Background
The given SWOT analysis will primarily focus on Starbucks Corporation with a stock name SBUX. The company was founded in 1971, and it is currently headquartered in Seattle, Washington, United States. According to Starbuck’s recent annual report of 2020, its full-year revenue was equal to $19,164,000,000 (Starbucks Corporation, 2020, p. 22). The company has a total of 32660 licensed and company-operated stores around the globe, where more than half of these stores are located in the Americas as of 2020 (Starbucks Corporation, 2020). Starbucks mostly specializes in selling non-alcoholic beverage products, such as coffee drinks.
Strengths
The three key strengths of Starbucks Corporation include subsidiary diversification, a well-developed global supply chain, and a strong brand image. The latter provides a clear advantage in all of its markets since it can be categorized as the most recognized brand when it comes to coffee shops. It is stated that having a strong brand image and equity “contributes to increased brand preference, willingness to pay a premium price, and customer loyalty” (Godey et al., 2016, p. 5835). In other words, it can be considered as the most important competitive advantage enabler for the company.
In addition to a strong brand image, the company has an extensive supply chain network scattered across the globe. It is stated that “innovative SCs have a discernible positive influence on all dimensions of risk management capability, which in turn has a significant impact on enhancing competitive advantage” (Kwak et al., 2018, p. 2). Starbucks has almost 33000 stores globally, which makes the company omnipresent and accessible to a larger consumer base. It is not limited to a single international market, which means that it is resilient and has superior risk management when it comes to depending on a single nation.
The third major strength of the company is its diversification through subsidiaries. It is important to note that “licensed stores generally have a lower gross margin and a higher operating margin than company-operated stores. Under the licensed model, Starbucks receives a margin on branded products and supplies sold to the licensed store operator along with a royalty on retail sales” (Starbucks Corporation, 2020, p. 4). In other words, the company-operated stores are more profitable, but licensed stores increase the reach and presence of the company globally, which allows it to enter highly restrictive markets. All of these factors are possible to be put in place effectively by having a properly designed supply chain network.
Weaknesses
The three main weaknesses of Starbucks Corporation include product imitability, product standard generalizability, and high price points. Firstly, the company sets high prices for its products in order to capitalize on its marketing efforts and strong brand image. However, it makes the products less affordable and less appealing among individuals with less disposable income. In addition, the prices are high due to increased operating costs, especially in international markets, which might have populations with even less disposable income.
Secondly, the product of coffee beverages, which is the main product, is highly imitable. It is a challenging task to make such a simple product stand out from the rest of the competitors. It is also the company’s inherent weakness, which is why it is forced to rely on its marketing efforts and distribution channels rather than the product itself. For example, due to the specific coffee culture of Australia, “Starbucks accumulated $105 million in losses, forcing the company to close 61 locations” (Turner, 2018, para. 8). It was not able to capitalize on its strong brand image and distribution chains, which made the product a sole predictor of its success. However, the company was not able to fully understand Australians’ “deep love for coffee,” which is why it failed (Turner, 2018, para. 3). In other words, coffee beverages as products are difficult to differentiate.
Thirdly, a company this vast and expansive is forced to have certain standards when it comes to its products. It has a list of specific general rules for coffee preparation and delivery, which makes Starbucks inflexible and unadaptable. Any sudden change in a coffee market cannot be adapted to quickly, whereas smaller chains are more flexible. Therefore, the size of the company is also its inherent weakness in regard to changes.
Analysis
The company can utilize the stated strengths to be a stronger competitor, and one might argue that it is already the most substantial enterprise in the non-alcoholic beverage market. However, there is still room to make more improvements when it comes to generalized standard change by improving its flexibility to changes. It is stated that “revenues from our licensed stores accounted for 10% of total net revenues” (Starbucks Corporation, 2020, p. 4). In other words, it should expand its portion of company-operated stores in order to increase its profits, whereas the diversification efforts should be focused on different markets. The inherent weaknesses can further be mitigated by focusing on improving the product’s perceived quality in order to decrease the factor of imitability. It also could invest in its own coffee bean farms instead of relying fully on suppliers, which could reduce the price as well as improve quality.
References
Godey, B., Manthiou, A., Pederzoli, D., Rokka, J., Aiello, G., Donvito, R., & Singh, R. (2016). Social media marketing efforts of luxury brands: Influence on brand equity and consumer behavior. Journal of Business Research, 69(12), 5833–5841. Web.
Kwak, D. W., Seo, Y. J., & Mason, R. (2018). Investigating the relationship between supply chain innovation, risk management capabilities and competitive advantage in global supply chains. International Journal of Operations & Production Management, 38(1), 2–21. Web.
Starbucks Corporation. (2020). Form 10-K [PDF document]. Web.
Turner, A. (2018). Why there are almost no Starbucks in Australia. CNBC. Web.