The case discusses the international expansion efforts of the global coffee retailer, Starbucks. Starbucks had proliferated in several regions of the world, many of which had historical ties to a coffee heritage such as Western Europe. It had also challenged traditionally tea drinking countries such as Japan and China. In implementing its globalization strategy, the company relies on a set of sound principles that call for astute partner selection, real estate management, and managing the brands. While the company had witnessed critical success in most of its major markets overseas, it appeared to be facing significant challenges in every region. For example, in Japan, revenues had declined and so too profitability. New copycat competitors had emerged and many had started questioning the validity of Starbucks' market saturation strategies. In emerging countries, such as Mexico, China and India the company saw very good potential but this rosy picture was somewhat dampened by the ability of the consumer to pay close to $3 for a cup of coffee when local versions retailed at $0.50. The case with several questions related to the future of Starbucks in the global arena: whether it should alter its new store growth strategy, whether it should rethink its uniform pricing policy in emerging markets where affordability was of paramount importance, and where the next major thrust ought to be.
Swot Analysis of "Planet Starbucks (B)" written by Michael Moffett, Kannan Ramaswamy includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Starbucks Coffee facing as an external strategic factors. Some of the topics covered in Planet Starbucks (B) case study are - Strategic Management Strategies, and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Planet Starbucks (B) casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing government debt because of Covid-19 spendings, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, technology disruption, digital marketing is dominated by two big players Facebook and Google,
increasing commodity prices, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Planet Starbucks (B)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Planet Starbucks (B) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Starbucks Coffee, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Starbucks Coffee 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 Planet Starbucks (B) can be done for the following purposes –
1. Strategic planning using facts provided in Planet Starbucks (B) case study
2. Improving business portfolio management of Starbucks Coffee
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Starbucks Coffee
Strengths Planet Starbucks (B) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Starbucks Coffee in Planet Starbucks (B) Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Starbucks Coffee 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.
High switching costs
– The high switching costs that Starbucks Coffee 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.
Operational resilience
– The operational resilience strategy in the Planet Starbucks (B) 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.
Effective Research and Development (R&D)
– Starbucks Coffee 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 Planet Starbucks (B) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Starbucks Coffee is present in almost all the verticals within the industry. This has provided firm in Planet Starbucks (B) 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.
Highly skilled collaborators
– Starbucks Coffee 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 Planet Starbucks (B) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management
– Starbucks Coffee is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of Starbucks Coffee in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Starbucks Coffee has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Starbucks Coffee to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– Starbucks Coffee is one of the leading recruiters in the industry. Managers in the Planet Starbucks (B) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Strategy & Execution industry
– Planet Starbucks (B) firm has clearly differentiated products in the market place. This has enabled Starbucks Coffee to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Starbucks Coffee to invest into research and development (R&D) and innovation.
Innovation driven organization
– Starbucks Coffee is one of the most innovative firm in sector. Manager in Planet Starbucks (B) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses Planet Starbucks (B) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Planet Starbucks (B) are -
No frontier risks strategy
– After analyzing the HBR case study Planet Starbucks (B), it seems that company is thinking about the frontier risks that can impact Strategy & Execution 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.
Increasing silos among functional specialists
– The organizational structure of Starbucks Coffee is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Starbucks Coffee needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Starbucks Coffee to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though Starbucks Coffee 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 - Planet Starbucks (B) should strive to include more intangible value offerings along with its core products and services.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Planet Starbucks (B) 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 Coffee has relatively successful track record of launching new products.
Lack of clear differentiation of Starbucks Coffee products
– To increase the profitability and margins on the products, Starbucks Coffee 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 Planet Starbucks (B) 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 Coffee 's lucrative customers.
Interest costs
– Compare to the competition, Starbucks Coffee 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Starbucks Coffee is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Planet Starbucks (B) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Slow decision making process
– As mentioned earlier in the report, Starbucks Coffee 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 Coffee 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.
Capital Spending Reduction
– Even during the low interest decade, Starbucks Coffee 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.
Skills based hiring
– The stress on hiring functional specialists at Starbucks Coffee 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.
Opportunities Planet Starbucks (B) | 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 Planet Starbucks (B) are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Starbucks Coffee 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 Coffee to hire the very best people irrespective of their geographical location.
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 Coffee 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.
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 Coffee can use these opportunities to build new business models that can help the communities that Starbucks Coffee operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Manufacturing automation
– Starbucks Coffee can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution 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.
Leveraging digital technologies
– Starbucks Coffee 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Starbucks Coffee 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, Planet Starbucks (B), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– Starbucks Coffee can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Planet Starbucks (B) 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.
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 Coffee in the consumer business. Now Starbucks Coffee can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Starbucks Coffee to increase its market reach. Starbucks Coffee 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.
Creating value in data economy
– The success of analytics program of Starbucks Coffee has opened avenues for new revenue streams for the organization in the industry. This can help Starbucks Coffee to build a more holistic ecosystem as suggested in the Planet Starbucks (B) case study. Starbucks Coffee can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Starbucks Coffee 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.
Loyalty marketing
– Starbucks Coffee 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Starbucks Coffee in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Threats Planet Starbucks (B) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Planet Starbucks (B) are -
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Consumer confidence and its impact on Starbucks Coffee 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.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Starbucks Coffee can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Starbucks Coffee 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.
Environmental challenges
– Starbucks Coffee 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 Coffee can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Regulatory challenges
– Starbucks Coffee 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 Strategy & Execution industry regulations.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Starbucks Coffee in the Strategy & Execution industry. The Strategy & Execution 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.
Technology acceleration in Forth Industrial Revolution
– Starbucks Coffee has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Starbucks Coffee needs to keep up with the evolution of technology in the Strategy & Execution 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.
High dependence on third party suppliers
– Starbucks Coffee 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.
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 Coffee business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of Starbucks Coffee
– 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 Coffee.
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 Coffee.
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 Coffee 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 Planet Starbucks (B) 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 Planet Starbucks (B) 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 Planet Starbucks (B) 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 Planet Starbucks (B) 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 Planet Starbucks (B) 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 Coffee needs to make to build a sustainable competitive advantage.
