Situation Analysis and SWOT Analysis: Starbucks - Case Study Example

Starbuck Contents Situation analysis 3 Porters 5 forces 3 Industry Competition 3 Threat of New Entrants 3 Threat ofSubstitute Products 4 Buyer’s Bargaining Power 4 Bargaining Power of Suppliers 4 Environmental scanning 4 Political 5 Social 5 2.SWOT analysis 5 Strengths 5 Weaknesses 6 Opportunities 6 Threats 7 3.Recommendations 8 4.Potential outcomes 9 Works Cited 10 1. Situation analysis Porters 5 forces Industry Competition The biggest threat for the company is from its competitors those are present in the same industry. The company has lots of competitors in the same industry and faces lot of difficulties in maintaining its position in the market. Though the coffee industry seems to be a small one but it has huge number of commodities which are in this industry and are doing their business operations at a very fast rate. The coffee industry’s characteristics are very unique and also have lots of scope to grow. The company also has certain products like bottled coffee drinks; ready to drink coffees in packs, whole grain coffee beans and many others that increase the competition for the company as many more companies present in different segments in the same industry are also big rivals for the company. The company faces main rivals from its competitors like Nestle, Procter & Gamble, and Kraft etc. The company also has strong competition from the local coffee makers which are also been preferred by customers in huge way. Threat of New Entrants The coffee industry is been dominated by Starbucks and to build such a huge capital and distribution chain for a new company is very difficult. The size of the company to which Starbucks has grown over the years and spread its business across to the whole world, it is very difficult for any new comer to setup its business and compete neck to neck with Starbucks. Thus the threat for Starbucks from new entrants is very low and they just need to keep growing and expanding their business in new dimensions (Böhm 46-63). Threat of Substitute Products In case of special coffee industry, substitute products are generally the non-alcoholic drinks like tea, fruit juices, soft drinks, energy drinks etc. These are the few substitutes which can replace coffee and people can look to consume those products in place of coffee. Still the specialty of special coffee remains the same and people still look to have a cup of special coffee than the other substitutes from time to time. Hence this threat is not considered so serious in case of Starbucks. Buyer’s Bargaining Power Customers in this industry tend to look more for quality and they are ready to pay more for the special good quality coffee. Thus the bargaining power of buyers in case for Starbucks is very low. Bargaining Power of Suppliers The bargaining power of the suppliers is very less as there are huge number of coffee growing farmers thus Starbucks have huge number of options to get coffee beans from the farmers. Environmental scanning Starbucks has sometimes faced the problems of pollution and waste management regulation and restrictions in various countries. The wastes that are eliminated from the stores and factory of Starbucks do cause a lot of environmental problems to people. Few countries have implemented strict rules for environmental protection for Starbucks. Political The changing price of coffee beans in various countries has affected the buying behavior and production of Starbucks. The changes in the governmental associations do affect the business operations of the company in a huge way (Henry 123-134). Social Starbucks has got its brand image growing at a good rate as it has looked to take care of the perception, liking and dislike of people in different parts of different countries. The company has provided people to maintain a good status symbol and also build a good reputation. 2. SWOT analysis Strengths Starbucks has very strong brand recognition in the global market in the coffee industry which has given it a strong mage and hold over the overall market share. The company is well known to mostly everyone across the world and thus the company gets huge number of customers and also keeps growing at a constant rate. It has a flexible corporate structure and the employees are free to give their innovative ideas for the growth of the company. The organization structure is made of different segments and the chain of command is very less as the employees are not compelled to follow any strict chain of command. The company has got certain special features like customized service, internet facilities etc. in their stores which other companies don’t provide. This gives the company a good competitive advantage over the competitors as the customers find the ambience and the facilities that are provided in the stores of Starbucks being better than the outlets of other companies. The financial stability of the company is the biggest strength that it has over the competitors, this does enables the company to continuously make innovative changes and also look for new ways of meeting the expectations of the customers. The huge global presence of the company as a well-known brand with good distribution channel is one of the biggest strength that the company has gained over the years. Weaknesses It is not mentioned in the USP of Starbucks that they serve to the customer’s good quality coffee at a price below premium rates. But because of its brand name people generally consider it to be costly than normal stores. Therefore the premium pricing and positioning strategy of Starbucks is another weakness as these two factors do not allow the brand not to be positioned in mass market. On the other side, high brand value or brand image of the company act as a negative catalyst to the buying behavior of lower income people. They always prefer especially food and beverage products with discounted pricing and additional quantity offering like 10% extra or 15% extra etc. Another weakness of the company is they have similar