Starbucks Corporation: Financial Analysis of a Business Strategy SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Leadership & Managing People
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Starbucks Corporation: Financial Analysis of a Business Strategy
This note introduces calculation and interpretation of basic financial analysis, including common size income statements and financial ratios. It emphasizes linkages between financial results and operating strategy. It uses financial results for Starbucks Corporation for fiscal 2010 through 2012 to provide context for financial analysis interpretation. Starbucks' global presence and widely familiar business model make it a particularly helpful vehicle for illustrating interpretation of financial analysis. In addition to profitability ratios, asset management ratios, and financial leverage ratios, DuPont analysis of return on equity (ROE) is introduced to illustrate how profitability, asset utilization, and financial leverage come together to measure ability to generate return to shareholders. This note does not draw definitive conclusions about whether Starbucks is effectively managed, but it illustrates how Starbucks' operating strategy is reflected in its financial results. It demonstrates that financial results tell an intuitive story about a firm's business model and operating strategy. This note assumes a working knowledge of income statements and balance sheets. Its intended audience is non-financial managers in an executive program wishing to understand how their operating decisions affect corporate-level financial performance. It also is useful for MBA students in a core finance or accounting course.
Swot Analysis of "Starbucks Corporation: Financial Analysis of a Business Strategy" written by Kathleen Hevert includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Starbucks Financial facing as an external strategic factors. Some of the topics covered in Starbucks Corporation: Financial Analysis of a Business Strategy case study are - Strategic Management Strategies, Financial management and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Starbucks Corporation: Financial Analysis of a Business Strategy casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, wage bills are increasing, geopolitical disruptions, there is increasing trade war between United States & China, increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs,
increasing energy prices, technology disruption, etc
Introduction to SWOT Analysis of Starbucks Corporation: Financial Analysis of a Business Strategy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Starbucks Corporation: Financial Analysis of a Business Strategy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Starbucks Financial, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Starbucks Financial 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 Starbucks Corporation: Financial Analysis of a Business Strategy can be done for the following purposes –
1. Strategic planning using facts provided in Starbucks Corporation: Financial Analysis of a Business Strategy case study
2. Improving business portfolio management of Starbucks Financial
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Starbucks Financial
Strengths Starbucks Corporation: Financial Analysis of a Business Strategy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Starbucks Financial in Starbucks Corporation: Financial Analysis of a Business Strategy Harvard Business Review case study are -
Sustainable margins compare to other players in Leadership & Managing People industry
– Starbucks Corporation: Financial Analysis of a Business Strategy firm has clearly differentiated products in the market place. This has enabled Starbucks Financial to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Starbucks Financial to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Starbucks Financial has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Starbucks Financial 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.
Highly skilled collaborators
– Starbucks Financial 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 Corporation: Financial Analysis of a Business Strategy HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Starbucks Financial has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Starbucks Financial to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Starbucks Financial in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Leadership & Managing People field
– Starbucks Financial 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 Financial in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Starbucks Financial 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 Financial is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Starbucks Corporation: Financial Analysis of a Business Strategy Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Starbucks Financial is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Low bargaining power of suppliers
– Suppliers of Starbucks Financial in the sector have low bargaining power. Starbucks Corporation: Financial Analysis of a Business Strategy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Starbucks Financial to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– Starbucks Financial is one of the leading recruiters in the industry. Managers in the Starbucks Corporation: Financial Analysis of a Business Strategy are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High switching costs
– The high switching costs that Starbucks Financial 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.
Analytics focus
– Starbucks Financial 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 Kathleen Hevert 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.
Weaknesses Starbucks Corporation: Financial Analysis of a Business Strategy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Starbucks Corporation: Financial Analysis of a Business Strategy are -
Increasing silos among functional specialists
– The organizational structure of Starbucks Financial is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Starbucks Financial needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Starbucks Financial to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though Starbucks Financial 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 - Starbucks Corporation: Financial Analysis of a Business Strategy should strive to include more intangible value offerings along with its core products and services.
Slow to strategic competitive environment developments
– As Starbucks Corporation: Financial Analysis of a Business Strategy HBR case study mentions - Starbucks Financial 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.
Aligning sales with marketing
– It come across in the case study Starbucks Corporation: Financial Analysis of a Business Strategy 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 Corporation: Financial Analysis of a Business Strategy can leverage the sales team experience to cultivate customer relationships as Starbucks Financial 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 Starbucks Corporation: Financial Analysis of a Business Strategy, in the dynamic environment Starbucks Financial has struggled to respond to the nimble upstart competition. Starbucks Financial has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Low market penetration in new markets
– Outside its home market of Starbucks Financial, firm in the HBR case study Starbucks Corporation: Financial Analysis of a Business Strategy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Starbucks Corporation: Financial Analysis of a Business Strategy, is just above the industry average. Starbucks Financial 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Starbucks Financial 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Starbucks Corporation: Financial Analysis of a Business Strategy has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Starbucks Financial 's lucrative customers.
Need for greater diversity
– Starbucks Financial has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Capital Spending Reduction
– Even during the low interest decade, Starbucks Financial 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.
Opportunities Starbucks Corporation: Financial Analysis of a Business Strategy | 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 Corporation: Financial Analysis of a Business Strategy are -
Using analytics as competitive advantage
– Starbucks Financial 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 Starbucks Corporation: Financial Analysis of a Business Strategy - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Starbucks Financial to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 Financial 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 Leadership & Managing People industry, but it has also influenced the consumer preferences. Starbucks Financial can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Starbucks Financial to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Starbucks Financial to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help Starbucks Financial to increase its market reach. Starbucks Financial 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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Starbucks Financial in the consumer business. Now Starbucks Financial can target international markets with far fewer capital restrictions requirements than the existing system.
Building a culture of innovation
– managers at Starbucks Financial 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 Leadership & Managing People segment.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Starbucks Financial is facing challenges because of the dominance of functional experts in the organization. Starbucks Corporation: Financial Analysis of a Business Strategy 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.
Loyalty marketing
– Starbucks Financial 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 Starbucks Financial has opened avenues for new revenue streams for the organization in the industry. This can help Starbucks Financial to build a more holistic ecosystem as suggested in the Starbucks Corporation: Financial Analysis of a Business Strategy case study. Starbucks Financial can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Starbucks Financial in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
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 Financial can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Starbucks Financial can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Starbucks Corporation: Financial Analysis of a Business Strategy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Starbucks Corporation: Financial Analysis of a Business Strategy are -
Environmental challenges
– Starbucks Financial 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 Financial can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Starbucks Financial can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Starbucks Financial in the Leadership & Managing People industry. The Leadership & Managing People 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.
Regulatory challenges
– Starbucks Financial 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 Leadership & Managing People industry regulations.
Shortening product life cycle
– it is one of the major threat that Starbucks Financial is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Starbucks Financial
– 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 Financial.
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 Financial in the Leadership & Managing People sector and impact the bottomline of the organization.
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 Financial.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Starbucks Financial 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 Financial 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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Starbucks Financial business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Starbucks Corporation: Financial Analysis of a Business Strategy, Starbucks Financial may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
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.
Weighted SWOT Analysis of Starbucks Corporation: Financial Analysis of a Business Strategy 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 Corporation: Financial Analysis of a Business Strategy 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 Corporation: Financial Analysis of a Business Strategy 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 Corporation: Financial Analysis of a Business Strategy 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 Corporation: Financial Analysis of a Business Strategy 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 Financial needs to make to build a sustainable competitive advantage.
