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Starbucks SWOT Analysis

Corporate Team Crew

Arizona State University

OGL 355: Leading Organizational Innovation and Change

Dr. Tammy Campbell

Sept. 12, 2021

Starbucks SWOT Analysis

In this paper, our team will discuss the SWOT Analysis of Starbucks Coffee Company.

We will analyze some of their strengths, weaknesses, opportunities and threats highlighting some

topics in each area. Our goal is to help our audience understand Starbucks strategies when

dealing with these areas.

SWOT Analysis

A SWOT analysis is a chart where strengths, weaknesses, opportunities and threats to an

organization can be listed and easily referenced. It allows us to have a glimpse of how both

internal and external forces affect an organization. In the case of Starbucks, we will be looking

at the correlation between the strengths of a strong company brand image (internal forces) and

the relationship to a changing global market (external forces).

Strengths Weaknesses

1. High Employee Satisfaction 1. High Volatility In Supply and

2. Strong Global Supply Chain Product.

3. Diverse Product Offerings 2. High/ Premium Product Prices.

4. Great Brand Image 3. Products Can Be Replicated By

Competitors.

4. Unhealthy/ High Calorie Beverages.

Opportunities Threats
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1. Product Line Expansion and 1. Supply Chain Issues (Global

Diversification. Shipping)

2. Increased Healthy/ Low Calorie 2. Increased Labor Costs

Options. 3. Easily Replicated Product

3. Purchasing and Expanding Market 4. Economic Recession Threats

Share. (Reduction in Market Share)

4. Offering Lower Cost Options

Strengths

High Employee Satisfaction

Employee retention provides insight to internal systems and processes. Conducting an

internal analysis will help organizations identify any gaps that may be affecting employee

satisfaction. How managers design their work for their employees matters (Goler, 2018). This is

why Starbucks has a high employee satisfaction rate of 82% (Ludlum, 2015). Starbucks

employees, often referred to as “Partners,” are called partners because every employee has

ownership within the organization. Starbucks will listen to employees and make adjustments to

their systems making it easier to be a partner.

Great Brand Image

Starbucks has a strong brand image. The Starbucks siren logo is almost easy to spot

anywhere. Their marketing methods are effective and how the organization represents itself on

every social platform is important and consistent. The Starbucks webpage and all social

platforms are carefully calculated, optimized for its customers (Sun, 2016). The organization is

cautious of how they portray themselves to the public. Which is why when something damaging
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happens to the brand, they are quick to take ownership and make the necessary changes needed

to save its image.

Let's take for example the incident that occurred in Philadelphia back in April 2018. A

store manager had called the police on two black men after refusing to leave. The police arrested

the men causing outrage across the nation (Sun, 2016). Not only did Starbucks apologize for the

incident, but they began a series of training to challenge bias, racism, and everything opposite of

inclusion and diversity. In order to be a brand ambassador of diversity and inclusion, they

understood that the best way to correct the situation was to teach its leaders how to be diverse

and inclusive through the lens of humanity. It is a smart strategy that saved the brand image at

that time.

Weaknesses

High Volatility In Supply And Product

Starbucks is known for the variety of drinks they offer. Currently, one of Starbucks'

weaknesses is that they are facing a ton of product outages that limit stores to what drinks they

can or cannot make. These outages have been going on since March of this year, however some

stores have been out of product since before then. This is a weakness because it can cause a

decline in sales and it could also cause Starbucks to lose loyal customers to take their business

elsewhere. The question here is will Starbucks lose their loyal customers if Starbucks continues

to have outages?

High Product Prices

While Starbucks is very popular for their TikTok drinks and how customers have endless

ways to customize their drinks, however, these drinks can be sold at top dollar after all the add

ons. This is a weakness because other competing coffee shops are starting to sell similar products

at more affordable prices. To add on, it seems as though a lot more people are starting to build

little coffee set ups at home. It is a lot less expensive to brew at home than to purchase coffee

everyday. Starbucks products cost an average of 38% more than products sold by competitors.

(Business Insider) Another known fact is Starbucks Coffee bean prices have changed

dramatically over time, with a 164% price increase from 2007 to 2011, and an overall 20%

increase from 2007 to 2021(Business Insider). When this happens our guests are paying a high

price for these expensive drinks in the store.

Opportunities

Product Line Expansion and Diversification

Starbucks is no stranger to partnerships, mergers, strategic alliances, and joint ventures.

