swot analysis - Introduction SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of planning and helps marketers to focus on key issues. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors. The internal factors may be viewed as strengths or weaknesses depending upon their impact on the organization's objectives. What may represent strengths with respect to one objective may be weaknesses for another objective. The factors may include all of the 4P's; as well as personnel, finance, manufacturing capabilities, and so on. The external factors may include macroeconomic matters, technological change, legislation, and sociocultural changes, as well as changes in the marketplace or competitive position. The results are often presented in the form of a matrix. SWOT analysis is just one method of categorization and has its own weaknesses. For example, it may tend to persuade companies to compile lists rather than think about what is really important in achieving objectives. It also presents the resulting lists uncritically and without clear prioritization so that, for example, weak opportunities may appear to balance strong threats. Strengths to Build Upon Weaknesses to Overcome Opportunities to Exploit Threats to Overcome I have chosen the coffee chain Starbuks for swot analysis. introduction
* In 1971 Starbucks opened operations in Seattle’s Pike Place Markets with the future aim of providing coffee to a number of restaurants and surrounding bars. With the recruitment of Howard Schultz who led the marketing and retail efforts of Starbucks. * In 1982, the company took a change in direction through the views of Schultz, who after visiting Italy tried to adapt the same principles in order to a strong bar culture. Schultz then utilized Starbucks ability to provide quality coffee beans and opened up a new store called Il Giornale, which brewed coffee from these particular beans. In 1987, Giornale had decided to take over the assets of Starbucks and also, further changed its name to Starbucks Corporation. By the end of the year,
Starbucks had increased the number of stores to 17 and furthered its location span by entering Chicago and Vancouver. * In 1990, the company took further steps forward with expansion of the Seattle headquarters and an increase in resources with the opening of a new roasting plant. Relationships and other ventures also took off during the early nineties as the company looked to development organizations to further its progress. *In 1995, the company really established its name with the opening of the 676th store as well as increasing the products in store with the addition of compact discs a result of a previously popular experiment with ‘in-house’ music. 1996, the company kept on stretching its reach by entering into the market of Japan, Singapore and Hawaii. This was achieved through joint ventures including the one formed with Sazaby Inc., which pushed through the development of coffee houses in Japan By the year 2000, things had progressed so far that 3,300 stores were already opened, the company had ventured into countries ranging from England to Australia & China. * By last quarter of 2008, total international stores became 5113 store & 11567 stores in United States. 2- Current situation The current international situation for Starbucks seems to be an emerging part of their business and the reorganization of this is proved by their aim to become a leading global company through making a difference in people’s lives all around the world. This goal is quite close to being achieved as proved the Starbucks current locations in international markets and the successfulness of these ventures. The current countries in which Starbucks are located in are: Australia, Bahrain, Canada, Hong Kong, Israel, Japan, Kuwait, Lebanon, Malaysia, New Zealand, Oman, Peoples Republic of China, Philippines, Qatar, Saudi Arabia, Singapore, South Korea, Switzerland, Taiwan, Thailand Current performance External Environment: Opportunities
Starbucks are very good at taking advantage of opportunties. In 2004 the company created a CD-burning service in their Santa Monica (California USA) cafe with Hewlett Packard, where customers create their own music CD. New products and services that can be retailed in their cafes, such as Fair Trade products.
The company has the opportunity to expand its global operations. New markets for coffee such as India and the Pacific Rim nations are beginning to emerge. Co-branding with other manufacturers of food and drink, and brand franchising to manufacturers of other goods and services both have potential.
• Starbucks Corporation is a very profitable organization, earning in excess of $600 million in 2004.The company generated revenue of more than $5000 million in the same year. It is a global coffee brand built upon a reputation for fine products and services. It has almost 9000 cafes in almost 40 countries. Starbucks was one of the Fortune Top 100 Companies to Work For in 2005. The company is a respected employer that values its workforce.
