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 - – cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, increasing transportation and logistics costs, there is increasing trade war between United States & China, technology disruption, talent flight as more people leaving formal jobs, there is backlash against globalization,
competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, 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 -
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.
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.
Diverse revenue streams
– Schultz Starbucks is present in almost all the verticals within the industry. This has provided firm in Howard Schultz and Starbucks Coffee Company 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.
Cross disciplinary teams
– Horizontal connected teams at the Schultz Starbucks 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 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.
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.
Highly skilled collaborators
– Schultz Starbucks 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 Howard Schultz and Starbucks Coffee Company HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
High switching costs
– The high switching costs that Schultz Starbucks 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.
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 -
High cash cycle compare to competitors
Schultz Starbucks has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Howard Schultz and Starbucks Coffee Company, in the dynamic environment Schultz Starbucks has struggled to respond to the nimble upstart competition. Schultz Starbucks has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to strategic competitive environment developments
– As Howard Schultz and Starbucks Coffee Company HBR case study mentions - Schultz Starbucks 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Howard Schultz and Starbucks Coffee Company 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 Schultz Starbucks 's lucrative customers.
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.
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.
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.
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Howard Schultz and Starbucks Coffee Company, is just above the industry average. Schultz Starbucks needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
No frontier risks strategy
– After analyzing the HBR case study 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.
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 -
Better consumer reach
– The expansion of the 5G network will help Schultz Starbucks to increase its market reach. Schultz Starbucks 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.
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.
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.
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.
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.
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.
Building a culture of innovation
– managers at Schultz Starbucks 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.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Schultz Starbucks can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– Schultz Starbucks can use the latest technology developments to improve its manufacturing and designing process in Innovation & Entrepreneurship 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.
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.
Developing new processes and practices
– Schultz Starbucks 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.
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 -
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.
Regulatory challenges
– Schultz Starbucks 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.
Increasing wage structure of Schultz Starbucks
– 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 Schultz Starbucks.
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.
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.
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 Schultz Starbucks business can come under increasing regulations regarding data privacy, data security, etc.
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. Schultz Starbucks can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Schultz Starbucks 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.
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.
Technology acceleration in Forth Industrial Revolution
– Schultz Starbucks has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Schultz Starbucks 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.
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.
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.