Starbucks' Strategic Planning Using Swott Analysis

Starbucks' Strategic Planning Using SWOTT Analysis

"Mirror, mirror, on the wall, who's the fairest of them all?" - The Queen in Snow White. Beauty is only skin deep, companies must also look within to secure longevity. Before a company can successfully bring a mission statement and vision to fruition, they must take a good hard look into the mirror. A company must reflect upon internal strengths and weaknesses, external opportunities and threats, and consider the trends associated with each (SWOT analysis). The fundamental process of strategic planning is through the encompassment of SWOT analysis. Taking a bite from the poisonous apple will be inevitable if a company fails to self-evaluate and strategically plan for the future. Starbucks Coffee Company is a paradigm of effective strategic planning through SWOT analysis. Astute analysis coupled with the ability to act swiftly has catapulted them to the position as the number one gourmet coffee retailer. They continue to document increased revenue annually and maintain a majority share of the gourmet coffee market.

Strengths Weaknesses

* Product diversification

* Customer loyalty

* High visibility * Self-cannibalization

* Price

* US market reliance

* Problems in some international operations

Opportunities Threats

* Expansion into retail operations

* Technological advances

* Expand globally

* Brand extension

* Product distribution * Competition

* Prices of coffee beans and dairy

* Economy

* Political tensions in global markets

Figure 1. SWOT Analysis for Starbucks Corporation

Strengths

Starbucks serves up strong drinks and remains strong as the leader in the coffee industry market through product diversification, customer loyalty, and high visibility. Starbucks caters to the addictions and satisfies the needs of socioeconomic groups attempting to beat the daily grind. Got Milk? Starbuck does, and they put a spin on the famous marketing campaign to add calcium to the diet; they have created a dairy appeal for youths (Berry, 2002). Whether younger or older, customers with sundry palates may find something desirable amongst Starbucks' diverse products. They are sure to delight the senses with gourmet coffees, flavorful teas, baked pastries, and a myriad of seasonal hot and cold specialty drinks for any age patron. Starbucks has built a reputation and developed a loyal customer base. Where else can a complicated complex individual receive service with a smile when ordering a "triple-bypass-extra-hot-no-water-venti-Ð...-soy-Ð...-skim-no-whip-one-splenda-white-mocha-stirred-not-shaken-double-cupped-Mochaccino?" Starbucks has created a safe environment where people are free to design creative coffee concoctions; an environment that has instilled trust while in the company of comfort. Trust is a powerful tool that has provided Starbucks with the ingredients necessary to brew success. With up to 87 stores within a 5-mile radius in key locations, Starbucks has made their presence known and can easily sustain customer loyalty by means of convenient access (Starbucks, 2005).

Weaknesses

Self-cannibalization, price, US market reliance, and problems in some international operations makes Starbucks vulnerable in the coffee market, but the Starbucks SWOT team is consistently trying to look in the crystal ball to avoid any set backs. Strategic planning includes identifying market areas and locations conducive to profitability. One key to retail prosperity is "location, location, location"; but with so many locations, possibly too many, this strategy could lead to "self cannibalization." A quick glance around the corner in any major city will reveal a Starbucks cafй at almost every turn. Although data are not available as to the impact of proximity, stores may eventually find themselves in a turf war competing for the same customer pool. The impact of propinquity may become more evident if the price of a cup-of-joe continues to climb. The typical java junkie in New York City, on average, spends $3 for a Starbucks latte (Wong, 2004). Understandably, the increasing prices of coffee beans, dairy, and sugar elevates costs and forces Starbucks to pass those costs to the consumer (USA today, 2004). However, while the latest price increase of 11 cents per cup does not hollow the pocket, consumers may eventually make a conscious decision to "just say no" to this luxury vice. Today though, Americans remain willing to budget for this extravagant expenditure. Last year, 85 percent of Starbucks' portfolio showed dependency on the U.S. market. Strategic planning dictates they need to increase global penetration to achieve a balanced portfolio by reaching additional worldwide consumers (Datamonitor, 2005). Japan is the largest international market and rapidly experienced Starbucks saturation. Strategic planning allowed Starbucks to combat the challenge of a sluggish market by introducing alcohol to the repertoire of products (Singer & Fackler, 2003). Each challenge has posed an opportunity, but time will tell whether people from different cultures will embrace the concept of this American social obsession.

Opportunities

Though many companies have fallen victim to failure due to unresolved weaknesses, Starbucks has adopted the attitude that opportunity is not only now here but everywhere. Through expansion into retail operations, technological advances, global expansion, brand extension and product distribution Starbucks has embraced opportunities with reckless abandon. As an answer to a weak international portfolio, Starbucks has initiated plans to infiltrate the global market by opening 15,000 new stores internationally over the next few years (Datamonitor, 2005). Starbucks has also realized an opportunity in developing smart partnerships in order to enhance brand extension. This is accomplished through product distribution and refining ingredient technology. In acclimating the adage that two heads are better than one, Starbucks has formed alliances with Pepsi in developing on-the-go Frappuccino beverages and Jim Beam liquor to offer customers