Starbucks SWOT Analysis

SWOT is an acronym for strengths, weaknesses, opportunities and threats related to organizations. The following table illustrates Starbucks SWOT analysis:

Starbucks SWOT Analysis

Strengths in Starbucks SWOT Analysis

1. Starbucks Corporation maintains an extensive, yet highly focused brand portfolio. At the same time, all brands belonging to Starbucks portfolio including Teavana, Tazo, Seattle’s Best Coffee, Evolution Fresh, La Boulange and Ethos are popular drinks and beverages of premium class. The company also sells merchandise products such as coffee- and tea-brewing equipment, Verismo® System by Starbucks, mugs and accessories, packaged goods, books and gifts. Starbucks is able to apply its competitive advantage and extensive experience in the promotion and sales towards each product within its portfolio thanks to the shared features of these products associated with high quality for a premium price.

Selected products within Starbucks focused portfolio

2. In fiscal year 2021 Starbucks generated consolidated revenues of USD 29,1 billion an increase of 24% compared to the previous year. The global coffeehouse chain enjoyed a GAAP operating margin of 16,8% and GAAP earnings per share of USD3.54 during the same period. Furthermore, in FY21 the Seattle-based international coffee chain had an operating margin of 16,8%[1] and the company has billions of cash reserves on its bank accounts. The company’s current solid financial position can play an instrumental role in terms of engaging in R&D and withstanding the periods of economic difficulties such as the global economic and financial crisis of 2007 – 2009.

3. Starbucks Coffee operates 17,133 company-operated stores and 16,700 licensed stores employing approximately 383,000 people in 84 markets[2]. The company is one of the leaders in the global coffee chain market. Market leadership is usually associated with a high level of customer loyalty and benefiting from the economies of scale and these may contribute to long-term growth prospects of the business.

4. Starbucks has been successful in positioning its coffee chains as a ‘third place’, away from work and home, where people can spend quality time with a company or alone, enjoying ‘Starbucks Experience’. Unlike restaurants, customers do not have to order food in Starbucks shops, thus spending time at Starbucks does not to have to be expensive. Relaxed and creatively decorated environment and exceptional customer services increases the value and attractiveness of Starbucks experience.

5. The company is effectively increasing its presence in China and other emerging economies in Asia. Specifically, the global coffee house chain plans to increase its store numbers by 50 percent to 9,000 stores by 2025 in China－its second-largest market.[3] Increasing level of customer purchasing power and greater level of interest in the lifestyle of people in developing countries are important tendencies observed in emerging economies. From this point of view, increasing Starbucks market share in emerging economies, ahead of competition, is a major strength with highly positive implications on the long-term growth prospects of the company.

Weaknesses in SWOT Analysis of Starbucks

1. Despite the presence of the business in 84 markets worldwide, revenues generated from North America operating segment that comprises US and Canada accounted for approximately 70% of total revenues for the fiscal year 2021.[4] Such an extensive dependence of the business on home market is a point of vulnerability in a way that recessions and economic difficulties in the US and Canada is going to have negative effects on the overall performance of the business to a significant extent. The focus of the Seattle-based international coffee chain on international market expansion strategy is strength, as discussed above. However, at the same time the current dependence on US and Canada markets is a considerable weakness.

2. There is a consensus among customers and industry analysts that Starbucks coffees and other beverages and foods are overly overpriced compared to the products of the majority of other coffee house chains in most parts of the U.S. and worldwide. As of March 2022, a cup of Starbucks Tall Latte costs USD 3.85 in Canada, USD 3.26 in US, USD 5.38 in United Kingdom and as high as USD 7.17 in Switzerland. High Starbucks prices are understandably the result of pursuing product differentiation business strategy and capitalization on high level of customer loyalty. Nevertheless, such a strategy may alienate certain segment within current customer base, especially in times of economic difficulties.

Starbucks Corporation Report contains a full version of Starbucks SWOT Analysis. The report illustrates the application of the major analytical strategic frameworks in business studies such as PESTEL, Porter’s Five Forces, Value Chain analysis, Ansoff Matrix and McKinsey 7S Model on Starbucks. Moreover, the report contains analyses of Starbucks leadership, organizational structure, business strategy and organizational culture. The report also comprises discussions of Starbucks marketing strategy, ecosystem and addresses issues of corporate social responsibility.

[1] Fiscal 2021 Annual Report, Starbucks Corporation

[2] Fiscal 2021 Annual Report, Starbucks Corporation

[3] Zhuoqiong, W. (2022) “Starbucks charts expansion plan in China for more market share” China Daily, Available at: http://global.chinadaily.com.cn/a/202209/15/WS63227f3da310fd2b29e77bc4.html

[4] Fiscal 2021 Annual Report, Starbucks Corporation