Company analysis - SWOT

When looking at Starbuck’s SWOT, one can see they have a variety of strengths and opportunities to help make their business grow even further. Nevertheless, even though they are the No.1 coffeehouse brand in the world, they are susceptible to certain threats originating both inside and outside of the company.

Strengths & Opportunities

Let’s start by looking at the good. From Starbuck’s investor overview publication, they state that their return on investment is 24.54% and their return on equity is 29.16%. This is a key advantage as it outmatches their competitors by a hefty margin. This is one reason why Starbuck’s is able to have a sound support system for their employees. Starbucks offers a variety of benefits to their employees, helping workers out with things such as medical costs. However, to name the most important strength that has enabled Starbucks rise is the “Starbucks experience”. The combination of premium music, perfectly blended coffee, friendly staff and a warm atmosphere differentiates Starbucks from their competitors.

Being as big and knows as Starbucks is, they have some great opportunities that other, smaller competitors might not necessarily have. One opportunity to help further their competitive advantage is to extend their supplier network. They outsource coffee beans from various suppliers, mainly located in Arabia, Africa or South America. As expansion in Asia is starting to grow, Starbucks should reduce their dependence of African and South American harvests and find suppliers closer to Asia, which would in turn lower shipping and handling costs. Thanks to its size, Starbucks could further expand its retail operations and product offerings. They could sell a variety of their products at grocery stores and supermarkets, especially the cold coffees, partnering up with big chains to increase the availability of the brand. Increasing their product offerings would enable them to reach a broader consumer group, which would be good for new entry markets such as Finland. Having an ‘Arctic coffee’ could be one idea for a special blend only available in Northern Europe or in countries touching the Arctic circle. Expanding in areas where Starbucks has comparably only a few restaurants, such as India and China, is also a great opportunity in unsaturated markets.

Weaknesses & Threats

A big weakness for Starbucks is its dependence on the price of coffee beans and dairy products. Firm’s profits suffer and Starbuck’s profitability has a dangerous correlation with the price of coffee beans. Due to weather conditions and many other factors, Starbucks cannot estimate the price of its coffee and the companies profitability with the accuracy that is needed to sustain a competitive advantage. Another weakness is their product pricing. The great coffee and the Starbucks experience is a win, however, on the other side of the coin are the prices the fancy experience brings. They have had problems, most recently in China, with their ‘overpriced’ coffee. Here’s a great read on their recent negative publicity: http://business.time.com/2013/10/24/how-a-starbucks-latte-shows-china-doesnt-understand-capitalism/

Their biggest threat is the rising coffee bean prices. As a commodity they can not control, Starbucks has to always be on the lookout for any variation in price. Another threat, especially when expanding to Asia, are trademark infringements. There have been numerous cases where Starbucks has been involved in cases over illicit use of their trademark. This creates further negative publicity and is costly for the company. Another threat is the increasing amount of local cafes, shops, and specialized coffee houses. Local cafes offer a much lower price and suitable menu for its customers, and bigger coffee chains are specializing so they wouldn’t have to compete head-to-head with Starbucks. The loss of market share and increasing intense competition are major threats Starbucks faces. In addition, the saturation of developed economies is a worry. The coffee markets in developed countries are saturated with more competition than ever, and Starbucks will find entry and growth hard in these markets. Lastly, supply disruptions are another main threat for Starbucks. Political, economic, and weather conditions may affect the supply of coffee beans, which significantly adds to the firms costs.

Based on Starbuck's SWOT for their global brand, we've made a more specific SWOT analysis with the Finnish market particularly in mind.

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