Case Study Description of Starbucks: Crisis of Confidence
This is a follow-up to the Starbucks case, product 98M006, describing the aftermath of strategic decisions taken in 1999. The case describes the crisis of confidence of investors in the strategic choices made by Starbucks. It poses the issues facing Starbucks in attempting to regain focus.
Swot Analysis of "Starbucks: Crisis of Confidence" written by Mary M. Crossan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Starbucks Confidence facing as an external strategic factors. Some of the topics covered in Starbucks: Crisis of Confidence case study are - Strategic Management Strategies, Competitive strategy, International business, Marketing and Organizational Development.
Some of the macro environment factors that can be used to understand the Starbucks: Crisis of Confidence casestudy better are - – digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, geopolitical disruptions, challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels,
talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of Starbucks: Crisis of Confidence
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Starbucks: Crisis of Confidence case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Starbucks Confidence, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Starbucks Confidence 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: Crisis of Confidence can be done for the following purposes –
1. Strategic planning using facts provided in Starbucks: Crisis of Confidence case study
2. Improving business portfolio management of Starbucks Confidence
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 Starbucks Confidence
Strengths Starbucks: Crisis of Confidence | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Starbucks Confidence in Starbucks: Crisis of Confidence Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Starbucks Confidence in the sector have low bargaining power. Starbucks: Crisis of Confidence has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Starbucks Confidence to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy in the Starbucks: Crisis of Confidence 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.
Sustainable margins compare to other players in Organizational Development industry
– Starbucks: Crisis of Confidence firm has clearly differentiated products in the market place. This has enabled Starbucks Confidence to fetch slight price premium compare to the competitors in the Organizational Development industry. The sustainable margins have also helped Starbucks Confidence to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Starbucks Confidence is present in almost all the verticals within the industry. This has provided firm in Starbucks: Crisis of Confidence 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
– Starbucks Confidence is one of the leading recruiters in the industry. Managers in the Starbucks: Crisis of Confidence are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High switching costs
– The high switching costs that Starbucks Confidence 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.
Organizational Resilience of Starbucks Confidence
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Starbucks Confidence does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Organizational Development field
– Starbucks Confidence 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 Starbucks Confidence in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– Starbucks Confidence 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: Crisis of Confidence - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– Starbucks Confidence has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Starbucks Confidence 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.
Highly skilled collaborators
– Starbucks Confidence 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: Crisis of Confidence HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Starbucks Confidence is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Mary M. Crossan can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Weaknesses Starbucks: Crisis of Confidence | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Starbucks: Crisis of Confidence are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Starbucks: Crisis of Confidence, is just above the industry average. Starbucks Confidence needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Low market penetration in new markets
– Outside its home market of Starbucks Confidence, firm in the HBR case study Starbucks: Crisis of Confidence needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Starbucks Confidence is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Starbucks: Crisis of Confidence can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Need for greater diversity
– Starbucks Confidence 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 dependence on star products
– The top 2 products and services of the firm as mentioned in the Starbucks: Crisis of Confidence 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 Starbucks Confidence has relatively successful track record of launching new products.
High cash cycle compare to competitors
Starbucks Confidence 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.
Capital Spending Reduction
– Even during the low interest decade, Starbucks Confidence 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.
Increasing silos among functional specialists
– The organizational structure of Starbucks Confidence is dominated by functional specialists. It is not different from other players in the Organizational Development segment. Starbucks Confidence needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Starbucks Confidence to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though Starbucks Confidence 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: Crisis of Confidence should strive to include more intangible value offerings along with its core products and services.
No frontier risks strategy
– After analyzing the HBR case study Starbucks: Crisis of Confidence, it seems that company is thinking about the frontier risks that can impact Organizational Development strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Interest costs
– Compare to the competition, Starbucks Confidence 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.
Opportunities Starbucks: Crisis of Confidence | 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: Crisis of Confidence are -
Learning at scale
– Online learning technologies has now opened space for Starbucks Confidence 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.
Loyalty marketing
– Starbucks Confidence 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Starbucks Confidence can use these opportunities to build new business models that can help the communities that Starbucks Confidence operates in. Secondly it can use opportunities from government spending in Organizational Development sector.
Leveraging digital technologies
– Starbucks Confidence can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Manufacturing automation
– Starbucks Confidence 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.
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. Starbucks Confidence 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 Starbucks Confidence 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.
Building a culture of innovation
– managers at Starbucks Confidence 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Starbucks Confidence is facing challenges because of the dominance of functional experts in the organization. Starbucks: Crisis of Confidence 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Starbucks Confidence can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Starbucks Confidence has opened avenues for new revenue streams for the organization in the industry. This can help Starbucks Confidence to build a more holistic ecosystem as suggested in the Starbucks: Crisis of Confidence case study. Starbucks Confidence can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Starbucks Confidence 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: Crisis of Confidence, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Starbucks Confidence 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.
Threats Starbucks: Crisis of Confidence External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Starbucks: Crisis of Confidence are -
Shortening product life cycle
– it is one of the major threat that Starbucks Confidence 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.
Consumer confidence and its impact on Starbucks Confidence 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.
Regulatory challenges
– Starbucks Confidence 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.
Technology acceleration in Forth Industrial Revolution
– Starbucks Confidence has witnessed rapid integration of technology during Covid-19 in the Organizational Development industry. As one of the leading players in the industry, Starbucks Confidence 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.
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: Crisis of Confidence, Starbucks Confidence 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 .
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.
High dependence on third party suppliers
– Starbucks Confidence high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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 Starbucks Confidence in the Organizational Development sector and impact the bottomline of the organization.
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. Starbucks Confidence can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Starbucks Confidence business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Starbucks Confidence 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. Starbucks Confidence 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. Starbucks Confidence 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.
Weighted SWOT Analysis of Starbucks: Crisis of Confidence 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: Crisis of Confidence 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: Crisis of Confidence 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: Crisis of Confidence 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: Crisis of Confidence 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 Starbucks Confidence needs to make to build a sustainable competitive advantage.
