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 - – geopolitical disruptions, increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, wage bills are increasing, increasing energy prices, increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization,
challanges to central banks by blockchain based private currencies, increasing transportation and logistics costs, 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 -
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 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.
Operational resilience
– The operational resilience strategy in the Starbucks Corporation: Financial Analysis of a Business Strategy 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.
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.
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.
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.
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.
Effective Research and Development (R&D)
– Starbucks Financial 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 Corporation: Financial Analysis of a Business Strategy - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– 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.
Cross disciplinary teams
– Horizontal connected teams at the Starbucks Financial 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.
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.
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.
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 -
Skills based hiring
– The stress on hiring functional specialists at Starbucks Financial 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 to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Starbucks Financial is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Starbucks Corporation: Financial Analysis of a Business Strategy can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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.
Interest costs
– Compare to the competition, Starbucks Financial 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 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.
No frontier risks strategy
– After analyzing the HBR case study Starbucks Corporation: Financial Analysis of a Business Strategy, it seems that company is thinking about the frontier risks that can impact Leadership & Managing People 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.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Starbucks Corporation: Financial Analysis of a Business Strategy, it seems that the employees of Starbucks Financial 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.
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 Financial supply chain. Even after few cautionary changes mentioned in the HBR case study - Starbucks Corporation: Financial Analysis of a Business Strategy, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Starbucks Financial vulnerable to further global disruptions in South East Asia.
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 bargaining power of channel partners
– Because of the regulatory requirements, Kathleen Hevert suggests that, Starbucks Financial 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.
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 -
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.
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.
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.
Manufacturing automation
– Starbucks Financial can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People 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.
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.
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.
Buying journey improvements
– Starbucks Financial can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Starbucks Corporation: Financial Analysis of a Business Strategy 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Starbucks Financial 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 Financial 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.
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.
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.
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.
Learning at scale
– Online learning technologies has now opened space for Starbucks Financial 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.
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 Financial can use these opportunities to build new business models that can help the communities that Starbucks Financial operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
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 -
High dependence on third party suppliers
– Starbucks Financial 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.
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 Financial 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.
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 .
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.
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. Starbucks Financial needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Starbucks Financial with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Starbucks Financial 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 Starbucks Corporation: Financial Analysis of a Business Strategy .
Stagnating economy with rate increase
– Starbucks Financial 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.
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.
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.
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.