Starbucks Strategy Analysis and Opportunities

Henry D. Sakhel El Mehdi Benjelloun October 2017

Starbucks SWOT and company analysis Starbuck’s Presentation: Starbucks Company was created in 1971 in Seattle, as a retailer of coffee bean and spices. Today they provide much more services with more than 24000 stores around the world, being the leaders in the coffee shop industry.

Starbuck’s Strategy:  

To elevate the coffee experience.

To create new customer occasions. Offering “third-place” experience, away from home and

  

work.

Selling coffee of the highest quality, to achieve product differentiation.

International market expansion on emerging economies.

To integrate into various business processes.

Starbucks Mission: To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.

Goals of Starbucks:   

Serve the best coffee possible.

To increase the number of stores.

All the coffee to be grown under the highest standards of quality, using ethical sourcing



practices.

Seeks to grow relationships with a diverse network of suppliers through strategic community



relationship-building.

Strike a balance between profitability and a social conscience.

Business Model: 

The standard retail business model: 51% of the stores are company-owned. The majority of the revenue is generated by the retail locations that the company owns.

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Franchise model for expansion: 49% of the stores are franchises, located mostly out of the



United States.

Starbucks loyalty program: Starbucks Rewards.

Business Environment: Industry 1. The coffee industry keeps growing, it does not show a sign of slowing.

2. The consumers are learning more about coffee and getting into specialty coffee.

3. Younger coffee consumers, from ages 13-18, are increasing, and reached a total of 37 percent.

Trends 1. Diversified coffee shop offering. Coffee shops are offering more than just coffee to reach wider audiences.

2. New offerings for new coffee drinkers. I.e. cold brew and specialty coffee.

3. Gourmet coffee. Young consumers have increased their consumption on gourmet coffee.

Competition 1. Dunkin’ Donuts.

2. McDonald’s: McCafé 3. Independent coffee shops.

Starbucks SWOT Strengths

Weaknesses

1. One of the world’s strongest and most

1. The higher priced products make them

popular brand image, with a 59.2% of the

less accessible to the middle and lower

market share.

class.

2. Extensive global supply chain. Works

2. Most products are based on

with over 18,000 stores in 62+ countries

generalized standards and less aligned

worldwide.

with cultural demands.

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3. Diversified business through subsidiaries.

3. Dependence on the Americas Segment:

Among them: Seattle’s Best Coffee,

69% of total revenues were generated

Evolution Fresh, La Boulange, Ethos

in the Americas region, primarily in

Water and Torrefazione Italia Coffee.

the United States.

4. Social responsibly company. Has over

4. Slow Expansion in Europe: the

1000+ LEED certified stores, a

Europe, Middle East, and Africa

certification for companies that optimally

segment only contributed 6% to

use the location, minimize non-renewable

revenues in 2015.

energy use, and reduce water consumption.

Opportunities

Threats

1. Expansion into Emerging Markets:

1. Increased Competition: Dunkin donuts increasing their market

China have more than 1 billion costumers.

share (24,5%)

2. Expanding Product mix and offerings: Starbucks recently started to expand their

2. Price Volatility in the Global Coffee

product mix by venturing into the Tea and

Market: There has be significant fluctuations in

fresh juice product.

the market prices of high quality coffee beans, which Starbucks can’t control.

3. Technological advances:

3. Changing Consumer tastes and lifestyle

More than 10% of the transaction of

choices:

Starbucks’s are by phone

Starbucks derives a significant amount of its revenue from the development 3

markets and there is increased market saturation currently

4. New distribution channels: Starbucks introduced a beta version of a

4. Changing Consumer tastes and lifestyle choices: The shift of consumers toward healthier

delivery system called Mobile Pour

products and the risk of coffee culture being just a fad represent a threat for Starbucks going into the future.

Business Opportunities based on SWOT and Conversion Strategies: Starbucks is a company that is known worldwide, but it depends significantly on the United States, with more than 13100 stores that constitute 52% of their actual stores (25700). This opens many opportunities, like the opportunity to expand its brand to emerging markets, especially Asia and precisely China. This country has a big potential for Starbucks as it’s the second largest economy in the world, and Starbucks is one of the few US companies that are doing well in China, having more than 2500 locations. Taking in account that China has a huge potential (1 billion consumers), it can be stated that Starbucks has a large growth margin.

Knowing that the coffee culture is different from one continent to another, Starbucks can adapt their product to the country, like McDonalds does. For example: in India they only serve chicken, as they know that the population cannot eat cows. As well, in Arabic countries they always introduce something that is related to the culture and that entices the costumers to try all the different food they provide.

Key objectives and metrics to achieve the Business Opportunity Business Opportunity Expansion into Emerging

Key Objectives To operate 5,000 stores in

Metric Total of stores opened in

Markets Expanding product mix

mainland China by 2021.

To double its revenue, by

China: currently 2800 Global Consumer Products

2020, for the packaged

Revenues

Technological advances

products.

To increase by 2020 to 50% 4



Program Retention

the transactions via mobile

Rate: currently 94

devices. 

percent Mobile transactions: currently 30 percent

Retail operations expansion

To open approximately 12,000



Total number of



stores Earnings Per Share

new stores – to a total of 37,000 - globally by 2021.

Conclusion: Starbucks is company that has a consistent brand image in the world. During this analysis was noticed that Starbucks is a step ahead from their competitors in all points. The market share of Starbucks’s is higher than any other competitor (59.2%) and it’s known worldwide. Nevertheless, the company can get even better. It can turn its weaknesses to strengths by following these recommendations: 1- To find an alternative to solve the high prices we can think of a paid subscription system, like a membership, that reduce price for loyal customers and offers them other perks.

2- The effectiveness of Starbucks on Asian countries can be improved by adapting the product to the culture. For example, they must focus on the tea products and provide traditional tea services on Asia.

3- Starbucks is known to be involved in environmental-friendly activities. Therefore, it is an opportunity to add organic food in the menu, so it can attract more customers in breakfast or lunch.

REFERENCES   

https://www.starbucks.com/about-us/company-information/starbucks-company-profile https://www.starbucks.com/card/rewards https://www.forbes.com/sites/greatspeculations/2016/09/19/lets-look-at-starbucks-growth-

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strategy/#6d52028b3d71 https://www.forbes.com/sites/greatspeculations/2016/09/19/lets-look-at-starbucks-growth-

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strategy/#6d52028b3d71 http://www.businessinsider.com/starbucks-competition-independent-coffee-shops-2017-3 https://news.starbucks.com/press-releases/starbucks-debuts-voice-ordering https://news.starbucks.com/news/investor-day-2016-press-release

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http://www.businessinsider.com/starbucks-mobile-app-proves-successful-marketing-strategy-

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2016-4 https://www.starbucks.com/responsibility/environment/leed-certified-stores https://dailycoffeenews.com/2017/03/27/2017-us-coffee-drinking-trends-include-more-

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gourmet-more-youth/ https://www.perfectdailygrind.com/2017/06/coffee-industry-going-next-insights-woc-2017/ https://www.forbes.com/sites/ljkelly/2017/07/28/starbucks-doubles-down-on-china-targets-

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5000-stores-by-2021/#91e33ba7a00e https://www.forbes.com/sites/greatspeculations/2013/09/05/starbucks-has-big-plans-to-

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diversify-beyond-coffee/#63afa320de78 https://www.starbucks.com/about-us/company-information https://scholar.harvard.edu/files/nithingeereddy/files/starbucks_case_analysis.pdf http://fortune.com/worlds-most-admired-companies https://www.statista.com/statistics/266465/number-of-starbucks-stores-worldwide/

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