Starbucks Coffee Company in the 21st Century SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

Case Study SWOT Analysis Solution

Case Study Description of Starbucks Coffee Company in the 21st Century

The case explores the opportunities and challenges confronting Starbucks in the early 21st century. For more than 15 years, Starbucks has grown swiftly and successfully, helping create a large, dynamic market for specialty coffee, building one of the world's most powerful brands, and forging a new business model based on industry disrepair and responsible global citizenship. In 2008, Starbucks leadership faces a range of issues--inside and out of the company--related to that success. This case examines these issues in the context of a changing economy, increased competition, evolving consumer priorities, and the organization's place on the larger global stage.

Authors :: Nancy F. Koehn, Marya Besharov, Katherine Miller

Topics :: Innovation & Entrepreneurship

Tags :: Entrepreneurship, Growth strategy, International business, Leadership, Social responsibility, SWOT Analysis, SWOT Matrix, TOWS, Weighted SWOT Analysis

Swot Analysis of "Starbucks Coffee Company in the 21st Century" written by Nancy F. Koehn, Marya Besharov, Katherine Miller includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Starbucks 21st facing as an external strategic factors. Some of the topics covered in Starbucks Coffee Company in the 21st Century case study are - Strategic Management Strategies, Entrepreneurship, Growth strategy, International business, Leadership, Social responsibility and Innovation & Entrepreneurship.

Some of the macro environment factors that can be used to understand the Starbucks Coffee Company in the 21st Century casestudy better are - – technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, there is backlash against globalization, increasing government debt because of Covid-19 spendings, central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, etc

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Introduction to SWOT Analysis of Starbucks Coffee Company in the 21st Century

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Starbucks Coffee Company in the 21st Century case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Starbucks 21st, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Starbucks 21st 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Starbucks Coffee Company in the 21st Century can be done for the following purposes –
1. Strategic planning using facts provided in Starbucks Coffee Company in the 21st Century case study
2. Improving business portfolio management of Starbucks 21st
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 Starbucks 21st

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Strengths Starbucks Coffee Company in the 21st Century | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Starbucks 21st in Starbucks Coffee Company in the 21st Century Harvard Business Review case study are -

Diverse revenue streams

– Starbucks 21st is present in almost all the verticals within the industry. This has provided firm in Starbucks Coffee Company in the 21st Century 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 21st 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 Coffee Company in the 21st Century HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.

High brand equity

– Starbucks 21st has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Starbucks 21st to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Ability to lead change in Innovation & Entrepreneurship field

– Starbucks 21st is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Starbucks 21st in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Strong track record of project management

– Starbucks 21st is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Sustainable margins compare to other players in Innovation & Entrepreneurship industry

– Starbucks Coffee Company in the 21st Century firm has clearly differentiated products in the market place. This has enabled Starbucks 21st to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Starbucks 21st to invest into research and development (R&D) and innovation.

Effective Research and Development (R&D)

– Starbucks 21st 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 Starbucks Coffee Company in the 21st Century - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Organizational Resilience of Starbucks 21st

– The covid-19 pandemic has put organizational resilience at the centre of everthing that Starbucks 21st does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Analytics focus

– Starbucks 21st 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, Marya Besharov, Katherine Miller 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.

Learning organization

- Starbucks 21st is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Starbucks 21st is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Starbucks Coffee Company in the 21st Century Harvard Business Review case study emphasize – knowledge, initiative, and innovation.

Low bargaining power of suppliers

– Suppliers of Starbucks 21st in the sector have low bargaining power. Starbucks Coffee Company in the 21st Century has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Starbucks 21st to manage not only supply disruptions but also source products at highly competitive prices.

Innovation driven organization

– Starbucks 21st is one of the most innovative firm in sector. Manager in Starbucks Coffee Company in the 21st Century Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.

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Weaknesses Starbucks Coffee Company in the 21st Century | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Starbucks Coffee Company in the 21st Century are -

Slow decision making process

– As mentioned earlier in the report, Starbucks 21st 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 21st 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, Starbucks 21st 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.

