Starbucks Corporation: Building a Sustainable Supply Chain SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Organizational Development
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Starbucks Corporation: Building a Sustainable Supply Chain
Starbucks Corporation was the world's largest specialty coffee retailer, with 2005 annual revenue of $6.4 billion. Despite gigantic growth in specialty coffee in the 1990s, a worldwide oversupply of lower-grade coffee had depressed market prices in the previous few years, making it difficult for coffee farmers to earn enough revenue to cover the cost of production. By the end of 2005, Starbucks was at a challenging point in its history. It boasted more than 10,000 stores--up from 676 a decade before--and roasted 2.3% of the world's coffee. Each day it opened an average of four stores and hired 200 employees. To support such a high growth rate, the company's future success depended on a secure supply of high-quality coffee beans to meet increased demand--Starbucks had to ensure a sustainable supply of this key commodity. The company decided to partner with Conservation International, an environmental nonprofit organization, to develop C.A.F.E. Practices (Coffee and Farmer Equity Practices). The goal was to contribute to the livelihood of coffee farmers and to ensure high-quality coffee for the long term. If Starbucks were able to overcome the issues it faced with a widespread implementation of C.A.F.E., the initiative could go a long way towards improving the sustainability of its coffee supply chain while at the same time improving Starbucks' image as a socially responsible corporation.
Authors :: Hau Lee, Stacy Duda, Lashawn James, Zeryn MacKwani
Swot Analysis of "Starbucks Corporation: Building a Sustainable Supply Chain" written by Hau Lee, Stacy Duda, Lashawn James, Zeryn MacKwani includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Coffee Starbucks facing as an external strategic factors. Some of the topics covered in Starbucks Corporation: Building a Sustainable Supply Chain case study are - Strategic Management Strategies, Growth strategy, Social responsibility, Supply chain and Organizational Development.
Some of the macro environment factors that can be used to understand the Starbucks Corporation: Building a Sustainable Supply Chain casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, challanges to central banks by blockchain based private currencies,
increasing energy prices, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Starbucks Corporation: Building a Sustainable Supply Chain
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Starbucks Corporation: Building a Sustainable Supply Chain case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Coffee Starbucks, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Coffee Starbucks operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Starbucks Corporation: Building a Sustainable Supply Chain can be done for the following purposes –
1. Strategic planning using facts provided in Starbucks Corporation: Building a Sustainable Supply Chain case study
2. Improving business portfolio management of Coffee Starbucks
3. Assessing feasibility of the new initiative in Organizational Development field.
4. Making a Organizational Development topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Coffee Starbucks
Strengths Starbucks Corporation: Building a Sustainable Supply Chain | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Coffee Starbucks in Starbucks Corporation: Building a Sustainable Supply Chain Harvard Business Review case study are -
Strong track record of project management
– Coffee Starbucks is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High brand equity
– Coffee Starbucks has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Coffee Starbucks to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Coffee Starbucks are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Low bargaining power of suppliers
– Suppliers of Coffee Starbucks in the sector have low bargaining power. Starbucks Corporation: Building a Sustainable Supply Chain has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Coffee Starbucks to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– Coffee Starbucks has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Starbucks Corporation: Building a Sustainable Supply Chain - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of Coffee Starbucks
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Coffee Starbucks does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Coffee Starbucks is one of the leading recruiters in the industry. Managers in the Starbucks Corporation: Building a Sustainable Supply Chain are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Ability to lead change in Organizational Development field
– Coffee Starbucks is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Coffee Starbucks in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Coffee Starbucks has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Starbucks Corporation: Building a Sustainable Supply Chain HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in Organizational Development industry
– Starbucks Corporation: Building a Sustainable Supply Chain firm has clearly differentiated products in the market place. This has enabled Coffee Starbucks to fetch slight price premium compare to the competitors in the Organizational Development industry. The sustainable margins have also helped Coffee Starbucks to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Coffee Starbucks in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– Coffee Starbucks has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Starbucks Corporation: Building a Sustainable Supply Chain Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Weaknesses Starbucks Corporation: Building a Sustainable Supply Chain | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Starbucks Corporation: Building a Sustainable Supply Chain are -
Capital Spending Reduction
– Even during the low interest decade, Coffee Starbucks has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High cash cycle compare to competitors
Coffee Starbucks has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Starbucks Corporation: Building a Sustainable Supply Chain, in the dynamic environment Coffee Starbucks has struggled to respond to the nimble upstart competition. Coffee Starbucks has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Starbucks Corporation: Building a Sustainable Supply Chain HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Coffee Starbucks has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, firm in the HBR case study Starbucks Corporation: Building a Sustainable Supply Chain has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Coffee Starbucks 's lucrative customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Coffee Starbucks needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Skills based hiring
– The stress on hiring functional specialists at Coffee Starbucks has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Increasing silos among functional specialists
– The organizational structure of Coffee Starbucks is dominated by functional specialists. It is not different from other players in the Organizational Development segment. Coffee Starbucks needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Coffee Starbucks to focus more on services rather than just following the product oriented approach.
