Starbucks: Strengths, Weaknesses, Opportunities, Threats

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Table of Contents

SWOT analysis for Starbucks Corporation
Strengths of Starbucks
Weaknesses
Opportunities
Threats
Conclusion

SWOT analysis for Starbucks Corporation

Starbucks was founded in 1971 by three partners in Seattle, Washington. Originally, only coffee beans and coffee making equipment were sold. The company then grew into six other branches within Seattle. Eleven years after its inception, it was joined by Howard Schulz in the docket of retail operations director. Schulzs visit to Italy made turned around his mind as far the vision for Starbuck is concerned.

Since he was unable to convince his counterparts concerning adoption of the idea he had seen, he left Starbucks for II Geornale. A few years afterwards, Schulz bought Starbuck, merged it with II Geornale and retaining Starbucks name. Two years after that, the company had not only opened more retail stores, but had also expanded its operations to Oregon. At the same time Starbucks employed professionals who would invent strategies to detect regional purchasing trends.

This move bore successful strategies that made Starbuck to give its employees health benefits as it also developed a business rapport with CARE. It is from this time onwards that the company expanded to into at least 14000 locations by 2006. However the companys decisions with respect to expansion have not balanced well with experience. Despite this challenge among others, the company still has an option of spreading its market to other developing economies.

Strengths of Starbucks

First, the company had competent staff. During his time as a retail operations manager, Howard Schulz was not only visionary, but also determined, observant and a team player. After he had toured Italy, he was observant enough to pick a business idea that could prove success to the Starbucks. Even after sharing with his colleagues who turned it down, he still went ahead to explore more strategies that eventually made him buy Starbucks.

After the merger, the rapid growth of Starbucks was triggered by the strategies that had been born by the hired experts. The highly motivated employees also played a significant role in the companys growth. Secondly, Starbucks had high investment in Research and Development. This is manifested in the companys ability to offer diverse benefits and empowerment to its employees such as stock option, leaves, tuition reimbursement and health insurance.

It also indicated in the organizations launch of its hiring strategies that entailed: store managers meeting potential employees prior to real hiring, supply of interview guidelines to hiring managers to enable them assess the suitability of employees even before hiring them, and use of software that kept the database of online applicants.

Through this, the company was able to hire competent staff in a very swift manner. After hiring the right staff, Starbucks could then take its employees through a training schedule that covered customer relations, product knowledge and interpersonal communication.

The third strength was the companys rapid growth. The potential of its business expansion began manifesting even before amalgamation when six additional locations were added. After the merging, the rate at which the company grew was rapid and extended from Seattle to other parts of the world. Fourthly, the company also emphasized on product quality.

This was indicated by employee training that covered product knowledge intensely. Also, between 2000 and 2004, the company entered into agreements with many organizations that are generally concerned with the licensing and quality of coffee to ensure that its products meet international standards. The high rate at which the company penetrated the market also shows that its product was of top quality.

Additionally, the company had a very strong capital base that enabled it to generate a bigger percentage of its revenue from its locations. It was also because of its strong capital base and colossus revenue generation that Starbucks was not only able to open numerous locations, but also invest heavily in Research and Development. Moreover, Starbucks was one of the Fortune Top 100 companies to work for in 2005.

The company is respected for its ability to empower its employees through training, objective hiring, motivation and other forms of empowerment. Besides that, the company is a profitable firm that generated not only high revenue, but also excess profits in 2004 (Danca, 1999). Its ethical values and mission statement is sound and exceptional enough citing environmental leadership.

Weaknesses

As Howard Schulz himself had put it in an email, some of the managements decisions to continue with the creation of new retail locations had been made at the expense of Starbucks experience. For example, whereas the problem of speed and efficiency of service was solved at automatic expresso machines, the visibility of the machines by customers during essential processes of drink making was not fully considered. Use of flavor locked packaging did not only lead towards the loss of product aroma, but also towards the loss of the companys heritage.

The flavor locked packaging was also costly. Another weakness is that the changed store design that was initially done for purposes of gaining efficiencies of scale has changed the general publics outlook of the companys coffee. It no longer reflects the interests that the companys partners have or feel about the product.

There is also inadequacy of equipment in some of the companys stores. For example, coffee grinders, coffee filters and French presses are not available. This may hinder the operations in such stores. The self induced challenges have further led to the emergence of rivals such as other coffee firms, first food operators and even individuals.

The company also lost colossus sales as a result of its inefficient automatic expresso machines. Additionally, the companys food choices menu did not match the public demand. Lastly, the organization has more than 75% of its locations in the United States of America. As such, the company has not spread its risk because there are other foreign economies as well.

Opportunities

The company has a strong ability of maximizing available opportunities. For instance, some years ago, in its Santa Monica location, the company helped its clients to create their own music CD. Secondly, the company has new products and services that can be sold in their retail stores such as fair trade products.

Thirdly, the company has the chance to penetrate its market especially in developing countries such as China, India, and Russia among others. Additionally, co-branding with other business dealers in food and drink and franchising to other producers have the potential in Starbucks.

Threats

Whether coffee will continue being in the market or will be replaced by another beverage is uncertain. Secondly, rises in dairy products and coffee products may pose a challenge of market retainability. Since Starbucks establishment, there has been a rise in competitors within the same line of business that may pose a threat to its operations.

Conclusion

Starbucks is a well-established coffee company that has grown rapidly since its inception. The company has not only competent staff, good capital base, strong Research and Development and high product quality.

However, the latest hurdles that Starbucks is experiencing such as competition, home market concentration, and inefficient machines require that company to chat a way forward. Among other strategies, the company should consider spreading its markets to developing countries such as China, Russia, India, just to mention but a few.

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