When someone says coffee, the first name that appears is Starbucks. It is a brand that has established itself with coffee and beverages. It started from humble beginnings in Seattle to become the largest coffee house company in the world. People tend to see the broader picture and may not realize the hardships of any business. Similarly, even after being the most prominent company, Starbucks has a lot of opportunities and weaknesses to attend to.
Undoubtedly, Starbucks has a lot of strengths that have helped the business expand in almost every city. However, it faces stiff competition from other businesses that are business threats to Starbucks. Analyzing all the strengths, weaknesses, opportunities, and threats of a business is simply a SWOT analysis.
In this article, I will perform a SWOT analysis on Starbucks.
SWOT Analysis Of Starbucks
There are many business analysis tools that you can use to get insight into any business. Considering SWOT, we have alternatives to SWOT as well. However, for this article, I would use the method of SWOT to pick our way forward.
Strengths Of Starbucks
Exceptional Brand Name
This point would not need much explanation. The “Starbucks” brand has established itself over the years across the globe. Starbucks is now synonymous with coffee. This is one of the strongest strengths of this company. Building such a remarkable brand name is tough for businesses in the current era. This was done by Starbucks with humble beginnings.
Having a strong brand name allows Starbucks to dictate prices and offer its services at a higher end of the price range. Many other competitors are providing similar coffee and beverage menu at a lower price. Still, Starbucks leads the way owing to its strong brand value.
Strong Customer Loyalty
When you get customers who are loyal and return to you for business, this becomes your biggest strength. Starbucks has had this for many years. You will see people heading straight to Starbucks whenever the idea of coffee crosses their minds. Now, how this became possible? The strong and exceptional brand value is the reason for strong customer loyalty. People trust Starbucks in terms of quality and service. This leads them to think of none other than Starbucks for their coffee intake.
Remarkable Financial Performance
With an exceptional brand name and strong customer loyalty, Starbucks has had remarkable financial performance over the years. In the year 2022, Starbucks reached a net revenue of 26.58 billion dollars. If you see the data, there has been an increment in revenue for Starbucks every year. The only exception was the year 2020 due to COVID restrictions.
Adding to this, the company is valued at more than $4 Billion. It is the highest as compared to its competitors.
Global Presence
The other biggest strength of Starbucks is that it provides services to almost every city out there in the world. It has a great global presence with stores expanding each year. As of 2022, the number of Starbucks stores exceeded 35000 across the globe. Starbucks is present in 84 countries as of 2022.
Employee Satisfaction
This strength is many times not acknowledged by people. However, it holds great importance when you analyze any company. A business is run by the employees at the ground level. Starbucks have great reviews till now when it comes to the work culture for employees. The employees are treated well. They are given a good work-life balance along with good increments. Yes, there can be exceptions when it comes to certain cases for certain employees. However, if you see a broader picture Starbucks has been recognized by Fortune on their 2023 World’s Most Admired Companies list.
Strategic Acquisitions
Starbucks has not only limited itself to its operations but has also acquired some other companies over time. This has led Starbucks to gain more competitive strength in the market over others. Starbucks has made 2 acquisitions and 6 investments. Teavana (Nov 2012), and The Coffee Connection are two major acquisitions by Starbucks. Moreover, the company has spent over $ 644M on acquisitions. Starbucks has also invested in multiple sectors as well.
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Weaknesses Of Starbucks
Low Diversification In The Products
If you clearly observe, Starbucks is a coffee-oriented business. It is famous for its coffee collection across the entire menu. It does offer many other food items. However, the main selling proposition remains the coffee product. Starbucks is low in diversifying its product range and converting them into sales. When it comes to coffee, Starbucks is the name you consider. But if you are looking to grab a bite along with coffee, people do consider other competitors of Starbucks.
No Unique Proposition
Starbucks has a leading dominance in the coffee industry. But the coffee-selling business is not unique. It is imitable by other companies. The other companies may not outperform Starbucks in the market, but can still venture into the business of a coffee house company. Many competitors of Starbucks are offering a similar range of coffee beverages like Mcdonald’s, Dunkin’ Donuts, and more.
High Price Range
Starbucks offers a great quality of service for all its products. However, the price range for most products seems to be on the higher end. Moreover, if you analyze the prices of Starbucks’ menu in developing and Asian countries, the prices are a bit higher. This becomes a weakness for certain parts of the world where people with a limited expense ratio are preferring other competitors as compared to Starbucks.
Heavy Dependance On Coffee Beans Procurement
It is obvious that the main selling proposition of Starbucks is the coffee product. To prepare coffee, the main ingredient is coffee beans. The procurement of coffee beans dictates how well the Starbucks business would perform. Whenever the price fluctuates or the procurement process sees a change, the profit margins for Starbucks fluctuate as well. Now, if you see the fluctuations across 35000+ stores across the globe, the impact becomes huge.
Opportunities For Starbucks
Product Diversification
Many people prefer other coffee house outlets due to the fact that they offer more food items other than coffee and beverages. They are not primarily focusing on coffee products. This is where the opportunity lies for Starbucks. Having a great brand value, Starbucks would find it easy to introduce more items on its menu and attract customers. Where other companies find it hard to make a mark on their new products, Starbucks can use its established name and get ahead of the competitors.
Expansion In Asian And Developing Countries
Starbucks is quite popular in Europe and the United States. However, Starbucks is still not the first choice for Asian countries and many other developing countries. The primary reason has been the high price range it offers for these markets. Starbucks can bring a new price range for these markets. This can help them expand exponentially and increase their profits to a large extent.
Threats To Starbucks
Low-Cost Coffee House Competitors
There are many competitors across the globe that are providing coffee drinks and beverages at an affordable price range. Yes, they do not have an established brand name out there like Starbucks. But the truth is, many people still do not run after a Starbucks outlet. Many people are ready to explore as long as they get a good taste along with timely service. Many local outlets are competing with Starbucks and people have started exploring these outlets.
Supply Chain Issues
Starbucks heavily relies on the supply chain logistics of coffee beans from various parts of the world. As coffee beans contribute to the major selling coffee beverages for it, any issue arising in the supply may cost immense revenue losses. Moreover, the rates of coffee beans fluctuate a lot due to which the supply chain costs increase. This increase can thereby reduce the profit margins for the company.
Imitation Of Recipes
To be very honest and straightforward, Starbucks has no unique drink or patent of any sort regarding any item it offers. Yes, it is the largest coffee house company in the world. But it still remains a coffee house. Most other competitors and outlets are easily replicating the recipes of items offered in a Starbucks outlet. Moreover, if the same standard of taste comes at a lower price, most people prefer to buy it from there.
Bottom Line
Starbucks is a name that will be remembered in History for revolutionizing coffee standards. It is the largest coffee house company in the world and is expanding at a very remarkable pace. However, as discussed above, there are certain threats and weaknesses of Starbucks. SWOT analysis of any business teaches us that even the best companies out there face threats from competitors. Moreover, the opportunities tell us that there is always room to collaborate and explore. Starbucks is a strong company based on finances. However, the threats can still pile up in a long rain and get in the way of profits.
Here is a quick table to summarize the entire SWOT analysis of Starbucks