Swot Analysis Of Starbucks

Starbucks suppliers have high bargaining power due to the fact that the demand for coffee is high in global level and coffee beans can be produced only in certain geographical areas.

* Interest rates – An increase in interest rates in the USA would result in plans for investment and expansion being deterred by the Starbucks resulting in decreased productivity of the company. Furthermore, increased expenses for the consumers such as rising mortgage repayments would result in decreased availability of income to spend on luxurious products such as coffee. Low interest rates should have the

Starbucks desire as the leader in the specialty coffee industry is to be acknowledged for its responsibility to coffee farmers and their families to improve their well-being. The corporation’s primary stakeholders are broad organizations such as, coffee trade associations, suppliers, and groups with interest in sustainable coffee production. Including non-profit groups focused on human rights, social justice, and environmental issues. Other stakeholders include governmental agencies such as, U. S. AID (Starbucks Corporation, 2010).

Starbucks has created a competitive advantage with their product quality by setting themselves apart from their competitors. “The Company has stayed with the upper-scale of the coffee market, competing on comfort rather than convenience, which is the case with its closest competitors, McDonald’s and Dunkin Donuts” (Mourdoukoutas, Panos). Consumers believe they are receiving a better product and experience when they purchase from a Starbucks as opposed to another large food service company that may sell coffee.

In regards to the company Starbucks, their cost of production includes the cost of coffee beans, milk, plastic products, advertising, rent and labor. When it comes to the high price of Starbucks coffee customers should consider the cost of what goes into the coffe, Howard Schultz said “I am concerned about dairy, both domestically and around the world, and we are working feverishly with our suppliers, (and to) identify new suppliers (Thomnson, R. 2014). When it comes to the price of coffee, “prices recently hit a two-year high due to crop-damaging drought in Brazil, the top producer” (Thomnson, R. 2014). This has a huge impact on the price consumers pay for their coffee.

Changes in demand determines how much Starbucks should supply in the market. Competitors pricing strategies, customers income, economic conditions and advertising will cause the demand curve either to shift outwards or inwards. So Starbucks should always be ready to face these challenges and set its prices and supply according to market conditions. If Starbucks intends to focus only high income group then the demand for its coffee in middle and lower income group will be very less. But if Starbucks set prices which attract all the income groups then its demand will become elastic and slight change in price will cause a greater change in quantity

The first factor was “the coffee itself “– Starbucks believed that they offered their consumers with the highest quality coffee which was sourced from Africa, Central and South America, and Asia-Pacific regions. Starbucks tactic was to corner the market by controlling as much of the supply chain as possible and also controlling the distribution of retail stores around the world. Starbucks

In order to cut overhead costs Starbucks merged with other retail locations, such as Costco, Target, Omni hotel, and resorts, and online at amazon.com. Even though Starbucks expands globally one of the major risks because of the recession, was increasing coffee prices. Starbucks faces many other challenges, such as lower wages with employees, and frustrated store managers. Coffee is the main source of why they call it Starbucks. The major focus is the quality of improving their coffee and customer service instead of raising their prices on coffee.

Many Starbucks business practices concern activists and international advocacy groups. Even the consumers have expressed issues. So, the company should take these into account to continue holding consumers’

T able of Contents   1. 2. Introduction Company Analysis 2.1 Foundation and Development 2.2 Internationalization 2.3 Products and Services 2.4 Recognition and Awards 3. Ethical Sourcing 3.1 C.A.F.E. Practices 3.2 Coffee Purchasing 3.3 Farmer Support 3.4 Forest Carbon Programs 4. Green Store Design 4.1 Energy Conservation 4.2 Renewable Energy 4.3 Water Conservation 4.4 LEED® certification and Green Building 5. Recycling 5.1 Reusable Cups 5.2 Store Recycling 6. Corporate Social Responsibility 6.1 Community Initiatives 6.2 Youth Action Grants 7. 8. 9. Conclusion Appendix Bibliography .. ... . .. 3 4 4 4 4 5 6 6 6 ... 7 .. 7 .. 8 8 . 8 9 9 10 10 10 12 12 12 14 15 16

As Starbucks continues to expand, more profits and more risks are in store. The corporation’s brand and reputation may be put at risk as the quality of the products supplied by third parties is outside of the company’s control (―Starbucks Corporation Fiscal 2009 Annual Report‖, 20). Partnering with farmers and suppliers meant letting go of control over the quality of certain products. In order to retain customers and protect their brand, Starbucks must establish and maintain effective working relationships with reputable farmers and suppliers, which could increase costs.

In terms of competition and the forces, which could limit the success of Starbucks it is important they stay ahead or even with other companies concerning innovative products. Many more micro companies are coming up with new products with a similar quality and a lower price/cost. It is important that Starbucks continues to search for innovative products to continually satisfy their customers. At the same time “rivalry” amongst Starbucks and smaller providers of coffee will continue to increase as the demand for coffee continues. The buyers bargaining power is significant as they can determine the cost, type of product, quantity and ultimately

Starbucks primary weakness stems from the pricing of its coffee in comparison to its competitors. Since Starbucks makes 75% of its profit from coffee (unlike the McDonalds and Dunkin’ Donuts which make most profit from food), it is exposed to rising coffee-bean costs and stepped-up competition from lower-priced competitors.

The customers demand Starbucks to be innovative. Starbucks is focusing on the food side of the business. It would be very beneficial for the Starbucks to focus on their in-store items or baked goods. The test locations have already started to follow on this trend, and have provided positive feedback and results. Starbucks is continuing to innovate its product mix to capture the

Nevertheless, Starbucks possesses an immense core business in the United States, which is based on its corporate roots in Seattle, as well as the huge market