Starbucks' Strategic Planning Using SWOTT Analysis"Mirror, mirror, on the wall, who's the fairest of them all?" – The Queen in Snow White. Beauty is only skin deep, companies must also look within to secure longevity. Before a company can successfully bring a mission statement and vision to fruition, they must take a good hard look into the mirror. A company must reflect upon internal strengths and weaknesses, external opportunities and threats, and consider the trends associated with each (SWOT analysis). The fundamental process of strategic planning is through the encompassment of SWOT analysis. Taking a bite from the poisonous apple will be inevitable if a company fails to self-evaluate and strategically plan for the future. Starbucks Coffee Company is a paradigm of effective strategic planning through SWOT analysis.
Astute analysis coupled with the ability to act swiftly has catapulted them to the position as the number one gourmet coffee retailer. They continue to document increased revenue annually and maintain a majority share of the gourmet coffee market.
Astute analysis coupled with the ability to act swiftly has catapulted them to the position as the number one gourmet coffee retailer. They continue to document increased revenue annually and maintain a majority share of the gourmet coffee market.
Strengths Weaknesses
• Product diversification
• Customer loyalty
• High visibility • Self-cannibalization
• Price
• US market reliance
• Problems in some international operations
Opportunities Threats
• Expansion into retail operations
• Technological advances
• Expand globally
• Brand extension
• Product distribution • Competition
• Prices of coffee beans and dairy
• Economy
• Political tensions in global markets
Figure 1. SWOT Analysis for Starbucks Corporation
- Strengths
Starbucks serves up strong drinks and remains strong as the leader in the coffee industry market through product diversification, customer loyalty, and high visibility. Starbucks caters to the addictions and satisfies the needs of socioeconomic groups attempting to beat the daily grind. Got Milk? Starbuck does, and they put a spin on the famous marketing campaign to add calcium to the diet; they have created a dairy appeal for youths (Berry, 2002). Whether younger or older, customers with sundry palates may find something desirable amongst Starbucks' diverse products. They are sure to delight the senses with gourmet coffees, flavorful teas, baked pastries, and a myriad of seasonal hot and cold specialty drinks for any age patron. Starbucks has built a reputation and developed a loyal customer base. Where else can a complicated complex individual receive service with a smile when ordering a "triple-bypass-extra-hot-no-water-venti-½-soy-½-skim–no-whip-one-splenda-white-mocha-stirred-not-shaken-double-cupped-Mochaccino?" Starbucks has created a safe environment where people are free to design creative coffee concoctions; an environment that has instilled trust while in the company of comfort. Trust is a powerful tool that has provided Starbucks with the ingredients necessary to brew success. With up to 87 stores within a 5-mile radius in key locations, Starbucks has made their presence known and can easily sustain customer loyalty by means of convenient access (Starbucks, 2005).
- Weaknesses
Self-cannibalization, price, US market reliance, and problems in some international operations makes Starbucks vulnerable in the coffee market, but the Starbucks SWOT team is consistently trying to look in the crystal ball to avoid any set backs. Strategic planning includes identifying market areas and locations conducive to profitability. One key to retail prosperity is "location, location, location"; but with so many locations, possibly too many, this strategy could lead to "self cannibalization." A quick glance around the corner in any major city will reveal a Starbucks café at almost every turn. Although data are not available as to the impact of proximity, stores may eventually find themselves in a turf war competing for the same customer pool. The impact of propinquity may become more evident if the price of a cup-of-joe continues to climb. The typical java junkie in New York City, on average, spends $3 for a Starbucks latte (Wong, 2004). Understandably, the increasing prices of coffee beans, dairy, and sugar elevates costs and forces Starbucks to pass those costs to the consumer (USA today, 2004). However, while the latest price increase of 11 cents per cup does not hollow the pocket, consumers may eventually make a conscious decision to "just say no" to this luxury vice. Today though, Americans remain willing to budget for this extravagant expenditure. Last year, 85 percent of Starbucks' portfolio showed dependency on the U.S. market. Strategic planning dictates they need to increase global penetration to achieve a balanced portfolio by reaching additional worldwide consumers (Datamonitor, 2005). Japan is the largest international market and rapidly experienced Starbucks saturation. Strategic planning allowed Starbucks to combat the challenge of a sluggish market by introducing alcohol to the repertoire of products (Singer & Fackler, 2003). Each challenge has posed an opportunity, but time will tell whether people from different cultures will embrace the concept of this American social obsession.
- Opportunities
Though many companies have fallen victim to failure due to unresolved weaknesses, Starbucks has adopted the attitude that opportunity is not only now here but everywhere. Through expansion into retail operations, technological advances, global expansion, brand extension and product distribution Starbucks has embraced opportunities with reckless abandon. As an answer to a weak international portfolio, Starbucks has initiated plans to infiltrate the global market by opening 15,000 new stores internationally over the next few years (Datamonitor, 2005). Starbucks has also realized an opportunity in developing smart partnerships in order to enhance brand extension. This is accomplished through product distribution and refining ingredient technology. In acclimating the adage that two heads are better than one, Starbucks has formed alliances with Pepsi in developing on-the-go Frappuccino beverages and Jim Beam liquor to offer customers a fresh Starbucks buzz (AdPlulp, 2005). Further, Starbucks and HP have partnered to provide customers with Hear Music so they can create and burn CDs that are as unique to the customer as their drink of choice (starbucks.com, 2005). Other opportunities in technological advancements enable Starbucks to capitalize on convenience by distributing their products to more customers through Internet orders. In keeping with the trends of convenience technology, Starbucks offers Wi-Fi service for the on-the-go consumer (Griffith, 2003). Starbucks is a model example on how a company can assess opportunities and develops innovative ways to capitalize on them in a continuous drive for success.
