Mgt 4199 Mini Case: Starbucks
Professor Canan Mutlu
October 14th, 2017
Mini Case: Starbucks
The Starbucks chain is the coffee phenomenon of the last decades. A brand, where the idea of a luxury cafe and a chic place to meet friends are already consecrated in the collective unconscious. Currently, the chain has more than 16 thousand branches in various countries of the world and its prestige is recognized worldwide. To understand better the business it is important to conduct a SWOT analysis for powerful strategic study that will allow understanding the potential and challenges of this company.
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Starbucks for being a well positioned franchise in the market has its strengths very well marked and consolidated. These are: solid financial statements. Starbucks profitability has been rising over the past few years. Since 2000, Starbucks’ revenues have grown 10-fold, from less than $2 billion to some $20 billion in 2015. Also, Starbucks has a solid brand reputation associated with quality coffee and excellent customer service. Its brand is the most valuable brand in the coffee segment and is valued at $ 4 billion. One of Starbucks’ strongest strengths is that it has the necessary expertise and knows its customers. They know their customers need excellent attention, high-quality music, friendly staff and warm atmosphere, resulting in unparalleled customer service. The company operates around 20,000 coffee shops in 60 countries, making it the largest coffee chain in the world.
As for its weaknesses, Starbuck’s profitability depends heavily on coffee grain prices, which is a raw material that is out of Starbucks control. Because of hedge funds, weather conditions and many other factors, Starbucks cannot estimate the price of coffee and hence the profitability of the company. Also, Starbucks offers a great coffee experience and great customer service, which translates into high prices for its products. In comparison, McCafe’s premium coffee is lower than Starbucks coffee and was better evaluated.
As a big company, Starbucks has several opportunities ahead. It is clear that the company has opportunities to growth even more. As for opportunities, Starbucks does not sow its own coffee beans, but has to buy them from several suppliers, which are mainly grouped in South America, Arabia or Africa. Starbucks to secure critical supplies for its operations in Asia reduce reliance on good or bad harvests in Africa and South America and to save on shipping costs, has to extend its network of suppliers. Also, there are great opportunities for cafes in China and India, where Starbucks has comparatively only modest number of venues, they should probably try to open new stores there. Starbucks not only sells with coffee shops and franchises but sells some of its products through other retailers. The company must form more partnerships and offer the sale of its coffee, for example, in the retail markets (Forbes).