SWOT analysis of Starbucks. Starbucks is a US multinational coffeehouse and food chain company. Gordon Bowker, Jerry Baldwin, and Zev Seigl are the founders of Starbucks and they laid the foundation of the brand on Mar 30, 1971. The headquarter of the company is in Seattle, Washington. Kevin Johnson is the current CEO of the company.
Coffee, gifts, handcrafted beverages, mugs and accessories, packaging goods, fresh foods, and non-food items are some of the main products of Starbucks. The company has approximately more than 31256 location points across the world.
According to a statistical analysis conducted by macrotrends.net, the estimated annual revenue of Starbucks in 2020 was 23.518 billion US dollars by the end of 2020, out of which the net profit of the brand after minimizing all the expenses was 0.928 billion dollars. The brand has hired approximately 346000 employees to manage various operations at different location points across the world in 2020.
If we compare the annual profit and net earnings of Starbucks with 2019 of 26.509 B and 3.599 B respectively, then the company’s annual revenue and net profit have declined approximately 11.28% and 74.21% respectively.
Panera Bread, Costa Coffee, Costa, McDonald’s McCafe, Tim Hortons, Café Coffee Day, and Dunkin Donuts are some of the main competitors of Starbucks.
Today we’ll study swot analysis of Starbucks that how internal strengths/weaknesses and external opportunities/threats impact the growth and performance of the company. Here’s the swot analysis of Starbucks as follows;
Strengths of Starbucks
Company’s Financial Position
The annual revenue of Starbucks in 2020 was roundabout 1 billion US dollars. Although it has declined from 3.6 B to 1 B since 2019, it was mainly due to the pandemic of covid-19. If you compare the company’s performance with other businesses, then Starbuck’s financial performance is very good.
Growing Location Points
Starbucks had approximately 1886 location points in the late 90s, and the total numbers of location points in 2020 are 31256 by the end of 2020. It means that the brand is continuously growing each year.
Powerful Brand Image
When we talk about the food and beverage industry, then Starbucks comes to our mind immediately. It’s because the management has made it a strong and powerful brand with years of dedication and work. The company has made a plethora of loyal customers over the years. According to an estimate, the market capitalization of Starbuck is approximately 105.22 billion dollars by the end of 2020. According to the ranking of Interbrand, the brand worth of Starbucks in 2019 was 11.9 billion dollars.
Unique and Diverse Portfolio
Starbucks hasn’t just added ordinary food items and beverages into its product portfolio. The company has introduced new and unique techniques to launch innovative products to its customers. For instance, Starbucks offers an ice cube made of coffee and it provides a strong flavor. It’s just one example, all other food items are unique and diverse.
The acquisition is a very good business strategy for the growth of your business. Starbucks has followed the same strategy and the company has acquired approximately 6 brands. Like Ethos Water, Seattle’s Best Coffee, Torrefazione Italia Coffee, Teavana, Evolution Fresh, and Tazo are some of the main acquisition of the brand. They turned out to be very successful for the company, and the brand would do the same in the upcoming years as well.
As we know that Starbucks is a multinational brand and the company has coffee beans suppliers across the world to keep things going smoothly. Some of the main suppliers of the company are from Asia Pacific, Latin America, and Africa.
Starbucks is very open and respectful towards modern issues like LGBT rights. That’s why the company has separate restrooms for gay, lesbian, transgender, and bisexual. Starbucks is against the discrimination of the LGBT community.
Starbucks has a very good system of reward programs. Its purpose is to attract new customers and retain old ones. For instance, the company offers 3 stars to 1 dollar you spend in Starbuck. When your stars accumulate to 150, then the brand provides you a free drink. The company provides the convenience of birthday drinks, mobile payments, and pre-orders to the rewarded members.
Better treatment with Employees
According to the ranking of Fortune’s top 100 places to work, Starbuck has always been in the list of top 100 companies where people should work. It’s because the company has always treated its employees as an asset to the company. When employees are satisfied with their job and work environment, then they can perform better.
Progressive & Reinvestment Strategy
The reason Starbucks has become a global brand is that the company didn’t sit back with its success in the early years. Instead, the company keeps on investing its profit into acquiring other brands and building new location points across the world. The reinvesting strategy turned out to be very fruitful for the company.
Starbucks has always provided a blend of delicious taste with quality service. People liked it and they brought other people into Starbucks. That’s how the company kept on growing over the years. The company has also maintained its quality standards, taste, and service to keep on growing.
Weaknesses of Starbucks
Unethically Buying Coffee Beans
Some of the critics and environmental activists hailed the actions of Starbucks that the company is buying coffee beans unethically. They claim that coffee beans producing countries are very poor. Companies like Starbucks buy coffee beans from them in cents and earn billions of dollars as result. They also claim that the company is violating the free trade principles of coffee beans.
Taxes in Europe & UK
Although it’s been years, the critics still criticize the tax avoidance issue of Starbucks. According to Reuters’s investigation in 2012, the brand didn’t pay a tax of approximately 1.3 billion pounds for three years.
Some of the marketers have said that Starbucks has devised a general standard and the company applies it everywhere. For instance, some of the drinks and beverages that Starbucks offers do not align with the local cultures and trends of different countries.