- Threats
Even with the vast success of this company through innovation and expansion, external factors create cause for concern as well as a platform for future planning to combat potential threats. Competition, unstable prices of coffee beans and dairy products, a questionable economy, and political tensions in global markets continually threaten the bottom line of Starbucks Corporation. The corner street-carts and kiosks lend themselves as more convenient to downtown commuters on foot. Further, fast-food enterprises increasingly join the convenience cause and offer coffee as an added service to satisfy coffee craving customers (Petrecca, 2005). Escalating dairy prices, gas prices, and the cost of coffee beans may force the price of a Frappuccino over $5 and Starbucks may lose appeal to a frugal American society. Meeting the demands of diversity in international markets has been a struggle for Starbucks. Political tension over the war in Iraq has caused anxiety between France and the U.S., but Starbucks made a deliberate and courageous move to open six new stores in Paris. The feelings French people feel toward President Bush combined with their opinions of American coffee will put Starbucks to the test with their product (Knox, 2004).
Will an American coffee company embrace worldwide coffee patrons considering the relations some countries have with the US? Starbucks has successfully turned a weakness into strength and has figured out a long time ago to sell an experience, not just a beverage. To threaten the Starbucks team is going to be a dare and allow the corporation to move on to the next trend.
Strategic Planning and Trends
Notorious for their business acumen, Starbucks' mission statement is the tenet of their progress. Starbucks studies market trends and employs these trends to realize future growth. Through strategic planning, they capitalize on internal strengths and turn many weaknesses and potential threats into strengths. They stay true to the mission statement, follow the guiding principles, and remain in sync with market trends to prevent static in profitability. Because they are reliant upon customer satisfaction, Starbucks pays close attention to people trends and modifies their strategy accordingly. Starbucks figured out a long time ago they are not in the business of merely selling coffee; they are selling an experience (Weber, 2005). Starbucks Chairman, Howard Shultz, strives to create a "third place" for the Starbucks' customer. He says, "A third place is a place between home and work where people can come to get their own personal time out, their respite, meet with friends, have a sense of gathering" (Bateman & Snell, 2004). Capitalizing on the coffee craze, Starbucks created a niche market once they identified the trend that ordinary people set money aside for luxury items. "Today's consumers are interested in "products that offer self-expression, exceptional experience, innovation . . ." (The City Paper, 2005). Starbucks appears to saturate the coffee market yet has adjusted to the trend of a convenience driven society that seeks instant gratification. With respect to the trend in global branding, Starbucks is a missionary of caffeinating the world and making a presence in world economy. The guiding principle to "Develop enthusiastically satisfied customers all of the time" drives them to continual innovation to maintain the countenance of a fresh image.
Success can only be maintained through continually analysis of the strengths, weaknesses, opportunities, threats and trends of organizational factors. Starbucks provides a model of innovation and consistent evaluation of the products and partnerships possessed by this corporation. The magic is not contained by the reflection of success but by the planning executed when all factors of SWOT and trends are paradigm.
References
Berry, D. (2002). Milk and sugar, please: One of the hottest trends these days is actually quite cold. Retrieved October 15, 2005, from http://findarticles.com
Griffith, E. (2003). T-mobile cut price of Wi-Fi. Retrieved October 7, 2005, from http://www.wifiplanet.com/news/article.php/1855971
Petrecca, L. (2005). Fast-food restaurants spruce up coffee. Retrieved October 15, 2005, from http://www.usatoday.com/money
Singer, J. & Fackler, M. (2003, July 15). Starbucks changes mix in Tokyo, Shanghai; as latte business slows in Japan, the chain may try new products: Beer, wine and coffee cocktails. Wall street journal, A6. Retrieved October 7, 2005, from ProQuest database.
The City Paper. (2005, June 29). The Starbucks effect: Luxury brands for everyone. Retrieved October 13, 2005, from http://www.nashvillecitypaper.com/index.cfm?section_id=51&screen=news&news_id=42505USA Today. (2004). Starbucks to boost coffee prices in U.S. Retrieved October 10, 2005, from http://www.usatoday/money
Weber, G. (2005). Preserving the Starbucks' counter culture. Retrieved Oct. 10, 2005, from http://www.workforce.com/section/06/feature/23/94/44/
Wong, B (2004). Cup of Starbucks going up average of 11 cents Oct. 6. Seattle Post- Intelligencer Reporter. Retrieved October 14, 2004. from http://seattlepi.nwsource.com/business/192721_coffeeprice28.html
