Starbucks (SBUX) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Grocery)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Starbucks (Germany)
Based on various researches at Oak Spring University , Starbucks is operating in a macro-environment that has been destablized by – increasing inequality as vast percentage of new income is going to the top 1%, technology disruption, talent flight as more people leaving formal jobs, increasing energy prices, central banks are concerned over increasing inflation, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google,
increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Starbucks can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Starbucks, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which 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 Starbucks can be done for the following purposes –
1. Strategic planning of Starbucks
2. Improving business portfolio management of Starbucks
3. Assessing feasibility of the new initiative in Germany
4. Making a Retail (Grocery) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Starbucks
Strengths of Starbucks | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Starbucks are -
Operational resilience
– The operational resilience strategy of Starbucks comprises – understanding the underlying the factors in the Retail (Grocery) 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.
Highly skilled collaborators
– Starbucks has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Grocery) industry. Secondly the value chain collaborators of Starbucks have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– 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 Retail (Grocery) industry. The technology infrastructure of Germany is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Low bargaining power of suppliers
– Suppliers of Starbucks in the Services sector have low bargaining power. Starbucks has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Starbucks to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Retail (Grocery) industry
– Starbucks has clearly differentiated products in the market place. This has enabled Starbucks to fetch slight price premium compare to the competitors in the Retail (Grocery) industry. The sustainable margins have also helped Starbucks to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Starbucks has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Starbucks staying ahead in the Retail (Grocery) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Starbucks is present in almost all the verticals within the Retail (Grocery) industry. This has provided Starbucks 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.
Digital Transformation in Retail (Grocery) industry
- digital transformation varies from industry to industry. For Starbucks digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. 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.
High brand equity
– Starbucks has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Starbucks to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the 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 recruit top talent
– Starbucks is one of the leading players in the Retail (Grocery) industry in Germany. It is in a position to attract the best talent available in Germany. The firm has a robust talent identification program that helps in identifying the brightest.
High switching costs
– The high switching costs that 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 of Starbucks | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Starbucks are -
Workers concerns about automation
– As automation is fast increasing in the Retail (Grocery) industry, Starbucks 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Starbucks is slow explore the new channels of communication. These new channels of communication can help Starbucks to provide better information regarding Retail (Grocery) products and services. It can also build an online community to further reach out to potential customers.
High dependence on Starbucks ‘s star products
– The top 2 products and services of Starbucks still accounts for major business revenue. This dependence on star products in Retail (Grocery) industry has resulted into insufficient focus on developing new products, even though Starbucks has relatively successful track record of launching new products.
Skills based hiring in Retail (Grocery) industry
– The stress on hiring functional specialists at 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.
Low market penetration in new markets
– Outside its home market of Germany, Starbucks needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow decision making process
– As mentioned earlier in the report, 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 Retail (Grocery) industry over the last five years. 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 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 supply chain. Even after few cautionary changes, Starbucks is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Starbucks vulnerable to further global disruptions in South East Asia.
Capital Spending Reduction
– Even during the low interest decade, 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 Retail (Grocery) industry using digital technology.
Employees’ less understanding of Starbucks strategy
– From the outside it seems that the employees of 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.
High cash cycle compare to competitors
Starbucks has a high cash cycle compare to other players in the Retail (Grocery) 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
– From the outside it seems that Starbucks needs to have more collaboration between its sales team and marketing team. Sales professionals in the Retail (Grocery) industry have deep experience in developing customer relationships. Marketing department at Starbucks can leverage the sales team experience to cultivate customer relationships as Starbucks is planning to shift buying processes online.
Starbucks Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Starbucks are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Starbucks in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Grocery) industry, and it will provide faster access to the consumers.
Use of Bitcoin and other crypto currencies for transactions in Retail (Grocery) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Starbucks in the Retail (Grocery) industry. Now Starbucks can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– Starbucks can improve the customer journey of consumers in the Retail (Grocery) industry by using analytics and artificial intelligence. It 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.
Learning at scale
– Online learning technologies has now opened space for 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, 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 Starbucks to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Leveraging digital technologies
– 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.
Loyalty marketing
– 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.
Manufacturing automation
– Starbucks can use the latest technology developments to improve its manufacturing and designing process in Retail (Grocery) sector. 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for 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 Starbucks to hire the very best people irrespective of their geographical location.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Retail (Grocery) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. 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. 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.
Using analytics as competitive advantage
– Starbucks has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Grocery) sector. This continuous investment in analytics has enabled Starbucks to build a competitive advantage using analytics. The analytics driven competitive advantage can help Starbucks to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help Starbucks to increase its market reach. 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.
Developing new processes and practices
– Starbucks can develop new processes and procedures in Retail (Grocery) 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 Starbucks External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Starbucks are -
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, 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 Starbucks prominent markets.
Environmental challenges
– 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. Starbucks can take advantage of this fund but it will also bring new competitors in the Retail (Grocery) industry.
Shortening product life cycle
– it is one of the major threat that Starbucks is facing in Retail (Grocery) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Grocery) industry are lowering. It can presents Starbucks with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Grocery) sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Starbucks in Retail (Grocery) industry. The Retail (Grocery) 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.
High dependence on third party suppliers
– 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.
Regulatory challenges
– 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 Retail (Grocery) industry regulations.
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 in the Retail (Grocery) sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Starbucks has witnessed rapid integration of technology during Covid-19 in the Retail (Grocery) industry. As one of the leading players in the industry, Starbucks needs to keep up with the evolution of technology in the Retail (Grocery) 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
– 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 Retail (Grocery) industry.
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 Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Starbucks 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 Starbucks 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 Starbucks 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 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 needs to make to build a sustainable competitive advantage.