Case Study Description of Trouble Brews at Starbucks
After going public in 1992, Starbucks' strong balance sheet and double-digit growth made it a hot growth stock. The Starbucks vision was coffee culture as community, the Third Place between work and home, where friends shared the experience and exotic language of gourmet coffee. Its growth was fueled by rapid expansion in the number of stores both in the United States and in foreign markets, the addition of drive-through service, its own music label that promoted and sold CDs in stores and other add-on sales, including pastries and sandwiches. In an amazingly short time, Starbucks became a wildly successful global brand. But in 2007, Starbucks' performance slipped; the company reported its first-ever decline in customer visits to U.S. stores, which led to a 50 per cent drop in its share price. In January 2008, the board ousted CEO Jim Donald and brought back Howard Schultz - Starbucks' visionary leader and CEO from 1987 to 2000 and current chairman and chief global strategist - to re-take the helm. Starbucks' growth strategies have been widely reported and analyzed, but rarely with an eye to their impact on the brand. This case offers a compelling example of how "non-brand" managerial decisions - such as store locations, licensing arrangements and drive-through service - can make sense on financial criteria at one point in time, yet erode brand positioning and equity in the longer term. Examining the growth decisions made in the United States provides a rich context in which to examine both the promise and drawback of further foreign expansion.
Swot Analysis of "Trouble Brews at Starbucks" written by Lauranne Buchanan, Carolyn J. Simmons includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Starbucks Stores facing as an external strategic factors. Some of the topics covered in Trouble Brews at Starbucks case study are - Strategic Management Strategies, Growth strategy, Product development and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Trouble Brews at Starbucks casestudy better are - – central banks are concerned over increasing inflation, challanges to central banks by blockchain based private currencies, increasing energy prices, digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, wage bills are increasing,
increasing government debt because of Covid-19 spendings, technology disruption, etc
Introduction to SWOT Analysis of Trouble Brews at Starbucks
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Trouble Brews at Starbucks case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Starbucks Stores, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Starbucks Stores 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 Trouble Brews at Starbucks can be done for the following purposes –
1. Strategic planning using facts provided in Trouble Brews at Starbucks case study
2. Improving business portfolio management of Starbucks Stores
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 Stores
Strengths Trouble Brews at Starbucks | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Starbucks Stores in Trouble Brews at Starbucks Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Starbucks Stores 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.
Ability to recruit top talent
– Starbucks Stores is one of the leading recruiters in the industry. Managers in the Trouble Brews at 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.
Highly skilled collaborators
– Starbucks Stores 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 Trouble Brews at Starbucks HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of Starbucks Stores in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Sustainable margins compare to other players in Sales & Marketing industry
– Trouble Brews at Starbucks firm has clearly differentiated products in the market place. This has enabled Starbucks Stores to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Starbucks Stores to invest into research and development (R&D) and innovation.
High brand equity
– Starbucks Stores has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Starbucks Stores to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy in the Trouble Brews at 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.
Diverse revenue streams
– Starbucks Stores is present in almost all the verticals within the industry. This has provided firm in Trouble Brews at 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.
Organizational Resilience of Starbucks Stores
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Starbucks Stores does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management
– Starbucks Stores is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Starbucks Stores is one of the most innovative firm in sector. Manager in Trouble Brews at Starbucks Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Successful track record of launching new products
– Starbucks Stores has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Starbucks Stores 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.
Weaknesses Trouble Brews at Starbucks | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Trouble Brews at Starbucks are -
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 Stores supply chain. Even after few cautionary changes mentioned in the HBR case study - Trouble Brews at 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 Stores vulnerable to further global disruptions in South East Asia.
Slow to strategic competitive environment developments
– As Trouble Brews at Starbucks HBR case study mentions - Starbucks Stores 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.
Skills based hiring
– The stress on hiring functional specialists at Starbucks Stores 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.
Lack of clear differentiation of Starbucks Stores products
– To increase the profitability and margins on the products, Starbucks Stores needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, firm in the HBR case study Trouble Brews at Starbucks 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 Starbucks Stores 's lucrative customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Trouble Brews at Starbucks, is just above the industry average. Starbucks Stores 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.
Slow decision making process
– As mentioned earlier in the report, Starbucks Stores 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. Starbucks Stores 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.
Aligning sales with marketing
– It come across in the case study Trouble Brews at 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 Trouble Brews at Starbucks can leverage the sales team experience to cultivate customer relationships as Starbucks Stores is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of Starbucks Stores, firm in the HBR case study Trouble Brews at Starbucks needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
No frontier risks strategy
– After analyzing the HBR case study Trouble Brews at 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.
Products dominated business model
– Even though Starbucks Stores 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 - Trouble Brews at Starbucks should strive to include more intangible value offerings along with its core products and services.
Opportunities Trouble Brews at 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 Trouble Brews at Starbucks are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Starbucks Stores can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Stores can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at Starbucks Stores 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Starbucks Stores 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 Stores to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Starbucks Stores 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.
Buying journey improvements
– Starbucks Stores can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Trouble Brews at Starbucks suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Better consumer reach
– The expansion of the 5G network will help Starbucks Stores to increase its market reach. Starbucks Stores 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Starbucks Stores is facing challenges because of the dominance of functional experts in the organization. Trouble Brews at 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.
Leveraging digital technologies
– Starbucks Stores 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.
Using analytics as competitive advantage
– Starbucks Stores 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 Trouble Brews at Starbucks - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Starbucks Stores to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 Starbucks Stores 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Starbucks Stores 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.
Manufacturing automation
– Starbucks Stores 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.
Threats Trouble Brews at Starbucks External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Trouble Brews at Starbucks are -
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 Stores in the Sales & Marketing sector and impact the bottomline of the organization.
Increasing wage structure of Starbucks Stores
– 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 Starbucks Stores.
Shortening product life cycle
– it is one of the major threat that Starbucks Stores is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Stores business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Starbucks Stores 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.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Starbucks Stores 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 Trouble Brews at Starbucks .
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Trouble Brews at Starbucks, Starbucks Stores 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 .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Starbucks Stores with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Stores needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
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 Stores.
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 Stores 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 Stores 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.
Weighted SWOT Analysis of Trouble Brews at 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 Trouble Brews at 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 Trouble Brews at 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 Trouble Brews at 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 Trouble Brews at 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 Stores needs to make to build a sustainable competitive advantage.