Easily Imitable Brand
Honestly speaking, the food items, drinks, and beverages that Starbucks offers. Other brands like McDonald’s, Dunkin Donuts, and McCafe provide the same quality and service. It means that Starbucks doesn’t have a uniqueness about its brand and offering. Any new entrants can copy the company’s products.
If we compare the prices of Starbucks’ products with McDonald’s and other brands, then they’re a bit higher. The company offers the same product and the same quality but charge higher prices. That’s why it’s unaffordable to some customers.
Starbucks offers something unique and good, then suddenly the company stops offering it one day. The brand has recalled products over the years that have a huge customer demand.
Contamination & Shutdown
Cheddar breakfast sandwich, sausage, eggs, fruit bistro box, and cheese were the famous food items back in March 2016. Starbucks recalled its products because of the fear of contamination and allergic reaction.
The threat turned out real when the testing authority found listeria monocytogenes on the breakfast sandwich during their routine testing tour. Resultantly the company had to remove the breakfast sandwich from its menu of approximately 250 stores in Oklahoma, Arkansas, and Texas.
Opportunities available to Starbucks
Using the latest Coffee making Technology
Coffee is one of the main products of Starbucks and the company has always adopted the latest technology. When we talk about technology, then there’s always room for updates and growth. For instance, the brand could launch RSI, foam tech to snap chilling, and back to black are some of the latest tech trends that Starbucks should consider using it.
Alliances & Partnership
We all know the advantages of acquisition and merging. Starbucks can increase its market share by making alliances and partnerships with other famous brands. Co-branding would increase the market share and influence of Starbucks.
Launching New Products
Starbucks could also launch some of the famous products like gingerbread loaf, peppermint mocha, and eggnog latte. It would help the company to attract new customers who like Mexican food.
Diversification & Specification
Starbuck should be specific about the product offerings and it should be relevant to the customers’ requirements of different markets. Secondly, the company should diversify its business operations to stabilize and increase the revenue stream of the company.
Expanding into Developing countries
Some of the developing economies like Africa, India, and East Asian countries hold great growth potential. Starbucks should shift its focus from the US market to other countries.
Subscription is a very good business model and it would help Starbucks to create a strong customer base. Some of the other competitors’ brands like Panera bread are providing the subscription service.
The home delivery service business is growing. Many customers rely on the service of Postmates, Uber Eats, and Grubhub to order their food. If Starbucks could provide a food delivery service, it would be a great step for the brand.
Online Channels & COVID-19
As we know that the pandemic of covid-19 has discouraged physical shopping and the whole business of Starbucks relies on the physical gathering. Therefore, the brand should use online channels and food delivery to keep things going under the lockdown of businesses.
Some customers are price conscious and Starbucks should products of different price ranges. It would help the company to target different types of demographic at the same time. Resultantly, the company would increase market share and revenue.
Threats Starbucks has to face
In March 2018, a judge in California gave its ruling that the companies like Starbucks should add warning labels on their products like coffee. The purpose of this ruling is to stop companies from using the chemicals in their products, because its usage may cause cancer.
The movement against Coffeehouse Chain
Many social activists have started a movement against the chain of coffeehouse business. They said that coffee is a very small and daily use item. Companies shouldn’t exploit it to earn billions of dollars. They also say that there should be small independent coffeehouse businesses instead of chain brands.
Strike of suppliers
Some of the mid-west Starbucks coffeehouses stopped offering coffee because of the suppliers’ strike. The company heavily relies on coffee beans suppliers. Even the whole business operations depend on the availability of coffee beans provided by suppliers.
Starbucks is offering the same product quality that others are offering. Any new entrants can copy the product and start his brands with the same products.
The fast-food providing multinational brands like McDonald’s, Dunkin Donuts, and others have made this industry very competitive. The future of Starbucks is challenging because it’s getting difficult for the company to maintain its market position.
There are many independent coffee businesses in the market and they offer the same quality or even the better taste at a lower. They pose a great threat and challenge to multinational brands like Starbucks.
Cost Coffee Beans
The cost of coffee beans has increased in recent years. It’s due to the many factors like a covid-19 pandemic, suppliers’ cost, increasing demand, hoarding, and shipment cost.
Economic Recession & COVID-19
The worldwide lockdown due to pandemic of covid-19, shutdown of businesses, and increasing unemployment have created an environment of uncertainty across the world. The global economy is going through a steep recession period. Most importantly, the company had to shut down most of its location points across the world.
Arrest in Philadelphia
Two African-American men wanted to use the restrooms without buying anything and the company’s employee didn’t let them. Things got out of the hands; the police came and arrested those two men. The whole event attracted a lot of attention on social media and caused a bad reputation for the company. CEO of Starbucks, Kevin Johnson, issued an apology to those two men, but it was too late by then.
After a careful study of swot analysis of Starbucks, we have concluded that Starbucks undoubtedly falls under the world’s leading multinational fast food and coffeehouse brands. But the company has to diversify its products and business, use the latest technology, reduce its prices, and use better marketing campaigns if the brand wants to maintain its profitability and market share.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.