SWOT Analysis of Starbucks - Essay Example

Starbucks uses only 100 % roasted natural Arabica beans to give the customer a good quality experience. But the experience is not only provided by their coffee. They claim that they are in the people's business of serving coffee not in the coffee business of serving people. It is their mission statement that brings the Starbucks experience to all. Thus by trying to provide a higher quality of life for the customers, they are branding themselves on a position of strong beliefs and values.

Also, Starbucks has a diverse range of product items to appeal to a diverse range of individuals. They have Frappuccino which appeals to non-coffee drinkers. They use their co-branding deal with Kraft so that they can appeal to home coffee brewers. They have created the idea of Third Place. They have made the store a place between home and work where they can relax. They make their stores Wi-Fi enabled, have a lounging environment, have gourmet coffee, gifts, and tea available at their stores, etc.

Weakness
The main weakness is the premium category of products is always under threat due to weak economic conditions. Due to the economic crisis in 2008 and the Euro Zone crisis, it is no longer affordable to working-class people. Hence it is affordable to the elite class which affects their profitability. The promotional strategy of Starbucks is mainly word-of-mouth marketing. Hence it can isolate them as an elitist drink. They need to make non-regular customers aware of their brand presence. They should target individuals who don’t prefer coffee to a regular coffee drinker.

Opportunities
Starbucks is quick to take advantage of the opportunities in the environment. They launched a CD-burning service in their café in California in 2004. They took the help of Hewlett Packard for this service. This made customers create their music CDs. They retail their new products and services in their cafes and at Fair Trade shows. They have the opportunity of expanding globally, like Pacific Rim nations and India. They should try to co-brand their product with other food and drink manufacturers to come out with new products and services.

Threats
Mcdonald's owns Mc Cafe which is also a premium segment player in this category. Mc Café has now around 1,300 stores worldwide. The value proposition of Mc Café is more or less the same as that of Starbucks. The drinks at McDonald’s are around $1 cheaper than that at Starbucks. Moreover, the strategy of Mc Café is to open up their business in existing franchises, which saves a lot of money. Studies have shown that it takes around one-third amount to open up an Mc Café store as compared to one Starbucks store. Starbucks doesn’t have an aggressive marketing strategy and hence can fall behind its competitors. Players like Dunkin Donuts have targeted customers belonging to middle-income white and blue collared workers. Dunkin Donuts is a renowned East Coast coffee which has created strong brand loyalty for them.

Conclusion and Recommendation
Starbucks has not captured the market share it needs to capture. Their goals should be to capture the market share from Mc Café and Dunkin Donuts. To compete with their rival, Starbucks has to position itself as a coffee store for the average middle-class individual. They have to provide their products at lower prices. But it can have a negative effect also because the customers of Starbucks want to stand out in the crowd. Hence it needs to target a niche market of Dunkin Donuts and Mcdonald's. After targeting them, it needs to market them in ways that will make its customers move on to their products. They must use their premium status and quality to gain customer loyalty. They should try to target college students and use the promotional strategy like discounts to attract their attention (McRoskey, 2008).

Starbucks has to target a whole new set of customer segments to maintain its profitability and competitive strategy. They should get more students to try out their products. They should encourage them to give it a try and thus capture their attention. Starbucks has been facing tough competition from these competitors but with a new marketing strategy, they can retain their brand position in the market. Read More