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 - – increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation,
there is increasing trade war between United States & China, increasing transportation and logistics costs, 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 -
Operational resilience
– The operational resilience strategy in the Howard Schultz and Starbucks Coffee Company 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.
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.
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.
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.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Howard Schultz and Starbucks Coffee Company firm has clearly differentiated products in the market place. This has enabled Schultz Starbucks to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Schultz Starbucks to invest into research and development (R&D) and innovation.
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.
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.
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.
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.
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.
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.
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 -
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.
Products dominated business model
– Even though Schultz Starbucks 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 - Howard Schultz and Starbucks Coffee Company should strive to include more intangible value offerings along with its core products and services.
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.
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.
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 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 Schultz Starbucks supply chain. Even after few cautionary changes mentioned in the HBR case study - Howard Schultz and Starbucks Coffee Company, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Schultz Starbucks vulnerable to further global disruptions in South East Asia.
Interest costs
– Compare to the competition, Schultz Starbucks 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.
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.
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.
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.
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.
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 -
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Schultz Starbucks 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, Howard Schultz and Starbucks Coffee Company, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
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.
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.
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.
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.
Leveraging digital technologies
– Schultz Starbucks 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.
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.
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.
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.
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.
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 -
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Howard Schultz and Starbucks Coffee Company, Schultz Starbucks may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Innovation & Entrepreneurship .
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.
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.
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 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 .
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.
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.
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.
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.
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.
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.