Starbucks is faced with the issue of how it should leverage its core competencies against various opportunities for growth, including introducing its coffee in McDonalds, pursuing further expansion of its retail operations, and leveraging the brand into other product areas. The case is written so that students need to first identify where Starbucks' competencies lie along the value chain, and then assess how well those competencies can be leveraged across the various alternatives. Also provides an opportunity for students to assess what is driving growth in this company. Starbucks has a tremendous appetite for cash since all its stores are corporate, and investors are betting that it will be able to continue its phenomenal growth so it needs to walk a fine line between leveraging its brand to achieve growth and not eroding it in the process.
Swot Analysis of "Starbucks" written by Mary M. Crossan, Ariff Kachra includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Starbucks Competencies facing as an external strategic factors. Some of the topics covered in Starbucks case study are - Strategic Management Strategies, Competitive strategy and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Starbucks casestudy better are - – digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, technology disruption, increasing energy prices,
supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Starbucks case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Starbucks Competencies, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Starbucks Competencies 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 can be done for the following purposes –
1. Strategic planning using facts provided in Starbucks case study
2. Improving business portfolio management of Starbucks Competencies
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Starbucks Competencies
Strengths Starbucks | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Starbucks Competencies in Starbucks Harvard Business Review case study are -
Training and development
– Starbucks Competencies has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Starbucks 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.
Ability to lead change in Sales & Marketing field
– Starbucks Competencies 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 Competencies in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Superior customer experience
– The customer experience strategy of Starbucks Competencies in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– Starbucks Competencies 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 HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Starbucks Competencies
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Starbucks Competencies does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Successful track record of launching new products
– Starbucks Competencies has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Starbucks Competencies 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.
Operational resilience
– The operational resilience strategy in the Starbucks 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.
Learning organization
- Starbucks Competencies is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Starbucks Competencies is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Starbucks Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– Starbucks Competencies is one of the most innovative firm in sector. Manager in Starbucks Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Sustainable margins compare to other players in Sales & Marketing industry
– Starbucks firm has clearly differentiated products in the market place. This has enabled Starbucks Competencies to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Starbucks Competencies to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Starbucks Competencies 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 Starbucks Competencies in the sector have low bargaining power. Starbucks has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Starbucks Competencies to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses Starbucks | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Starbucks are -
Need for greater diversity
– Starbucks Competencies 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.
Skills based hiring
– The stress on hiring functional specialists at Starbucks Competencies 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Starbucks Competencies is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Starbucks can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Aligning sales with marketing
– It come across in the case study Starbucks that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Starbucks can leverage the sales team experience to cultivate customer relationships as Starbucks Competencies is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Starbucks, is just above the industry average. Starbucks Competencies 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Starbucks, in the dynamic environment Starbucks Competencies has struggled to respond to the nimble upstart competition. Starbucks Competencies has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Workers concerns about automation
– As automation is fast increasing in the segment, Starbucks Competencies 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.
Products dominated business model
– Even though Starbucks Competencies 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 should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Starbucks Competencies 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 bargaining power of channel partners
– Because of the regulatory requirements, Mary M. Crossan, Ariff Kachra suggests that, Starbucks Competencies 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.
Slow to strategic competitive environment developments
– As Starbucks HBR case study mentions - Starbucks Competencies takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Opportunities Starbucks | 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 are -
Building a culture of innovation
– managers at Starbucks Competencies 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 Sales & Marketing segment.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Starbucks Competencies is facing challenges because of the dominance of functional experts in the organization. Starbucks 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
– Starbucks Competencies can use the latest technology developments to improve its manufacturing and designing process in Sales & Marketing 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Sales & Marketing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Starbucks Competencies 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. Starbucks Competencies 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 Starbucks Competencies has opened avenues for new revenue streams for the organization in the industry. This can help Starbucks Competencies to build a more holistic ecosystem as suggested in the Starbucks case study. Starbucks Competencies can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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. Starbucks Competencies can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Competencies can use these opportunities to build new business models that can help the communities that Starbucks Competencies operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Using analytics as competitive advantage
– Starbucks Competencies has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Starbucks - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Starbucks Competencies to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Starbucks Competencies 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Sales & Marketing industry, but it has also influenced the consumer preferences. Starbucks Competencies 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 Competencies in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Sales & Marketing segment, and it will provide faster access to the consumers.
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 Starbucks Competencies in the consumer business. Now Starbucks Competencies can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Starbucks Competencies can develop new processes and procedures in Sales & Marketing 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 External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Starbucks are -
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 Competencies 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.
Shortening product life cycle
– it is one of the major threat that Starbucks Competencies is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Starbucks Competencies 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 Sales & Marketing industry regulations.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Starbucks Competencies with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
High dependence on third party suppliers
– Starbucks Competencies 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.
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 Competencies 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.
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. Starbucks Competencies needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– Starbucks Competencies 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.
Technology acceleration in Forth Industrial Revolution
– Starbucks Competencies has witnessed rapid integration of technology during Covid-19 in the Sales & Marketing industry. As one of the leading players in the industry, Starbucks Competencies needs to keep up with the evolution of technology in the Sales & Marketing 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Starbucks Competencies in the Sales & Marketing industry. The Sales & Marketing 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.
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, Starbucks Competencies may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Sales & Marketing .
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 Competencies business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Starbucks 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 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 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 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 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 Competencies needs to make to build a sustainable competitive advantage.