Starbucks Struggled SWOT

Pages: 9 (2634 words)  ·  Style: Harvard  ·  Bibliography Sources: 8  ·  File: .docx  ·  Level: College Senior  ·  Topic: Business

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This audience is growing rapidly -- 4.6% per year, and it sees Starbucks as cool (O'Farrell, 2011). Teenagers and children are just 2% of the company's audience, leaving the other 9% or those over the age of 40.

The audience for Starbucks being mainstream, it can be expected that it shares roughly the same demographic characteristics of the American market in general, with perhaps a slight skew towards higher incomes and levels of education as a reflection of the company's premium status. Starbucks is also heavily involved in the Asian market, and sees it as a major source of growth in the coming years (Sanchanta, 2010). The Asian market has a massive population that is improving its wealth every year. The company has far fewer outlets in China than it does in Japan, indicating that China in particular has high potential for growth. One unique characteristic of Asian markets is that the company's business benefits from positioning as a "third place," as many urban Asians live in small apartments that are unsuitable for socializing (Simmons, 2005). A greater focus on tea drinks has also served Starbucks well in Asia because of taste preferences of Asian consumers.

Company Analysis

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The majority of Starbucks' revenue derives from its specialty coffee drinks, which amount to around 75% of the company's sales (O'Farrell, 2011). The company has long sought to differentiate into other product lines. This has resulted in some failures, but there have also been some successes. At this point, Starbucks sees two non-coffee businesses as crucial sources of growth. The first is making a stronger move into consumer products, a space it currently occupies with mixed coffee drinks produced under license by Pepsi. Starbucks is moving into the juice space as well, with its recent purchase Evolution Fresh Juices. Observers believe the company is going to try to do with juice what it did with coffee (Jargon, 2011).

SWOT on Starbucks Struggled in the Late Assignment

Internally, the company is strong. It has its original CEO Howard Schultz back at the helm, something that has been a major driver of success. The company is strong financially as well. Even during the downturn, Starbucks was profitable, and now its margins have been restored along with revenue and profit growth. The company has a solid balance sheet as well, having kept its long-term debt at around 15% of total financing, and having not taken out any new long-term debt in the past five years (MSN Moneycentral, 2011). Starbucks is liquid, solvent, and has improved nearly every financial metric over the course of the past five years. In seeking to take advantage of new opportunities, Starbucks is dealing from a position of strength.

SWOT

Starbucks has a number of strengths from which to draw. As mentioned, the company has strong, visionary leadership under Howard Schultz and has a healthy balance sheet and improving financial metrics. Starbucks also has one of the world's most recognizable brands (Interbrand/Business Week, 2006). The company has a large network of stores that it can leverage for other sales, extensive experience operating internationally and a host of popular products.

Given the recent turnaround by Starbucks, it is hard to pinpoint too many weaknesses at the company. Starbucks does have an overreliance of CEO Schultz, as evidenced by its lack of success without him. The company is more or less saturated in the core U.S. market, so there is little room for growth domestically, forcing the company into international markets. Additionally, the company remains heavily reliant on specialty coffee drinks, with many attempts at diversification ending in failure.

There are a number of opportunities in the market for Starbucks. The company has built out its China business nicely, but there is an astonishing amount of potential as that country's economy grows rapidly. The company has opportunity elsewhere in the world as well -- Arab markets are a good source of growth and the company has only minor presence in the other three BRIC markets. There are also new product opportunities for Starbucks. Two of these have already been targeted by the company -- the juice market and the consumer products market. The former would leverage the company's operating expertise and the latter would leverage the company's strong brand name. Further opportunities can be found in finding new products to sell in the company's extensive store network -- some new products have been successful while others have not, but more successful products would only help the bottom line and would especially help in competing with a company like McDonalds.

There are a number of threats in the environment as well. Starbucks remains subject to the twin threats represented by competition and the state of the economy. The latter is especially critical now that Starbucks has been forced to build growth in developing markets, which historically have been more volatile than developed markets. There are additional threats, however, that could impact on the company's cost structure. These range from unionization to supply chain issues. The price of coffee, for example, is expected to spike as climate change reduces the land available in the world for growing coffee and make coffee pests stronger (Adhiambo, 2011).

Conclusion

Starbucks is dealing from a position of strength. The company has dealt with the twin threats of competition and the global economic downturn effectively, and this is reflected in dramatically improved financial performance and stock price. The company has a number of potential growth sources available to it -- juice, consumer products and geographic diversification. Starbucks has a healthy balance sheet and a cash cow of a domestic market. In short, the company has a number of great opportunities and is well-positioned to take advantage of them. There are few weaknesses or threats that could derail the success of Starbucks at the present moment in time.

Works Cited:

Adamy, J. (2009). Starbucks plays common Joe. Wall Street Journal. Retrieved November 25, 2011 from http://online.wsj.com/article/SB123413848760761577.html

Adhiambo, M. (2011). Climate change could drive spread of major coffee pest. The Guardian. Retrieved November 25, 2011 from http://www.guardian.co.uk/environment/2011/oct/13/climate-change-coffee-pest

Allison, M. (2008). Starbucks closing 5% of U.S. stores. Seattle Times. Retrieved November 25, 2011 from http://seattletimes.nwsource.com/html/businesstechnology/2008028854_starbucks02.html

Interbrand/Business Week. (2006). The world's best brands. Business Week. Retrieved November 25, 2011 from http://www.businessweek.com/magazine/toc/06_32/B399606globalbrands.htm

Jargon, J. (2011). Latest Starbucks concoction: Juice. Wall Street Journal. Retrieved November 25, 2011 from http://online.wsj.com/article/SB10001424052970204358004577030112155716538.html

MSN Moneycentral. (2011). Starbucks. Retrieved November 25, 2011 from http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?symbol=sbux

Oches, S. (2011). The 2011 QSR 50. QSR Magazine. Retrieved November 25, 2011 from http://www.qsrmagazine.com/reports/2011-qsr-50

O'Farrell, R. (2011). Who is Starbucks' target audience? Houston Chronicle. Retrieved November 25, 2011 from http://smallbusiness.chron.com/starbucks-target-audience-10553.html

Sanchanta, M. (2010). Starbucks plans major China expansion. Wall Street Journal. Retrieved November 25, 2011 from http://online.wsj.com/article/SB10001424052702304604204575181490891231672.html

Simmons, J. (2005). Starbucks' supreme bean. Brand Channel. Retrieved November 25, 2011 from http://www.brandchannel.com/features_profile.asp?pr_id=259 [END OF PREVIEW] . . . READ MORE

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