like sodas, teas, other types of drinks, etc. It could also expand the culinary selection for providing a better customer experience and also more options.
Starbucks is popular because it releases new products now and then and also brings new flavors during the festive seasons. Some very popular and loved products are Gingerbread Loaf, Peppermint Mocha, and Eggnog Latte. The customer satisfaction rating of Starbucks is 79%.
- Market expansion: Primarily, the coffeehouses of Starbucks operate in the United States. The coffeehouse brand has been securing a firm foothold in China. The Chinese markets would give the brand several valuable lessons that it can use to expand and get into diverse markets. Worldwide expansion in developing economies such as India, Africa, and Latin America can prove to be fruitful and provide significant opportunities to the brand.
- Collaboration with other brands: It can prove to be quite beneficial for Starbucks to collaborate with big corporations. Cross-promotion and co-branding will be a good opportunity for Starbucks to increase its turnover and strengthen the public brand image. Starbucks has the opportunity to build alliances and collaborate with big and popular brands. Hence, it could increase the market share.
- Latest Coffee Trends: There’s no doubt that Starbucks has managed to stay on top of customer trends for a long time, but it’s challenging to keep up with the constantly changing market trends and customer demands. To maintain the market position, the brand can conduct robust research, keep on gathering customer feedback and develop their product accordingly and make new ones to increase customer retention rate and attract more customers.
- Price differentiation adoption: Most of the products available at Starbucks are quite expensive and thus may discourage some customers and force them to try out cheaper alternatives. What the brand could do is consider cost-effective options that would attract cost-conscious or frugal customers while developing new premium quality products. Thus, it would help bolster the basic market segment.
Several cafes are rapidly increasing their consumer base by providing various types of goods at different ranges of prices to cater to different types of customers. Starbucks could sell its normal coffee at a reasonable price range to cater to the middle class alongside offering more expensive options as premium.
- Coffee delivery service: many online food delivery services such as Uber Eats, GrubHub, DoorDash, etc., have become immensely popular recently, particularly since the global coronavirus pandemic. Similarly, Starbucks could reap benefits by taking advantage of such a growing consumer trend. It can partner up with such food delivery companies or could start its in-house delivery service to cater to customer demands.
- Online Platform: Ever since the outbreak of Covid-19 and the worldwide crisis, many companies and businesses have transitioned to online business. The brand could focus on the promotion and growth of its online platform. This could amplify the sales dramatically.
- Competition from much affordable coffee retailers: Similar coffee and breakfast food franchises offer products that are similar to Starbucks but the prices of such products are substantially low. This poses a threat to the future stability of the brand. Starbucks when compared to another popular brand McDonald’s, the product range and taste are quite similar but the price of the products offered by Starbucks is much more expensive. This could pose a great risk and the brand could become financially vulnerable.
- Issues with supply chain: Issues with the supply chain like a decline in the production of coffee bean crops, severe weather conditions, and strikes at third-party suppliers can pose a significant threat to the brand. These issues make the business vulnerable to even the slightest tweaks along the company’s supply chain. Thus, the brand should look for ways to reduce such deficits and reduce shortfalls whenever possible.
- Easily replicable: Coffee is consumed by people everywhere around the world and can be found in several regions across the globe. Several basic menu items can be replicated at a much lower cost. If the brand wants to maintain its position in the market for basic coffee, it has to change people’s perception that simpler beverages as options can’t be easily copied. They could do this either through marketing the use of authentic and premium quality beans or the process of brewing.
- Change in consumer behavior: Change in consumer behavior and trends are always a threat for any kind of business, and Starbucks is no exception. According to experts, the epidemic will continue to influence consumer behavior and tighten discretionary expenditure. Furthermore, the decline in the food business and other macroeconomic elements may adversely impact the brand’s operations and development plans.
- Local coffee shops: The locally-owned cafes and small restaurants that market themselves as fundaments of the community and who promote a welcoming social environment can pose a threat to big brands like Starbucks. The reason is that the presence of a famous and larger food business is thought to be the decline of smaller businesses. This is quite a sensitive issue that Starbucks needs to be aware of and be more considerate about this niche as these shops have more loyal customers. The number of tea and coffee shops and small cafes has declined by 7.3% in the US.
- Increase in prices of raw coffee beans: The cost of unroasted coffee beans – Arabica, the world’s highest-produced coffee that represents over 65% of the global production, has increased drastically throughout the global epidemic due to concerns over the availability, reserving, and supply chain bottlenecks. This affects the brand’s profitability with every extra dollar spent on the increased cost of raw coffee beans.
Summing Up on Starbucks’ SWOT Analysis
A strong brand image, diverse product offerings, and a strong financial position have paved a pathway for Starbucks to secure a firm foothold in the food and beverage industry and hence secure long-term success. It can be said that Starbucks has numerous opportunities for growth and expansion. By finding ways to provide less expensive products so as to meet every customer’s demand, mitigating the supply chain disruption, and producing new avenues for development and sales, Starbucks can continue being the customer favorite for years to come. In case you are having trouble to write custom essay paper then you can easily seek help from my paper writer. One such academic service provider is PenMyPaper who can help you with your academic assignments. Get in touch with us to learn more about our services.