Interest costs

– Compare to the competition, Starbucks 21st has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.

High 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 21st supply chain. Even after few cautionary changes mentioned in the HBR case study - Starbucks Coffee Company in the 21st Century, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Starbucks 21st vulnerable to further global disruptions in South East Asia.

Aligning sales with marketing

– It come across in the case study Starbucks Coffee Company in the 21st Century 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 Coffee Company in the 21st Century can leverage the sales team experience to cultivate customer relationships as Starbucks 21st is planning to shift buying processes online.

Capital Spending Reduction

– Even during the low interest decade, Starbucks 21st 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.

Slow to strategic competitive environment developments

– As Starbucks Coffee Company in the 21st Century HBR case study mentions - Starbucks 21st 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.

Increasing silos among functional specialists

– The organizational structure of Starbucks 21st is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Starbucks 21st needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Starbucks 21st to focus more on services rather than just following the product oriented approach.

Low market penetration in new markets

– Outside its home market of Starbucks 21st, firm in the HBR case study Starbucks Coffee Company in the 21st Century needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

High bargaining power of channel partners

– Because of the regulatory requirements, Nancy F. Koehn, Marya Besharov, Katherine Miller suggests that, Starbucks 21st 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 Coffee Company in the 21st Century, is just above the industry average. Starbucks 21st 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.

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Opportunities Starbucks Coffee Company in the 21st Century | 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 Coffee Company in the 21st Century are -

Creating value in data economy

– The success of analytics program of Starbucks 21st has opened avenues for new revenue streams for the organization in the industry. This can help Starbucks 21st to build a more holistic ecosystem as suggested in the Starbucks Coffee Company in the 21st Century case study. Starbucks 21st can build new products and services such as - data insight services, data privacy related products, data based consulting services, 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 21st can use these opportunities to build new business models that can help the communities that Starbucks 21st operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.

Building a culture of innovation

– managers at Starbucks 21st 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 Innovation & Entrepreneurship segment.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Starbucks 21st 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 Coffee Company in the 21st Century, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Better consumer reach

– The expansion of the 5G network will help Starbucks 21st to increase its market reach. Starbucks 21st 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.

Leveraging digital technologies

– Starbucks 21st 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.

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 21st 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 21st 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.

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. Starbucks 21st can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Starbucks 21st 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.

Developing new processes and practices

– Starbucks 21st can develop new processes and procedures in Innovation & Entrepreneurship industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Starbucks 21st is facing challenges because of the dominance of functional experts in the organization. Starbucks Coffee Company in the 21st Century 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.

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 21st can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Learning at scale

– Online learning technologies has now opened space for Starbucks 21st 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.

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Threats Starbucks Coffee Company in the 21st Century External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats mentioned in the HBR case study Starbucks Coffee Company in the 21st Century are -

Environmental challenges

– Starbucks 21st 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 21st can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.

Technology acceleration in Forth Industrial Revolution

– Starbucks 21st has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Starbucks 21st needs to keep up with the evolution of technology in the Innovation & Entrepreneurship 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 21st 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.

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 21st in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.

Regulatory challenges

– Starbucks 21st 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 Innovation & Entrepreneurship industry regulations.

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.

Easy access to finance

– Easy access to finance in Innovation & Entrepreneurship field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Starbucks 21st can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Shortening product life cycle

– it is one of the major threat that Starbucks 21st is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Increasing wage structure of Starbucks 21st

– 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 21st.

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 21st 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.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Starbucks 21st with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.

Consumer confidence and its impact on Starbucks 21st 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.

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 21st.

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Weighted SWOT Analysis of Starbucks Coffee Company in the 21st Century 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 Coffee Company in the 21st Century 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 Coffee Company in the 21st Century 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 Coffee Company in the 21st Century 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 Coffee Company in the 21st Century 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 21st needs to make to build a sustainable competitive advantage.

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