STARBUCKS

Background
Starbucks originally started in 1971 by Jerry Balswin, Gordon Bowker, and Zev Siegl, with it's first shop
located in Seattle's historic Pike Place Market. From this location, Starbucks sold high-quality whole
coffee beans, dark-roasted in small batches, the European way.

The name of Starbucks was chosen in honor of the coffee-loving first mate in Herman Melville's Moby
Dick, and, because they thought the name evoked the romance of the high seas and the seafaring
tradition of the early coffee traders. The current company logo is a twin-tailed siren, from Greek
mythology, encircled by the store's name.

In 1982, Howard Schultz, the now celebrated CEO of Starbucks, joined as director of retail operations and
marketing. Two years later, Mr. Schultz convinced the founders of Starbucks to test the coffeehouse
concepts in their downtown Seattle store, where the first Starbucks® Caffe Latte was served.

In 1987, Howard Schultz led a group of investors that purchased Starbucks from its' founders. Since then,
Starbucks has become the premier roaster and specialty coffee retailer in the world. Currently, there are
18,000 stores in 62 countries.
Along with selling high-quality coffee beans, Starbucks offers a variety of specialty coffee drinks, teas, hot
chocolate, merchandise, and a limited menu selection of food items. Their stores offer a clean, relaxing
atmosphere with free Wi-Fi for customers.

SWOT Analysis
STRENGTHS
1. Strong brand recognition

Strong brand recognition is a key strength for Starbucks. The company has a solid
reputation for quality and customer service, making it one of the most recognizable and
renowned coffee brands in the world. This strong brand recognition has helped
Starbucks establish a loyal customer base and differentiate itself from competitors.

Having a strong brand can also help Starbucks command a higher price for its products,
as customers are willing to pay a premium for the quality and reputation that the brand
represents. Strong brand recognition can also make it easier for Starbucks to enter new
markets and expand its customer base, as the brand is already well-known and trusted.

2. Innovative business model

Starbucks has a long history of innovation, including the introduction of the coffee bar
concept and the development of new products such as the Frappuccino. This focus on
innovation has helped Starbucks stay ahead of the competition and maintain its position
as a leader in the coffee industry.

Innovation is also essential for meeting the changing needs and preferences of
customers. By continually introducing new products and improving its operations,
Starbucks can better meet the evolving needs of its customer base and remain relevant
in a fast-changing market. This can help to drive sales and support the company’s
growth.

3. Commitment to sustainability

Starbucks places a high priority on sustainability, and it has put in place several
initiatives to lessen its impact on the environment and support sustainable agriculture.
For example, Starbucks has set a goal to become resource positive, meaning that it will
give back more resources to the planet than it uses.

4. Strong customer loyalty

Starbucks has strong customer loyalty due to the high quality of its products and services. The
company is known for its commitment to using high-quality, ethically sourced ingredients and
brewing techniques that result in a consistently excellent cup of coffee. Starbucks also has a
wide range of menu items, including food, beverages, and baked goods, which allows it to
appeal to a diverse customer base. In addition, Starbucks has a strong presence in many
locations, making it convenient for customers to access its products and services.

5. Global presence

With stores in more than 80 nations, Starbucks has a significant worldwide footprint.
This allows the company to reach a wide and diverse customer base, as well as tap into
new markets and revenue streams. Starbucks has established itself as a global brand
with a strong reputation for high-quality products and excellent customer service. The
company has also made efforts to adapt to local tastes and preferences, offering a range
of customized products and services in different regions. This helps Starbucks appeal to
a wide range of customers and maintain a strong presence in many different markets.

6. Strong digital presence

In this digital age, Starbucks has been able to connect with customers and foster brand
loyalty thanks to its robust online presence. One way that Starbucks has established a
strong digital presence is through its mobile app, which allows customers to order and
pay for their purchases in advance, track their rewards, and access exclusive offers. The
app also provides personalized recommendations based on a customer’s past purchases
and location.

7. Strong financial performance

Starbucks has consistently demonstrated strong financial performance over the years. The
company has consistently generated revenue growth, with revenues increasing from $13.98
billion in 2013 to $29.06 billion in 2021. This growth has been driven by a combination of
factors, including an expanding global presence, successful new product launches, and ongoing
efforts to improve the customer experience. Starbucks has also maintained a strong margin
profile, with its TTM operating margin consistently hovering around 18% over the past several
years, save for 2020.

