A Swot Analysis of Starbucks

Introduction Starbucks is a famous drinking chocolate tree beanhouse. Until the mid-1980s it was only a provider of coffee to fine restaurants. at that placeafter Howard Schultz, director of retail trading operations and grocery placeing, was impressed of the popularity of coffee in Milan while he was in europium . His idea was born. He wanted to bring the coffee bar husbandry to the Ameri earth- dummy upts. So Starbucks started to realise his idea and so created a impertinent trend. The clue is non only to sell coffee, only if to sell an have got. Today Starbucks has got closely 20 million nodes every(prenominal)(prenominal) week in about 5500 coffeehouses only over the world .While haunting to increase sales to a greater extent and more(prenominal), Starbucks has got a special educateth strategy. They disseminate a sh are of stores in a very short period of time, throw a fiting m any regimen religious offerings and to a fault getting into tonic pi eces, for sample super merchandises. They develop upstart harvest-feasts bid bottled coffee or Starbucks-flavoured ice option. In addition to that, Starbucks tests immature coffeehouse concepts, for example with live music. Since a few years, Starbucks opens more and more stores outside America.The burning(prenominal) question is, if Starbucks growth rate will continue within conterminous years because on the virtuoso(a) hand critics say that Starbucks grows too speedy and is loosing the focus while on the different hand some critics correspond Starbucks coffee with Mc Donalds? hamburger and believe that they will grow up more and more as the dominant player on this market . With the help of the SWOT analysis and the BCG matrix the situation of Starbucks can be analyzed after finding out, why raft open more money for a coffee, than in another(prenominal) coffeehouses.What has suddenly curb slew across the world willing to even up three to quadruplet times more f or a cup of coffee than they utilize to? Starbucks has created a new trend. They do non entirely sell coffee, they sell an set about. To beverage coffee at Starbucks is polar from inebriety coffee in other coffeehouse according to a Starbucks executive who tell, that Starbucks is not in the tune of fill bellies hardly in the line of increases of filling souls . They recognised that they were getting into a new niche, which did not exist onwards.While having great winner, Starbucks grows cursorily to have an advantage according to a bunch of competitors who also entered this new niche. With the spirited-quality coffee, Starbucks creates besides a new patsy a new life-style which is known all over the world. Furthermore, they offer a ring of different flavours which differs from other coffeehouses. But coffee is not the only reason why people be willing to pay a lot more in that respect than in other coffeehouses. The mission statement decl atomic itemise 18s that the employees job is not only to sell coffee.They should enthusiastically satisfy every customer to ordinate him the special feeling and experience at Starbucks . All in all Starbucks recognised a new niche and satisfied the customers with their special flavoured and high quality coffee. To get an idea of Starbucks success, it is necessary to take a close look at the keep connection by using the SWOT analysis and the BCG matrix. A SWOT analysis of Starbucks Strengths The company has a sozzled aim in the United States of America and a nice reputation for creativeness and coffee. Starbucks has started a real trend and many people enjoy drinking a Starbucks coffee.However, it is not just coffee but rather an experience Starbucks sells. Starbucks occupys in more than 5,500 stores worldwide. This presence provides a wide and strong customer base. It is a world(a) brand and is widely known. Starbucks built up a reputation for fine point of intersections and the anatomy is a common brand adjudicate and this gives Starbucks a matched advantage because people connect coffee with Starbucks. any week more than 20 million customers visit Starbucks to get a coffee once or twice a day. In the stick out years the company could tripled their earnings. some other(prenominal) strength is that Starbucks has a strategy they follow.These strong principles embarrass that Starbucks looks after their employees and threat each of them with respect. They create a nice and friendly environment that they also reflect outwards. Starbucks offers different flavours through and through its carriage as a disciplined innovator and introduces diverse increases. They also pay attention to the high standards and want to offer the surpass quality. Starbucks decided to toil into supermarkets because the majority of people bought their coffee in stores beforehand. Therefore Starbucks came to the conclusion to make a deal with the Kraft company.This deal combines Starbucks experience in producing agio coffee with Krafts knowledge of merchandise, selling and distributing. That was a good step for Starbucks to reach a new channel and to get the portal to 25,000 supermarkets. It makes sense that the company wants to reach the people at home and to include more people into the Starbucks lifestyle. Beyond stores, Starbucks sells its beans to hotels, several airlines and airports. Starbucks sells gourmet coffee, beans as head as gifts and related goods. (Starbucks also signed a deal to operate coffee shops within Waterstones bookshop superstores. Also the homepage of Starbucks has become sure-fire and a lifestyle portal, where the company sells a variety of products desire tea, coffee make equipment, compact discs and collectibles to satisfy their customers needs with different products. Weaknesses One of Starbucks helplessness is that their primary product is just coffee. They atomic number 18 therefore dependent on this main product line. Starbuc ks is however testing to launch food offerings like sandwiches and chips in combination with coffee. Its goal is not only to expand more and more in its offerings but also to reach further tail groups .A problem is that Starbucks has a slow ability to diversify into other sectors which could be fatal because the company believes in existence successful not only because it is selling coffee but rather it is selling an experience . This makes them different from other competitors who magnate only sell coffee. Coffee modus vivendi may vary from time to time due to the fact that the global coffee market is a very competitive sector . Another weakness are high prices of its products. People pay up to $3. 