Starbucks Strategic Analysis

Starbucks Strategic Analysis

By:

Phillip Bullington

Executive Summary

Starbucks Corporation was founded in 1971 as a single store in Seattle, WA and currently operates over 21,000 stores in 65 countries while employing 191,000 people.  The company purchases and roasts high quality coffee beans as well as handcrafted coffee, tea, other beverages, and fresh food items that are sold through company-operated stores, licensed stores, grocery stores, and national foodservice accounts.  The company sells goods under other brands such as: Ethos, Evolution Fresh, La Boulange, Seattle's Best Coffee, Tazo, and Teavana.

The company has four different operating segments: Americas, EMEA, CAP, and Channel Development and controlled 36.7% of the coffee and snack retail industry market share as of 2013.  Their current mission statement is, “To inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time.”  They are currently working to expand into new geographical regions as well as increase market share in developed regions.  The company has utilized a broad differentiation strategy based on high-quality products, superior customer service, convenient location, and diverse products.   Starbucks also has used a backward integration strategy by purchasing coffee farms to remain less affected by the volatile coffee market.

The coffee and snack shop industry expects an annual growth rate of 3.9% up to 2018 and is largely dependent on income and expenditure, health and lifestyle, and age demographics.  Key success factors for the industry include: clear market position, effective cost controls, franchising, location, market research, and a skilled and flexible workforce.  Barriers to entry are low in this industry due to lower start-up costs and the ability to lease the location, equipment and furniture for a company.  The industry is also in the mature phase of its life cycle which gives way for increasing mergers and acquisitions by large chains such as Starbucks.

Starbucks boasts a culture of diversity and inclusion that lie at the core of their leadership competencies.  Their marketing is based around social media such as Facebook, Twitter, Google+, YouTube, Pinterest, and My Starbucks Ideas and spends a low annual amount on this segment.  Starbucks is currently in strong financial standing with annual revenues increasing from 9.3% to 13.7% from 2010 to 2014.  The company looks to ethically source 100% of its coffee by 2015 and was at 96% in 2014.  Primary activities of Starbucks include inbound logistics, operations, and outbound logistics with their secondary activities consisting of the procurement of raw materials.  Starbucks takes an employee-centered approach and offer excellent benefits to both full and part-time “partners”.  Their information systems include a transaction processing system, customer relationship management, decision support system, and a supply chain management system.  A SWOT analysis of Starbucks reveals that the company will see opportunities in emerging markets, technology, brand extension, and the expansion of retail operations and product lines.  Their threats include: Increased competition, consumer lifestyle and taste changes, market saturation in developed countries, and the volatility of the global coffee market.