marketing strategy for all developed as well as emerging markets. By this way the company might not able to gain market share in new emerging markets they have recently entered or planning to enter by facing pricing competition with local players. Opportunities The continuous expansion of the company across the global market exploring new countries and encouraging the brand expansion in the new market, it also gives the opportunity to the company to diversify its business in other directions and expand it in a huge way throughout the entire globe. The increasing growth in technology and information system the company has a huge opportunity to implement such tools for improving their operations and also for providing the best service to the customers. Another major opportunity for one of the largest beverage company Starbucks is the changing life style of people around the world especially in emerging markets. Starbucks has successfully penetrated or captured developed markets have good market share and the company high opportunity in emerging markets like China, India, Arabian countries. Lifestyle of people of these markets have becoming more luxurious and having a cup of quality coffee from a multinational branded coffee chain like Starbucks in comparatively high price has become prestige concern among majority of people of emerging countries. The rising brand consciousness of major people for clothing, apparels and also for food is one of big external beneficial factor or opportunity for Starbucks. Threats The main threat for Starbucks is from the existing competitors in the same industry who also have built a good brand image in the global market. The recession, the fluctuations in the currency rates does effects the company a lot and it’s a big threat for the company. As because of the fluctuating currency the transactions been made in different countries does vary in a huge way. The company needs to adjust the price of the products also based on these fluctuations from time to time (Porter 38-45). Another major threat of the company is regional level small companies. To maintain the brand value the company cannot offer product with discounted price or low price and the local players especially in emerging markets are taking advantage of this and are able to position their product in mass market especially low income level customers. This is the big threat to the company this segment of customer hold major percentage in total target market of coffee or tea in specific market. Other major threat is threat of substitute product where the major threat comes from tea. According law of demand, high supply of quality tea especially in emerging markets helps the tea brands to offer quality tea in comparatively much lower price than quality coffee. Therefore, a major portion of people prefer the low cost substitute of coffee and this is a major threat to the one of the large player in coffee market, Starbucks. 3. Recommendations Looking at the SWOT analysis based on the case study it can be recommended to the company that they should keep looking forward towards growth of their company and implement all the latest technology that can help the company grow well in the global competitive market. The company can look forward to launch low cost products which will give more competitive advantage to the company and with such products the company will be able to gather the maximum market share mostly in developing countries where customers are very price conscious. With the launch of low cost products each of the products must have a good and individual promotion strategy where each product can communicate its value to the customers in a proper and exact way. These low cost products will help the company to fight against the competitors especially from the local shops and brands in a strong way and these products will help the company to meet the expectations of customers who look to get low cost products. The company needs to continue its innovations on a continuous basis so that they can serve the customers in the best possible way and provide better service to the customers than even expected by them. The company needs to look towards its promotional activities in a proper way so that they can communicate the message to the customers in a proper way and make sure that they can understand the correct message from the company. The company can also conduct quality functional deployment to understand the exact needs of the customers based on which it can make the products and serve to the customers based on their likes and meet the expectations of the customers in a huge way. 4. Potential outcomes The potential outcomes that the company can achieve if they implement these recommendations is that they will be able to attract more and more customers and also capture the maximum market share on a continuous basis. These recommendations will help the company to know the exact needs of the customers and based on which the products can be made as a result the customers can be satisfied to the maximum level and the company will get huge competitive advantage over the customers. The low priced products will help the company to fight against the competition from the small outlets which offer normal coffee and other products at a less price and attract more customers who prefer to have a cup of coffee at a low price. Proper communication to the customers will make the customers aware of the fact with regards to what they can benefit from the products of the company and help the customers in making their lifestyle better. Thus these recommendations will help the company to grow and expand its business in a huge way across the globe and also increase their sales volume and profit margin by good amount. Works Cited Böhm, Anja. The SWOT Analysis. Munich: GRIN Verlag. 2009. Print. Porter, Michael. Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York. Simon and Schuster. 2008. Print. Henry, Anthony. Understanding Strategic Management. London: Oxford University Press. 2011. Print. Read More