The organization has strong ethical values and an ethical mission statement as follows, 'Starbucks is committed to a role of environmental leadership in all facets of our business. 'Weaknesses. • Starbucks has a reputation for new product development and creativity. However, they remain vulnerable to the possibility that their innovation may falter over time. The organization has a strong presence in the United States of America with more than three quarters of their cafes located in the home market. It is often argued that they need to look for a portfolio of countries, in order to spread business risk. The organization is dependant on a main competitive advantage, the retail of coffee. This could make them slow to diversify into other sectors should the need arise.
Starbucks international operation was one of the major aspects of their success. , in the mid 1990s, with the market reaching saturation, Starbucks could no longer depend on the U.S. market for growth. To maintain its growth rates and to boost revenues, Starbucks had to venture abroad. Starbucks international presence is now in more than 25 countries and the United States of America. This presence is formed in three modes in entry that are Joint venture, licensing and wholly owned subsidiaries. This became a burden on the mother company in a later stage. That those types of entry moods need a lot of training, supervising, management assistance and technology transfer for the partner. This is along
with inability to engage in global strategic coordination. However, the success of Starbucks is not only to its aggressive expansion but also to its product innovation. Starbucks came out with new products to attract customers on different periods. Also diversification was one of the factors that Starbucks started to apply even on a small initiated base. That along with serving coffee, Starbucks also sold merchandise. In 1995, it started selling CDs of its famous in-house music program. It also entered into alliances withvarious players such as Canadian Airlines, United Air Lines, Starwood Hotels, and Barnes & Noble, Inc., to serve Starbucks coffee. Societal Environment Economics Economic factors are an important aspects that concern the nature and direction of the economy in which a firm operates. Starbucks also faced criticism from Non Governmental Organizations (NGOs) that urged the company to acquire certified coffee beans, ensuring that those coffee beans were grown and marketed under certain economic and social conditions. Furthermore, Starbucks faced problems due to economic recession in countries such as Switzerland, Germany, and Japan in the early 2000s, where it experienced declining sales and revenues. Moreover, a real expectation of huge recession during the next year due to the worldwide financial crisis may affect the company’s results badly. Technological Starbucks is continuously searching for ways to better a customers’ experience. With the introduction of the Starbucks Card for example, the Company has created the opportunity to improve customer service, shorten lines and make a customer’s visit at Starbucks quicker and more convenient. Most if not all Starbucks location has WI-FI for consumer needs. Political/Legal 1-Increasing tensions between the United States and the rest of the world, the business environment, especially in the Middle East and Southeast Asia, was becoming increasingly volatile. After U.S. declaration of war on Iraq in early 2003 matters became worse for the company. This created serious problems for Starbucks. In July 2002,
Arab students called for a boycott of American goods and services, due to the alleged close relationship between the United States and Israel. The boycott targeted U.S. companies including Starbucks, Burger King, Coca-Cola and Estee Lauder In addition to these incidents, Starbucks topped the list of companies to be boycotted due to Schultz's alleged closeness to the Jewish community. Till now in the Arab countries & Middle East a lot of rumors that Starbucks is sponsoring the Jewish community against Palestinian crises. Due to increasing security threats, Starbucks closed down its six stores in Israel. Starbucks had two class action suits pending since 2001. The lawsuits entitled Carr vs. Starbucks and Sheilds vs. Starbucks are challenging the status of Starbucks California store managers and assistant managers as exempt employees under California wage and hour laws. Starbuck’s is denying all liabilities in these cases, however; the company has agreed to the settlement in order to take care of all of the plaintiffs’ claims without having to get involved in any protracted litigation. Starbucks only imports all their coffee beans, so possible threats could include a change in import laws. A change in the status quo as far as imports go could greatly affect numerous areas of production for the company. For example, if it costs more to import or the process is made more difficult the result could ultimately be a change in price, which would affect the level of consumption for Starbucks coffees
• Who knows if the market for coffee will grow and stay in favour with customers, or whether another type of beverage or leisure activity will replace coffee in the future? Starbucks are exposed to rises in the cost of coffee and dairy products. Since its conception in Pike Place Market, Seattle in 1971, Starbucks' success has lead to the market entry of many competitors and copy cat brands that pose potential threats.