Lack of clear differentiation of Coffee Starbucks products
– To increase the profitability and margins on the products, Coffee Starbucks needs to provide more differentiated products than what it is currently offering in the marketplace.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Coffee Starbucks supply chain. Even after few cautionary changes mentioned in the HBR case study - Starbucks Corporation: Building a Sustainable Supply Chain, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Coffee Starbucks vulnerable to further global disruptions in South East Asia.
Products dominated business model
– Even though Coffee Starbucks has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Starbucks Corporation: Building a Sustainable Supply Chain should strive to include more intangible value offerings along with its core products and services.
Opportunities Starbucks Corporation: Building a Sustainable Supply Chain | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Starbucks Corporation: Building a Sustainable Supply Chain are -
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Organizational Development industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Coffee Starbucks can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Coffee Starbucks can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Creating value in data economy
– The success of analytics program of Coffee Starbucks has opened avenues for new revenue streams for the organization in the industry. This can help Coffee Starbucks to build a more holistic ecosystem as suggested in the Starbucks Corporation: Building a Sustainable Supply Chain case study. Coffee Starbucks can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Organizational Development industry, but it has also influenced the consumer preferences. Coffee Starbucks can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Coffee Starbucks can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Starbucks Corporation: Building a Sustainable Supply Chain, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Coffee Starbucks to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Loyalty marketing
– Coffee Starbucks has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Developing new processes and practices
– Coffee Starbucks can develop new processes and procedures in Organizational Development industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Coffee Starbucks is facing challenges because of the dominance of functional experts in the organization. Starbucks Corporation: Building a Sustainable Supply Chain case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Learning at scale
– Online learning technologies has now opened space for Coffee Starbucks to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Better consumer reach
– The expansion of the 5G network will help Coffee Starbucks to increase its market reach. Coffee Starbucks will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Building a culture of innovation
– managers at Coffee Starbucks can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Organizational Development segment.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Coffee Starbucks can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Coffee Starbucks can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Threats Starbucks Corporation: Building a Sustainable Supply Chain External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Starbucks Corporation: Building a Sustainable Supply Chain are -
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Coffee Starbucks.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Coffee Starbucks with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Coffee Starbucks business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Coffee Starbucks is facing in Organizational Development sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Coffee Starbucks demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Technology acceleration in Forth Industrial Revolution
– Coffee Starbucks has witnessed rapid integration of technology during Covid-19 in the Organizational Development industry. As one of the leading players in the industry, Coffee Starbucks needs to keep up with the evolution of technology in the Organizational Development sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Coffee Starbucks will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Regulatory challenges
– Coffee Starbucks needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Organizational Development industry regulations.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Coffee Starbucks in the Organizational Development industry. The Organizational Development industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing wage structure of Coffee Starbucks
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Coffee Starbucks.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Coffee Starbucks needs to understand the core reasons impacting the Organizational Development industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Coffee Starbucks can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Starbucks Corporation: Building a Sustainable Supply Chain .
Weighted SWOT Analysis of Starbucks Corporation: Building a Sustainable Supply Chain Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Starbucks Corporation: Building a Sustainable Supply Chain needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Starbucks Corporation: Building a Sustainable Supply Chain is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Starbucks Corporation: Building a Sustainable Supply Chain is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Starbucks Corporation: Building a Sustainable Supply Chain is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Coffee Starbucks needs to make to build a sustainable competitive advantage.