These strategic moves have allowed for product line expansion and diversification. In 2012, in

efforts to further develop their product line, Starbucks announced their agreement to acquire

Teavana (Starbucks, 2012). The acquisition of the tea industry giant was an investment to add to

its growing Tazo branded tea products. This in turn gave Starbucks a two-tiered market position

for tea, further cementing Starbucks’ presence in the tea marketplace (Starbucks, 2012). “The

acquisition of Teavana supports our growth strategy to innovate with new products, enter new

categories, and expand into new channels of distribution,” said Jeff Hansberry, President of

Channel Development and Emerging Brands for Starbucks” (Starbucks, 2018). Starbucks was

able to capitalize on the tea category of the beverage industry which has been rapidly growing

and has proven to be a top selling product for Starbucks (Zillman, 2015).
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Purchasing and Expanding Market Share

In 2018, Starbucks announced their global coffee alliance with multinational food and

beverage company, Nestle (Starbucks, 2018). Many opportunities arose from this alliance and

both companies were able to benefit in expanded market share and growth. “This global alliance

combines the strength and affinity of the Starbucks brand with the global reach of Nestlé and its

iconic coffee brands, creating new growth opportunities in the established North American

markets and unlocking expansion in international markets” (Starbucks, 2018). Starbucks

understood the value that Nestle offered by having established infrastructure and distribution

abilities which then translated to Starbucks products being available at home effortlessly.

Threats

One major threat for Starbucks is the increase in labor cost. This is a major threat to

Starbucks for many reasons. One of the reasons is because an increase in employee benefits will

result in an increase in prices of most drinks. Due to Starbucks being directed to medium to high

economic customers, drinks are already high. An increase in drink prices will result in potentially

losing medium economic status customers, which may be detrimental to Starbucks’ finances.

Another reason an increase in labor costs is a threat to Starbucks is because “rising labor cost in

developing countries is an external factor that threatens Starbucks because it increases the

company's spending for ingredients.” Smithson, Nathaniel (2021). Therefore, this means that the

steadiness and security of their products and ingredients will be unstable.

A second major threat for Starbucks, although this company stands for ensuring quality in

their coffee and coffee beans, this product is easily a replicated product. This means that high

prices in their drinks will result in competitors making coffee that is very similar in taste, with

the same great quality of coffee bean flavor, at a fraction of the cost. This will serve a massive
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threat to Starbucks because this may influence customers to go elsewhere. This is especially a

threat for Starbucks in developing countries, as the majority of the population can not afford

these products as is.

Conclusion

Starbucks is a global company that has many different strengths and weaknesses. During

this SWOT analysis we only wrote about a small percentage of them. As a company that has

grown to such a massive scale, there are many strengths in Starbucks such as High employee

satisfaction which is one of Starbucks core values to treat its partners with respect and give them

good benefits. We also discussed having a great global image, which is the strength that the

Starbucks Logo is today and how they represent it to the public. Starbucks also has many

weaknesses, one that we mentioned was high volatility in supply and product. For example, due

to the COVID-19 Pandemic, Starbucks was faced with many outages that were core ingredients

to their popular beverages causing a negative experience for their customers. For opportunities in

Starbucks we chose product line expansion and diversification which shows examples of

Starbucks broadening their horizons into teas and other tea beverages. And Purchasing and

Expanding market share shows the expansion of having strong allies like Nestle. The threats we

discussed were rising labor cost and easy replicated products. Even through all these different

weaknesses and opportunities, Starbucks has risen to be a global leader in its field and will keep

growing in the foreseeable future.

Each team member must update the name to the those on the team and provide initials,

confirming and agreeing to “SWOT” stated above.

APPROVAL: (sign off with initials by 12pm AZ time 6/24/2020) - plan to submit by 1-

2pm 6/24/2020

Laura Iris Boquiren - Aide Guerrero - Genesee Joe Bednarski - JB

Bognar - LB IB AG Ipema - GI Liliana Diaz De Leon

LDDL
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References

Gaille, B. (2021, March 18). Starbucks SWOT Analysis (2021). Business & Marketing Review.

Retrieved September 06, 2021, from https://brandongaille.com/starbucks-swot-analysis

Ludlum, M. (2016, November 16). Employees are Key: Lessons from starbucks.

Funeral Business Advisor Magazine. https://funeralbusinessadvisor.com/employees-are-

key-lessons-from-starbucks/funeral-business-advisor.

Starbucks and Nestle Form Global Coffee Alliance to Elevate and Expand Consumer Packaged

Goods. (2018, May 6). Starbucks. https://stories.starbucks.com/press/2018/starbucks-and-

nestle-form-global-coffee-alliance

Starbucks Announces Agreement to Acquire Teavana to Globally Transform Tea Industry.

(2012,
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November 14). Starbucks. https://stories.starbucks.com/stories/2012/starbucks-

announces-agreement-to-acquire-teavana-to-globally-transform-tea/

Smithson, Nathaniel (2021). Panmore, Starbucks Coffee PESTEL/PESTLE Analysis &

Recommendations

Sun, I. (2016, October). Starbucks brand Image methods are Super Effective: Follow them to

create your Startup Image. Growth Hackers.

https://www.growth-hackers.net/starbucks-brand-image-startup-image/.

Tornoe, R. (2018, April 16). What happened at Starbucks in Philadelphia?

https://www.inquirer.com.

https://www.inquirer.com/philly/news/starbucks-philadelphia-arrests-

black-men-video

viral-protests-background-20180416.html.

Zillman, C. (2015, April 23). Starbucks reports increased traffic and sales thanks to. . .tea.

Fortune. https://fortune.com/2015/04/23/starbucks-earnings-tea/