15 for a caffe latte. One supposes that people buy this product only because they designate that it is a grant product .But it is especially the brand chassis which tempts customers to buy the product without taking the high prices into consideration. As already mentioned before, the customer is not only buying the product, he is buying it with an experience. Another weakness of Starbucks is that they are simply relying on the philosophy that coffee is just an experience. There exists no doubt a good marketing strategy but it is question equal if this is helpful to mention over time on the market with the strategy of only focusing on one product. We are not in business of filling bellies were in the business of filling souls says one Starbucks executive.That shows another very good and appealing philosophy of Starbucks. This makes the product and its uniqueness but it is only a question of time when people are saturated of this experience. You have to point out that Starbucks itself tries hard to take on on this effect by the people through a competent humankind relationship. Opportunities Starbucks has a widespread presence and practices in about 1. 415 stores and just net year they build up 400 new stores. The company has seen opportunities to open f urther stores all over the world due to the heavy call for and space to expand. For example Indiana in the US has only one Starbucks.Furthermore, Starbucks has the opportunity to expand its global operations. The company is now expanding rapidly and in 2003 the number of stores has increased in 24 multinational markets compared to 1996 when they had only 11 stores outside the United States. Starbucks also tests new food which re strain ins that food might be the next step they want to go. With this the company would have the chance to offer food that could be successful as its coffee. They test everything from doughnuts to Greek pasta salads. Starbucks also teamed up with PepsiCo to adopt the brand on Frappuccino drinks and a newDoubleShot expresso drink.Beyond this Starbucks ice cream is nowadays a leading brand of coffee ice cream after Starbucks established a control stick venture with Breyers. In addition, Starbucks cloaked in coffee shop Starbucks, a European-style famil y bistro, where the costumer has a wide choice from huckleberry-pancakes too oven-roasted seared sirloin. Alongside, Starbucks is testing Circadia, a new food venture, where the customers have Internet access and listen to live music. Starbucks has everlastingly been able to offer new coffee experiences as well as creating new products or opening new kinds of stores. ThreatsOne of the biggest threats of Starbucks is its grand blowup all over the world. When launching a new product numerous customers are visiting the companys stores world wide each week. It is especially Starbucks growth strategy which stands for a threat for the company. Starbucks especially concentrates on store growth. Almost 85 per cent of sales are generated through its stores. Although they have great success, Starbucks alship canal finds new places for further expansion on the local as well as on the national market with being aware of the fact that the local as well as the national market may be saturated o f its product.The creation of new retail channels also shows that Starbucks is not concerned about peoples rejection or about failing to be successful. Apart from their strong presence in kiosks, several airlines, hotels and the co-operation with Waterstones bookshop superstores, Starbucks enters 25,000 supermarkets to sell their products next to their strong competitors like nestle and Kraft. They also offer coffee, tea and its equipment on its website to be internationally present for a wider target group. To intensify its presence they are not deterred by joining with other companies to have its logo to be seen everywhere.Several ideas should get hold of various people. They are full of ideas only of the fact of not abstracted to stop their expansion. However, the international growth is remarkable. While having only 11 coffee-houses in 1996 outside North-America, they now launch their products into 24 international markets. The great success of Starbucks has also brought negat ive consequences for the company because many competitors try to imitate them. These are companies like Caribou Coffee, Costa Coffee, and Coffee Republic. However, it is very hard to maintain on the global coffee market which is a very competitive sector.These days one speaks about an increasingly over caffeinated marketplace. So Starbucks must(prenominal) compete against the offers of restaurants, coffee shops and street carts. A major competitor with good greater financial, marketing and operating resources than Starbucks could enter the market at any time and compete directly against the company. Starbucks must be aware of argument on all levels and maintain its operational performance if it is to retain emplacement as the worlds leading specialty coffee retailer.lastly you could say that Starbucks is more concerned about the fact that there are still plenty of local places as well as internationally places which is not taken over by them. Instead of being broken about the fact that their rapid expansion could also lead to a rapid decrease and failure in several markets. The whole marketing strategy of Starbucks may cause to a loss of the main focus through stretching its resources by further expansion. Main focus should be first put on the product itself and not on international expansion in this way.Why not ensure the popularity of the product itself than making it something normal due to the fact that it is present almost everywhere. It can be seen undoubtedly that Starbucks has the potential for development in many different ways but it has to have its growth under control. This may be a challenge for Starbucks. BCG Matrix The BCG matrix is an instrument, developed in the early 1970? s by the Boston Consulting Group to analyze the product portfolio of a company or a business unit. The matrix is based on the product life circle. The matrix is mainly used in the strategic marketing sector.The matrix shows in a coordinate plan the positions of differ ent strategic business units. The interesting categories are on the one side the business growth rate on the y-axis and the market address on the x-axis. The rule brings cognitions in three relevant areas ?Analysis of the strategic position of a company. ?Determine the capital in the several business units with a experience on the whole company and therefore the capital flow in the company. ?Every quadrant responds to a norm strategy which could be used as a guideline to verbalize strategic activities in the company .It is also necessary to look after the whole portfolio especially on the statistical financial compensation. The products in the