Business Analysis - Starbucks Part 1

Topics: Starbucks, Coffee, Coffeehouse Pages: 6 (2024 words) Published: October 21, 2012
Business Analysis Part I

Business Analysis Part I
One of the most vital roles of business leaders today is the ability to conduct a comprehensive and honest analysis of the business. Such analysis can be conducted for strategic and business planning purposes or simply to determine if a company is a good investment opportunity. To demonstrate the importance of business analysis from both a business leader’s strategic point of view and from a business investor’s point view, this paper will provide the following study of Starbucks Coffee Company: (1) SWOT Analysis; (2) Relevance of Threats; (3) Internal and External Stakeholders; and (4) Balancing the stakeholders’ needs. Starbucks Coffee Company Overview

Starbucks Coffee Company (“Starbucks”) was founded in 1971 in Seattle, Washington. Starbucks is a gourmet coffee and tea provider and currently operates 17,000 stores in 55 countries. Starbucks offers gourmet coffee and teas and has recently started offering some ancillary items such as Starbucks branded products (coffee mugs, accessories, coffee machines), and a variety of breakfast and lunch food items. Starbucks strives to provide not only gourmet and food beverage experience for its customers but also provides customers with a clean, relaxing, and comfortable environment in which to enjoy its products (Starbucks, 2012).

Aside from focusing on customer satisfaction, Starbucks’ leaders are also concerned with being a socially responsible company. Its mission states as follows: “Our mission: to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time” (Starbucks, 2012). Starbucks has been awarded various accolades for doing business responsibly and continues to ensure that all of its business dealings with its partners and vendors to its employee relationships are all conducted in a manner that promotes social, ethical and environmental responsibility.

SWOT Analysis on Starbucks
To determine if Starbucks is a viable company, business leaders and investors alike may conduct a SWOT analysis that evaluates the company’s Strengths, Weaknesses, Opportunities and Threats.
“Weaknesses and strengths are more often internal and therefore more within reach of being measured and fixed” (Nickels, 2010, p. 17). Starbucks’ core strength is its trademark, products, and good balance sheet and good reputation. Starbucks has enjoyed a good strong balance sheet that enables it to not only survive in economic downturn but also thrive and continue operations. Starbucks’ trademarks and products continue to be the of most recognizable gourmet coffee brand worldwide. Its trademark alone and operating systems can be marketed and remain an important part of its intangible assets. Moreover, Starbucks’ reputation for being a socially responsible company, the loyalty of its customers, and its ability to sell branded products at a premium price are also essential assets.

Starbucks’ weaknesses include its limited products offered, increased commodity prices, limited pricing capability, and increasing labor and overhead costs. The increasing commodity prices of Starbucks’ raw materials such as coffee, tea, paper products, sugar, milk or cream can add on to Starbucks’ costs that in turn negatively impacts its profits. “The price of coffee is subject to significant volatility…the premium and commodity price depend upon the supply and demand at the time of purchase…” (Starbucks, 2012). Moreover, the increasing labor costs and health insurance benefit costs and other increasing overhead expenses such as rent, electricity and supplies also greatly impact profitability. Unfortunately, Starbucks has limited capacity to pass-on such costs to its customers because of the current slow-growth economic conditions. After all, customers who are willing to spend $5 for coffee will not be willing to spend $10 for the same cup. In addition, the fact that Starbucks offers a limited number of products (coffee, tea and some...

References: Nickels W.G., McHugh J. M., Mchugh S.M., (2010) Understanding Business, (9th ed.) McGraw-
Hill Company.
Starbucks Coffee Company. (2012). About Starbucks. Retrieved from
Starbucks Coffee Company. (2012). 2011 Annual Report. Retrieved from
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