Starbucks Case Analysis

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Case Analysis for
Starbucks-Early 2008

October 4,2010
MKTG 480

By: Brandy Johnson

Instructor: Dr. Jeff Totten

Table of Contents

I. S.W.O.T. 3
II. Situation Analysis 5
III. Problems Found in Situation Analysis 7
IV. Strategic Alternatives for Solving Problem 8 V. Selection of Strategic Alternative and Implementation 9



Established reputation/High brand recognition
Strong financial background
High visibility locations to attract customers
Well trained/motivated employees/favorable work environment •Low employee turnover
Brand loyalty
Product variety
Good relationships with suppliers
Leader in gourmet coffee industry
Comfortable and relaxing environment “third Place”
Highly knowledgeable employees
Donates time and supplies to help environment


Small stores
Many stores in United States
Focused on one area/specialized
High pricing compared to competitors
Limited ideas for coffee types
Succumbing to the fast-food model


Starbucks Card in international markets
Brand expansion/co-branding
Advances in Technology
New products
More stores in international markets
166 million coffee drinkers and steadily increasing
Increase in elderly coffee drinkers
Increase in workforce coffee drinkers
Utilize knowledgeable employees
Brand recognition through environmental services
Make new drinks to attract “health conscious” consumers


Increased competition with lower prices
Becoming too common/too many stores
Succumbing to the fast-food model
Loss of quality due to cost saving methods
Rising prices of resources
Running out of innovative ideas for coffee
Consumer trends toward more healthy lifestyles
Cultural/Political issues in foreign countries

Situation Analysis

The number of coffee drinkers, in the United States, is steadily rising, which presents opportunities for Starbucks. More elderly people are coming out of their homes to socialize over a cup of coffee and stores are beginning to see more of the workforce stopping on their way to work for a better tasting cup of coffee. On the other hand, the economy is starting to see a decline in disposable income which can effect the amount of money allotted for luxuries, such as gourmet coffee. Consumers are beginning to look for a cheaper substitute for Starbucks overly priced coffee. Society is also beginning to lean toward more healthy lifestyles. If this trend continues, consumers will begin looking for a smoothie and/or herbal tea shop in place of Starbucks. The large amounts of caffeine and sugar found in coffee will cause health conscious consumers to stop purchasing Starbucks products. If Starbucks would consider offering discounts or coupons, they might be able to persuade consumers to purchase their coffee even with the decrease in disposable income. Also, if Starbucks would begin making more smoothies and herbal teas then the health conscious consumers would be more likely to consider Starbucks as a healthy drink stop.

The three men that started Starbucks noticed an opportunity for an almost completely untapped industry. Most companies did not consider cups of coffee to be a very profitable or expandable market, until Starbucks. Starbucks started selling their gourmet coffee at almost four times the cost of a regular cup of coffee and people flocked into their stores. Starbucks is now considered the number one leader in the gourmet coffee industry. Since Starbucks created this extremely profitable and somewhat simple market, many competitors have taken interest in trying their hands in the gourmet coffee market. Starbucks number one competition is McDonalds new line of gourmet coffee. McDonalds started selling McCafe coffee, which include items such as frappes and lattes...
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