Starbucks Company: SWOT Analysis and Strategies for Competitive Advantage

Company and Product Overview

Starbucks Company is a multinational company that is a marketer, roaster, and retailer of coffee that operates in over 60 countries. There are four segments of the company which operates: the Middle East, Europe, Africa, Asia Pacific, and channel development. The company purchases coffee and roasts before selling them, along with handcrafted tea, coffee, and other beverages in addition to different fresh food items. These are done in their stores that are operated by the company. Furthermore, Starbucks Company sells a variety of tea and coffee products. The company also licenses its trademarks through channels like the licensed stores, national accounts for food service, and groceries (Bussing-Burks, 2009).

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Starbucks Company has been the most successful company in the industry of coffee in the few decades that have passed. The company uses aggressive strategies for expansion to push out most of its competitors. It has focused on forming a dense store network around the United States while opening up other new locations around the globe. Michelli (2007) pointed out that currently, Starbucks is the leading coffee market retail selling coffee at a premium price to maximize their profitability.

According to Sica (n.d), Starbucks Company surpassed the major competitor, Wendy, and Burger King to become the number three restaurant by posting $9.07 billion in sales last year. The company is also projected to gain in as one of the day parts of the restaurant that is fast-growing for breakfast. The estimated media budget of the company is a fraction of the total expenditure of other top chains in the industry. Bussing-Burks (2009) indicated that Starbucks company spend $94.4 million on media compared to the media expenditure of MacDonald of about $887.8million in 2010 in the united states only.

The major competitors of Starbucks Company include Caribou coffee, MacDonald’s, and Dunkins donuts. When comparing Dunkin donuts versus Starbucks, Americans who are hard-working prefer Dunkin donuts taste over Starbucks. Dunkin donuts launched in 2009 a $100 million advertisement campaign that ran through the radios, outdoor and print advertising, in-store purchase points, sports marketing, online advertisements, and special events (Michelli, 2007).

In comparing MacDonald versus Starbucks, MacDonald has heavily marketed its MaCafé coffee drinks for breakfast for the past two years. Additionally, they have continually introduced new drinks for noncoffee and coffee products such as frappes and smoothies. Sica (n.d) pointed out that MacDonald antagonized Starbucks in their TV adverts just like Dunkin donuts. Moreover, MacDonald uses also signage and billboards, sponsor sports events at large scales.

In comparing Caribou coffee versus Starbucks, Bussing-Burks (2009) observed that in 2008, Caribou coffee spent about $2 million in advertising. Moreover, the visitor demographics analysis shows that Caribou coffee could be having more online success if they applied the same tactics as Starbucks. Additionally, analysis shows Caribou coffee is preferred by young adults between 18-34 years. This represents 32% compared to 42 % that is attracted by Starbucks.

Situation Analysis for Starbucks Company

The second most traded commodity globally is coffee. The United States of America is the largest coffee importer in the world. Coffee demand is price inelastic; this implies that when the prices of coffee rise, coffee consumption is not reduced.

Starbucks according to Michelli (2007) is the world’s most recognizable and powerful high-quality brand that is unique. The market share of Starbucks is 32.6% with over 11,500 coffee stores in the United States. The SWOT analysis of Starbucks is according to Sica (n.d) to include:

Strength:

1. Is the best and the biggest coffee shop in the industry
2. Has a natural edge over other competitors who are less known in that customers associate it with popular experience and high quality
3. With its widespread locations, it reaches a larger market
4. Drive through store
5. The large demographic spread of its new products prevents new entrants and ensure large exposure

Weakness

1. The whole business is in the coffee industry only while its competitors like Dunkin donuts have invested in other industries
2. Strong presence in the home market, United States, hence oversaturation of their market
3. High price
4. Competition from other brands that are low priced

Opportunities

1. New opportunities for international markets
2. New products
3. Organic drinks
4. Health drinks
5. Energy drinks
6. More bottled drinks
7. Kid focused drinks
8. Forming partnerships with other companies of coffee

Threats

1. A new entry into the market
2. Stiff competition from McDonald’s when they upgraded in 2006
3. Smaller coffee houses that are privately owned
4. Anti- Starbucks groups
5. Image threat

References

Bussing-Burks, M. (2009). Starbucks. Santa Barbara, Calif: Greenwood Press.

Michelli, J. A. (2007). The Starbucks experience: 5 principles for turning ordinary into extraordinary. New York: McGraw-Hill.

Sica, Danielle. (n.d.). Starbucks Corporation: a strategy capstone. (Starbucks Corporation: a strategy capstone.