WEAKNESS
1. Major dependence on a single product line (coffee)
 One of Starbucks’ weaknesses is its major dependence on a single product line: coffee.
While the company does offer a variety of other products, such as tea, smoothies, and
food items, coffee is the primary focus of the business and the main source of its
revenue. This dependence on a single product line can be seen as a weakness because it
leaves the company vulnerable to fluctuations in demand for coffee and changes in
consumer preferences.

2. Intense competition in the coffee industry

Another weakness of Starbucks is the intense competition it faces in the coffee industry. The
coffee industry is highly competitive, with a large number of players, both large and small, vying
for market share. Starbucks faces competition from a variety of sources, including other
specialty coffee chains, independent coffee shops, and even fast food restaurants and
convenience stores that sell coffee.

3. Limited international expansion in some markets

Starbucks has a strong global presence, with over 30,000 stores in more than 80
markets around the world. However, the company’s expansion into certain markets has
been limited.

4. Potential negative impact of commodity price fluctuations

Starbucks is vulnerable to the potential negative impact of commodity price fluctuations,

particularly when it comes to the raw materials used to produce its products. Coffee, in
particular, is a commodity that is subject to price fluctuations due to a variety of factors,
including weather conditions, disease outbreaks, and global economic conditions. If the price of
coffee were to significantly increase, it could hurt Starbucks’ profitability and financial
performance.

5. Dependence on a large number of company-operated stores

Starbucks has a significant number of company-operated stores, which can be seen as a

weakness because it leaves the company vulnerable to operational risks and costs associated
with managing these stores. If there are issues with employee turnover or labor relations, it can
impact the company’s ability to effectively operate its stores and deliver a consistent customer
experience.

6. High prices compared to some competitors

Starbucks is known for offering high-quality products and services, but this can also
result in higher prices compared to some competitors. While the company’s prices may
be justified by the quality of its products and the customer experience it provides, they
can also be seen as a weakness because they may not be as competitive as the prices
offered by some other players in the market. This can make it difficult for Starbucks to
attract price-sensitive customers or to compete with other players that offer lower
prices. High prices can also be a deterrent for customers in certain markets where
disposable income is lower.

7. Limited menu options for customers with dietary restrictions or preferences.

Starbucks’ menu offerings may be limited for customers with dietary restrictions or
preferences, which can be seen as a weakness. While the company has made efforts to
expand its menu to include more plant-based options and to accommodate dietary
preferences, such as gluten-free, low-fat, and low-calorie options, it may not
have as many options as some other food and beverage retailers.

OPPORTUNITIES
1. Expanding into new markets

Starbucks needs to keep growing and diversifying its business, and one way to do that is
to move into new markets. The company has a strong presence in the US, but there are
still many markets where it does not have a significant presence or where it has
struggled to gain a foothold.

2. Partnerships and collaborations with other companies or brands

Partnerships and collaborations with other companies or brands can provide a number
of opportunities for Starbucks. These partnerships can allow the company to access new
markets, customer segments, or distribution channels, as well as leverage the resources,
expertise, and brand equity of its partners.

3. Adopt Price Differentiation

Adopting price differentiation as an opportunity could allow Starbucks to better meet

the needs and preferences of its customers, as well as increase its revenue and
profitability. For example, Starbucks could implement price differentiation by
introducing different product tiers like premium and regular options or by offering
discounts to certain customer segments, such as students or seniors.

4. Introducing new products

 This is a key opportunity for Starbucks to continue to innovate and meet the changing
needs and preferences of its customers. The company has a strong track record of
introducing successful new products, such as its seasonal drinks, such as the Pumpkin
Spice Latte, and its line of ready-to-drink beverages. By continuing to introduce new
products, Starbucks can keep its menu fresh and appealing to customers and stay ahead
of trends in the market. New products can also help the company reach new customer
segments and expand into new categories, such as by expanding its plant-based menu
options or healthier options.

5. Coffee Subscription

This type of service could be an opportunity for Starbucks to create a more convenient and
personalized experience for its customers, as well as to generate additional revenue and
customer loyalty.

6. Expanding the Starbucks Rewards loyalty program and other customer loyalty
initiatives

Expanding the Starbucks Rewards loyalty program and other customer loyalty initiatives
is an opportunity for Starbucks to deepen its relationship with its customers and to drive
customer loyalty and retention. The Starbucks Rewards program is a loyalty program
that rewards customers for their purchases with points that can be redeemed for
rewards, such as free drinks or food items.