portfolio should be based upon on another and finance one another. To create a long-term value a company should have a portfolio of products that includes fast growing products which need a high input of money and slowly growing products which are creating a high amount of cash. The BCG matrix has two dimensions relative market share and market growth rate. The idea behind this matrix is if a product has a high market share or the market of the product is growing fast than it is an advantage for the company.Analysis of Starbucks using the BCG Matrix immediate payment dismays Benefits from the generation of cash should be high. Because of the low-growth rate capital expenditures which are necessary should be hold low. Often cash cows are the stars of yesterday and build the base of a company . One of Starbucks cash cows is their coffee ice cream. This is a relatively risk impeccant practicement that doesnt absorb great amounts of cash. Through the partnership with Breyers, Starbucks doesnt need to spend money on the production process. With Breyer? experience and the Starbucks name the ice cream was sure to succeed on the market. With it now being one of the market leaders on the coffee ice cream market, Starbucks can milk it and benefit from the sales, knowing that there is not a high cost factor. Another, but q uite small cash cow is their bottled Frappuccino drink. Once again Starbucks took on a similar strategy by working with an already established beverage manufacturer. The expendments are once again a lot lower than their sales, giving them a high clams margin. Stars Stars use a high amount of cash.These are leader in the business and hence they should create a high amount of cash. Stars are often in balance with the net cash-flow. The company should do their best to hold the market share on stars because stars will become cash-cows if the market-share is held by the company . Starbucks biggest star is the coffee sold and consumed in their coffee shops (stores). With an astounding 85% of sales overture from their stores it is their biggest source of cash intake . Although competitors offering similar products have emerged, the market growth still looks promising.Some states like Alabama and disseminated multiple sclerosis dont have any Starbucks stores meat that there is still a large market to expand onto. The people living in these states have not been able to enjoy a cup of Starbucks coffee. The revenues from their coffee sales should therefore be used to invest in new stores making it possible to sell their coffee. Another one of their stars is the packaged coffee sold in supermarkets. With the help of Kraft Starbucks has gained restless access to the packaged coffee market. Thus they have been able to readily increase their market share on a rapidly growing market .Unlike their other joint ventures with PepsiCo and Breyers, Starbucks has done more than just put their name on the product. As they are still roast and packaging their own coffee they need to invest a lot to further establish their position on the market. Dogs Dogs are discontinued models of the company. A company should minimize, better avoid the number of dogs. Dogs have to make cash, differently they are divested . Starbucks? dog is the sandwiches sold in their stores. Although they experiment with different foods in their stores, they do not make a lot of profit from food sales.Furthermore it can be said that the sandwich market is not growing and Starbucks do not have a high market share. However, this SBU should not be divested immediately as it may help them to bring forth in further customers who know that they will be able to overhear a sandwich to go with their coffee. Question mark Question label are the newcomer of the products. The have a high growth-potential. They have the beat out cash features of all, because they have a high demand of cash but perform low outcomes because of their low market-share. If the market-share is unchanged are question marks using a high amount of cash.The management has to decide to invest in the product or to give it up. Starbucks further attempts to get up their growth such as selling coffee to airlines and hotels can be classified as question marks. At the moment the demand for premium coffee to be sold in airpo rts and hotels might be high, but so far only Marriott, Sheraton and Westin have deals with Starbucks meaning that there are a lot of hotels not selling their coffee . If they want to expand on this market they will need to invest a lot of money into new deals with other hotels.It will take time before they can increase their market share and make a profit. Cafe Starbucks and Circadia, two new store concepts are also question marks. At the moment they are only experimenting to see how customers will react to a different kind of Starbucks experience. Setting up a chain of these new concepts will require a lot of money and time before they can establish themselves on the market. If they succeed in competing with other cafes of a similar style this SBU could be another profitable SBU in the hereafterAfter positioning Starbucks? products on the BCG matrix it can be said that they have a stable source of revenue. With the majority of their sales coming from the coffee sold in their stor es and two profitable, if on a little scale, joint ventures they have enough money to invest in other new products or stores to ensure that they will be as successful in the future. Besides investing this money in new stores modify them to serve an even larger market, it can be invested in their coffee sold in supermarkets.Rapid growth of the premium coffee segment indicates that it wont be long before a number of competitors force their way onto the market. Investing into this SBU will enable it to develop into a cash cow in the future. Regarding the sandwiches sold in their stores they need to reckon if this is something they should continue to invest in the future. The prospects for the future look promising as they have two strong stars and other smaller products that can lend the company in the future. Looking at Starbucks as a whole it can be seen as a star.Although there are a number of copycats trying to move in on their market share, there is still the potential for the company to grow. Up until now not all states have their own Starbucks store, an indication that the market is still growing. Although they have tripled their sales and profits over the last 5 years, they need this money to invest in new stores in states such as Alabama and Mississippi and their new store concepts such as Cafe Starbucks . If they are able to expand successfully and the market ceases to grow they will eventually turn into a cash cow.