2. SWOT ANALYSIS
Starbucks is amongst one of the very few companies that have managed to successfully create market awareness and stir up consumer interest in specialty coffee while at the same time preserving brand dominance. Its focus on consistency in delivering positive consumer experience stresses the point about consumer visits to its cafes being an ‘Experience’ rather than just seeing it as another coffee maker (workforce.com). Unique Strategy:
The Ability to capture key locations and open stores in close nearness to each other is a unique strategy for Starbucks. This ensures that franchises that don’t meet set achievements are closed down. Therefore only the most profitable stores that maintain high sales, and retain the most customers survive. Valued and motivated employees:
Starbucks promotes an environment that encourages team working and collaboration. As such it encourages managers to follow its motto of ‘hire the personality, train the skill’. Hence through exceptional service, customers keep coming back. (workforce.com) The strengths provide a favourable impact.
Over-reliance on home market:
Although the American coffee market is worth over $18 Billion (e-importz.com), over-reliance on this market leaves Starbucks vulnerable to unforeseen changes that might occur in such market. E.g. recession affects disposable income for customers and subsequently, profits. Thus the management decision to focus mainly on the US market makes it a weakness. Aggressive Expansion:
Due to the takeover and acquisition of local community coffeehouses and buildings, Starbucks has been labelled the ‘Tesco of coffee’ after a criticism from local residents due to closures of local shops. This has lead to boycotts and increasing membership of sites likeihatestarbucks.com. They see Starbucks’ aggressive expansion as an erosion of their local environment and culture. This, in fact, means that weakness is an unfavourable impact.
Entry into new markets:
Global companies that plan for expansion usually seek out attractive countries with such opportunities. In a bid to increase its worldwide presence, Starbucks has opened a range of stores and operates in over 50 countries with 16,000 coffee shops (Starbucks.com).
Growth in coffee market:
The general taste of coffee drinkers in America is shifting towards the more expensive organic coffee which accounted for $1.3 billion in imports (Restaurant hospitality). This is favourable because it provides an opportunity for Starbucks to expand its customer base with the possibility of higher profit margins as a result. Opportunities is favourable for Starbucks
Although the competitive threat from the specialty coffee sector is minimal, competition from other sectors such as restaurants and other big coffee shops still remain. The dominant threat from other competitors such as Dunkin' Donuts and especially McDonalds which was recently found to sell good coffee for better value is damaging for Starbucks (msnbc.com). In other words this is an unfavourable influence. In summary, it could be said that Starbucks possesses more Strengths than weaknesses and although all companies do have weaknesses, the fact that this is within their internal environment means that it can change its practices in order to turn its weaknesses into strengths. Nevertheless for the threats, constant scanning of its environment and monitoring close rivals should assist it in developing strategies in order to remain competitive and maintain increase its market share.
3. Michael Porter’s five forces
Commonly, an industry is a group of companies which market its products and services closely substituted from each other. As noted by Porter (1980), some companies tend to become more profitable and competitive than their rivals, hence, an existing company such as the coffee shops should always bear in mind that their company will...
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