Howard Schultz and Starbucks Coffee Company SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Innovation & Entrepreneurship
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Howard Schultz and Starbucks Coffee Company
Investigates the entrepreneur's strategic initiatives to develop a mass market for specialty coffee in the 1980s and 1990s. These initiatives included the development of premium products, rapid expansion of company-owned stores--each with attractive retail environments and responsive customer service--and, especially, the creation of a strong brand. Also devotes considerable attention to how Schultz built the Starbucks organization, examining the consistent emphasis that he and his colleagues placed on the company's relationship with its employees, how Schultz financed Starbucks' early expansion, how vertical integration ensured quality control, and how--strategically and operationally--the company managed its phenomenal domestic and international growth after 1993.
Swot Analysis of "Howard Schultz and Starbucks Coffee Company" written by Nancy F. Koehn includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Schultz Starbucks facing as an external strategic factors. Some of the topics covered in Howard Schultz and Starbucks Coffee Company case study are - Strategic Management Strategies, Collaboration, Customers, Entrepreneurship, Government, Innovation, IT, Leadership, Leading teams, Mergers & acquisitions and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Howard Schultz and Starbucks Coffee Company casestudy better are - – central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, increasing transportation and logistics costs, geopolitical disruptions, increasing energy prices,
cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Howard Schultz and Starbucks Coffee Company
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Howard Schultz and Starbucks Coffee Company case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Schultz Starbucks, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Schultz Starbucks 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 Howard Schultz and Starbucks Coffee Company can be done for the following purposes –
1. Strategic planning using facts provided in Howard Schultz and Starbucks Coffee Company case study
2. Improving business portfolio management of Schultz Starbucks
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Schultz Starbucks
Strengths Howard Schultz and Starbucks Coffee Company | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Schultz Starbucks in Howard Schultz and Starbucks Coffee Company Harvard Business Review case study are -
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Schultz Starbucks digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Schultz Starbucks 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.
Effective Research and Development (R&D)
– Schultz Starbucks 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 Howard Schultz and Starbucks Coffee Company - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– Schultz Starbucks 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 Nancy F. Koehn 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.
Ability to lead change in Innovation & Entrepreneurship field
– Schultz Starbucks 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 Schultz Starbucks in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Schultz Starbucks 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 Schultz Starbucks is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Howard Schultz and Starbucks Coffee Company Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High brand equity
– Schultz Starbucks has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Schultz Starbucks to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Schultz Starbucks
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Schultz Starbucks does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– Schultz Starbucks is one of the most innovative firm in sector. Manager in Howard Schultz and Starbucks Coffee Company Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to recruit top talent
– Schultz Starbucks is one of the leading recruiters in the industry. Managers in the Howard Schultz and Starbucks Coffee Company 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
– Schultz Starbucks has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Howard Schultz and Starbucks Coffee Company 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.
Successful track record of launching new products
– Schultz Starbucks has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Schultz Starbucks 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.
Superior customer experience
– The customer experience strategy of Schultz Starbucks in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses Howard Schultz and Starbucks Coffee Company | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Howard Schultz and Starbucks Coffee Company are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Howard Schultz and Starbucks Coffee Company, it seems that the employees of Schultz Starbucks don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Skills based hiring
– The stress on hiring functional specialists at Schultz Starbucks 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.
Increasing silos among functional specialists
– The organizational structure of Schultz Starbucks is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Schultz Starbucks needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Schultz Starbucks to focus more on services rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of Schultz Starbucks, firm in the HBR case study Howard Schultz and Starbucks Coffee Company needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
No frontier risks strategy
– After analyzing the HBR case study Howard Schultz and Starbucks Coffee Company, it seems that company is thinking about the frontier risks that can impact Innovation & Entrepreneurship 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Schultz Starbucks is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Howard Schultz and Starbucks Coffee Company can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High bargaining power of channel partners
– Because of the regulatory requirements, Nancy F. Koehn suggests that, Schultz Starbucks 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 decision making process
– As mentioned earlier in the report, Schultz Starbucks 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. Schultz Starbucks 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Schultz Starbucks 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.
Capital Spending Reduction
– Even during the low interest decade, Schultz Starbucks 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.
Aligning sales with marketing
– It come across in the case study Howard Schultz and Starbucks Coffee Company 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 Howard Schultz and Starbucks Coffee Company can leverage the sales team experience to cultivate customer relationships as Schultz Starbucks is planning to shift buying processes online.
Opportunities Howard Schultz and Starbucks Coffee Company | 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 Howard Schultz and Starbucks Coffee Company are -
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 Schultz Starbucks in the consumer business. Now Schultz Starbucks can target international markets with far fewer capital restrictions requirements than the existing system.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Schultz Starbucks 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 Schultz Starbucks to hire the very best people irrespective of their geographical location.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Schultz Starbucks is facing challenges because of the dominance of functional experts in the organization. Howard Schultz and Starbucks Coffee Company 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Innovation & Entrepreneurship industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Schultz Starbucks 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. Schultz Starbucks 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Schultz Starbucks can use these opportunities to build new business models that can help the communities that Schultz Starbucks operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Learning at scale
– Online learning technologies has now opened space for Schultz Starbucks 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.
Buying journey improvements
– Schultz Starbucks can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Howard Schultz and Starbucks Coffee Company 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.
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 Schultz Starbucks 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Innovation & Entrepreneurship industry, but it has also influenced the consumer preferences. Schultz Starbucks can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Using analytics as competitive advantage
– Schultz Starbucks 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 Howard Schultz and Starbucks Coffee Company - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Schultz Starbucks to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Schultz Starbucks in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Innovation & Entrepreneurship segment, and it will provide faster access to the consumers.
Loyalty marketing
– Schultz Starbucks 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.
Creating value in data economy
– The success of analytics program of Schultz Starbucks has opened avenues for new revenue streams for the organization in the industry. This can help Schultz Starbucks to build a more holistic ecosystem as suggested in the Howard Schultz and Starbucks Coffee Company case study. Schultz Starbucks can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats Howard Schultz and Starbucks Coffee Company External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Howard Schultz and Starbucks Coffee Company are -
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. Schultz Starbucks needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Schultz Starbucks with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Schultz Starbucks.
Shortening product life cycle
– it is one of the major threat that Schultz Starbucks is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Schultz Starbucks 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 Howard Schultz and Starbucks Coffee Company .
Consumer confidence and its impact on Schultz Starbucks 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 Schultz Starbucks in the Innovation & Entrepreneurship industry. The Innovation & Entrepreneurship 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 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.
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 Schultz Starbucks in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
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.
Environmental challenges
– Schultz Starbucks 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. Schultz Starbucks can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
High dependence on third party suppliers
– Schultz Starbucks 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.
Stagnating economy with rate increase
– Schultz Starbucks 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.
Weighted SWOT Analysis of Howard Schultz and Starbucks Coffee Company 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 Howard Schultz and Starbucks Coffee Company 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 Howard Schultz and Starbucks Coffee Company 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 Howard Schultz and Starbucks Coffee Company 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 Howard Schultz and Starbucks Coffee Company 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 Schultz Starbucks needs to make to build a sustainable competitive advantage.