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 - – competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs,
increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, 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 -
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For Starbucks Competencies digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Starbucks Competencies 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.
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.
Ability to recruit top talent
– Starbucks Competencies is one of the leading recruiters in the industry. Managers in the Starbucks are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
Strong track record of project management
– Starbucks Competencies 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 switching costs
– The high switching costs that Starbucks Competencies 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.
Analytics focus
– Starbucks Competencies 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, Ariff Kachra 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.
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.
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.
Diverse revenue streams
– Starbucks Competencies is present in almost all the verticals within the industry. This has provided firm in Starbucks 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.
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.
High brand equity
– Starbucks Competencies has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Starbucks Competencies to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses Starbucks | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Starbucks are -
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.
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.
No frontier risks strategy
– After analyzing the HBR case study Starbucks, it seems that company is thinking about the frontier risks that can impact Sales & Marketing 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.
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.
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.
Low market penetration in new markets
– Outside its home market of Starbucks Competencies, firm in the HBR case study Starbucks needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 Starbucks Competencies supply chain. Even after few cautionary changes mentioned in the HBR case study - Starbucks, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Starbucks Competencies vulnerable to further global disruptions in South East Asia.
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.
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.
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Starbucks 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 Competencies has relatively successful track record of launching new products.
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 -
Loyalty marketing
– Starbucks Competencies 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 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Starbucks Competencies can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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.
Leveraging digital technologies
– Starbucks Competencies 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.
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.
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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Starbucks Competencies to increase its market reach. Starbucks Competencies 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Starbucks Competencies to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Starbucks Competencies to hire the very best people irrespective of their geographical location.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Starbucks Competencies 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, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 -
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.
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.
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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Starbucks Competencies 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 .
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 Starbucks Competencies.
Environmental challenges
– Starbucks Competencies 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 Competencies can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
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.
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.
Easy access to finance
– Easy access to finance in Sales & Marketing field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Starbucks Competencies can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
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.
