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 - – digital marketing is dominated by two big players Facebook and Google, competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, there is backlash against globalization, increasing energy prices,
increasing household debt because of falling income levels, increasing transportation and logistics costs, 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 -
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.
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.
Operational resilience
– The operational resilience strategy in the Starbucks Corporation: Building a Sustainable Supply Chain Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Digital Transformation in Organizational Development segment
- digital transformation varies from industry to industry. For Coffee Starbucks digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Coffee Starbucks has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
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.
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.
Successful track record of launching new products
– Coffee Starbucks has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Coffee Starbucks has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
High switching costs
– The high switching costs that Coffee Starbucks has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Diverse revenue streams
– Coffee Starbucks is present in almost all the verticals within the industry. This has provided firm in Starbucks Corporation: Building a Sustainable Supply Chain case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
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.
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.
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.
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 -
Slow decision making process
– As mentioned earlier in the report, Coffee Starbucks has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Coffee Starbucks even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Interest costs
– Compare to the competition, Coffee Starbucks has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
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.
Need for greater diversity
– Coffee Starbucks has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
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.
High bargaining power of channel partners
– Because of the regulatory requirements, Hau Lee, Stacy Duda, Lashawn James, Zeryn MacKwani suggests that, Coffee Starbucks is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
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.
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.
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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Coffee Starbucks is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Starbucks Corporation: Building a Sustainable Supply Chain can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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 -
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Coffee Starbucks can use these opportunities to build new business models that can help the communities that Coffee Starbucks operates in. Secondly it can use opportunities from government spending in Organizational Development sector.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Coffee Starbucks in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Organizational Development segment, and it will provide faster access to the consumers.
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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Coffee Starbucks in the consumer business. Now Coffee Starbucks can target international markets with far fewer capital restrictions requirements than the existing system.
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.
Manufacturing automation
– Coffee Starbucks can use the latest technology developments to improve its manufacturing and designing process in Organizational Development segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Coffee Starbucks can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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.
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.
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 -
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.
Easy access to finance
– Easy access to finance in Organizational Development field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Coffee Starbucks can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Coffee Starbucks in the Organizational Development sector and impact the bottomline of the organization.
Environmental challenges
– Coffee Starbucks needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Coffee Starbucks can take advantage of this fund but it will also bring new competitors in the Organizational Development industry.
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.
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.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
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.
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.
Stagnating economy with rate increase
– Coffee Starbucks can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Starbucks Corporation: Building a Sustainable Supply Chain, Coffee Starbucks may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Organizational Development .
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 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.
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.