Amazon vs Starbucks

Topics: Coffee, Dunkin' Donuts, Starbucks Pages: 6 (1815 words) Published: April 8, 2013
SWOT Starbucks
Starbucks owns the most recognizable brand in the specialty coffee business, and the Starbucks experience is an irreplaceable differentiating factor. Howard Shultz, founder and chairman of Starbucks is the barista to the world. Shultz has practically invented specialized coffee as a mass product, his leadership and innovative vision are very valuable assets. The company has a loyal customer base willing to pay premium prices for Starbucks products. Store location is an important competitive factor, and Starbucks has secured its presence in many of the most desirable corners of the planet. Starbucks is ahead of most competitors when it comes to financial strength and profitability. Weaknesses

Starbucks products are more expensive than those offered by the competition, and customers could easily switch to lower priced alternatives in times of economic hardship. Aggressive expansion can be risky, as it can lead to cannibalization and a watered down Starbucks experience. Health implications of coffee consumption are a matter of debate, and many of the company´s products have high calories and fat content. Opportunities

International expansion is still in its first stages, there is plenty of room for growth in emerging markets. Revamped food offerings, juice, energy drinks and even potentially some alcoholic drinks are smart ways to leverage the brand and attract different kinds of customers. The acquisitions of Evolution Fresh and La Boulangerie fit quite well into this strategy. The company has taken a two sided approach to the home brewing boom popularized by Green Mountain Coffee Roasters (NASDAQ: GMCR). On one hand it produces K-Cup coffee and tea packs for use in Green Mountain´s Keurig, but at the same time Starbucks is competing with its own premium brewing machine, Verisimo. Introducing new products and different distribution venues is a strategy which Starbucks is implementing successfully, and it still offers many opportunities in the US and abroad.  Threats

McDonald´s (NYSE: MCD) is successfully expanding its Mc Café stores on a global scale. The fast food giant has an unparalleled geographical presence and lower prices than Starbucks in addition to a globally recognized brand. Dunkin' Brands (NASDAQ: DNKN) makes 60% system wide sales from coffee and other beverages, and the company is expanding beyond its core northeastern U.S. market. Dunkin Brands is another relevant competitor with lower prices than Starbucks. High end competition is increasing too, with companies like Panera (NASDAQ: PNRA) growing strongly both on a total sales and comparable store sales basis. Panera offers high quality food and coffees for premium prices, and in that sense it goes after a similar customer group. Starbucks is exposed to commodity price fluctuations and possible supply problems in coffee and other products. SWOT Amazon

Amazon is the dominant online retailer. The Seattle-based company is synonymous with online shopping. You can buy anything, from the useful to the questionable. The reason Amazon is able to dominate the online retail business is the ability to employ economies of scale. The company has a number of warehouses scattered around the world to ship its goods from. Even though it's easy to start an online store, it's difficult to set up the kind of distribution network that Amazon has. Amazon offers good digital content, from movies to music, especially with Prime. Although Prime costs $79 a year, divided over 12 months it's actually a little bit cheaper than Netflix's $7.99 per month for all-you-can-eat streaming. But you can't get free shipping on boxes of popcorn from Netflix. As it does business exclusively online, it doesn't have as much overhead as some of its competitors, including Barnes & Noble (NYSE: BKS), Wal-Mart (NYSE: WMT) and even Apple (NASDAQ: AAPL). Compare Wal-Mart's $85.27 billion SG&A last fiscal year with Amazon's relatively...

Rothaermel, F.T. 2013. Strategic Management Concepts. McGraw Hill Irwin.
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