7. Acquiring complementary businesses or brands

Acquiring complementary businesses or brands is an opportunity for Starbucks to

expand its capabilities, diversify its portfolio, and enter new markets. By acquiring
companies or brands that complement its existing business, Starbucks can access new
technologies, expertise, customer segments, or distribution channels that can help drive
growth and value for the company.

THREATS
1. Competition from other coffee chains and independent coffee shops

Starbucks faces competition from a variety of sources, including other coffee chains and
independent coffee shops. These rivals may provide similar products and services to
Starbucks, which could make it challenging for the business to stand out from the
competition and hold onto its market share. Competition from other coffee chains and
independent coffee shops can impact Starbucks’ market share, customer traffic, and
profitability, and can also put pressure on the company to continually innovate and
improve its offerings in order to remain competitive.
 2. Changes in consumer preferences or trends

If there is a shift in consumer preferences toward healthier or more sustainable

products, it could impact the demand for certain Starbucks products or put pressure on
the company to adapt its offerings to meet these changing preferences. Also, if there
are changes in consumer trends, such as a shift towards online or mobile ordering, it
could impact the way Starbucks does business and require the company to adapt its
operations in order to remain competitive.

3. Economic downturns or market instability

Economic downturns or market instability can be a threat to Starbucks, as they can

impact consumer spending and the demand for the company’s products and services.
During times of economic uncertainty or recession, consumers may be more cautious
about their spending and may choose to patronize lower-priced options or cut back on
discretionary purchases, such as coffee or food items. Market instability can also impact
the cost of raw materials or other inputs used to produce Starbucks products, which can
impact the company’s margins and profitability.

4. Supply chain disruptions or sourcing challenges

Starbucks faces a risk when there are interruptions in its supply chain or sourcing
difficulties, since these might have an effect on the price and availability of the raw
materials and other inputs utilized in the production of its products. Disruptions in the
supply chain, such as transportation delays or natural disasters, can impact the
availability of certain ingredients or materials, which can, in turn, impact the company’s
production and profitability. The cost and dependability of the company’s supply chain
may also be affected by sourcing difficulties, such as a lack of access to suppliers that
can fulfill the company’s quality and sustainability standards.

5. Labor disputes or employee turnover

The capacity of Starbucks to run its stores efficiently and provide a reliable customer
experience may be jeopardized if there were a labor conflict or high staff turnover.
Conflicts with employees, such as strikes or protests, may have a negative effect on both
business operations and consumer satisfaction.

PEST Analysis
POLITICAL
• The tax policies and employment laws of a company can have a specific impact
on its sales. If the tax policies are fair, the company may earn good revenue from
the business.
• The government of many counties may have some laws which are ideal for
businesses. Starbucks can get a good chance of expansion in those countries.
• The Bureaucratic movements in developed countries can be a significant threat
to the business of the company.

ECONOMIC
• Most of the developing countries are having an emerging economy. It can be a
good sign for the countries that are willing to expand their business.
• The increasing cost of raw materials and labor charges can be a threat
concerning the development of their business.
• There are several alternatives of Starbucks, which are gradually getting hold of
the market. The competitive market scenario can be a threat to the business of
the company.

Social
• The changes in the lifestyle of the people and their choice of food can toll upon
the company's sale. People are more tending to have a healthy, low-calorie diet,
which can decrease the sales of their sugary beverages.
• The food items offered by the company are expensive considering their
alternatives. It is the reason they are losing customers from lower and middle-
income groups.
• As the coffee culture is getting new meaning worldwide, the cafe chain can
utilize it. It will help to expand its business.

TECHNOLOGICAL
• The increasing technological aid can make the journey of coffee from the farm to
the mug smoother and faster. The easy transport and high-tech coffee machine
both can contribute to this.
• As smartphone purchases have increased, more people can access the delivery
service to get their coffee from home.
• The company may see a drop in their sales because of the easy availability of
good quality coffee machines in the market.

REFERENCES
1. https://sites.google.com/a/email.vccs.edu/starbucks-
corporation/company-history
2. https://businessmodelanalyst.com/starbucks-swot-
analysis/
3. https://www.edrawmax.com/article/starbucks-pestel-
analysis.html