A SWOT and PESTEL analysis of Starbucks

Mr Howard Schultz established Starbucks in 1971 and opened operations in Seattle’s Pike Place. The first operations, they provided coffee to some restaurants and surrounding Bars. After that, they expanded their business into retail marker with many products , many stores in the world.

Today , with Starbuck’ famous brand , they welcome millions of customers through their doors every day, in more than 17000 locations in over 50 countries in the world.

Starbucks stores offered a choice of regular or decaffeinated coffee beverages, a special “coffee of the day,” and a broad selection of Italian-style espresso drinks. In addition, customers could choose from a wide selection of fresh-roasted whole-bean coffees. The company’s retail sales mix was roughly 76 percent coffee beverages, 3 percent whole-bean coffees, 18 percent food items, and 3 percent coffee-related products and equipment in 2009 . The product mix in each store varied, depending on the size and location of each outlet. Larger stores carried a greater variety of whole coffee beans, gourmet food items, teas, coffee mugs, coffee grinders, coffee-making equipment, filters, storage containers, and other accessories. Smaller stores and kiosks typically sold a full line of coffee beverages, a limited selection of whole-bean coffees, and a few hardware items.

Products line

Sep 2009

Sep 2008

Sep 2007

Beverages

76%

76%

75%

Food

18%

17%

17%

Equipment & other merchandise

3%

4%

5%

Whole bean coffee

3%

3%

3%

TOTAL :

100%

100%

100%

In recent years, the company began selling special jazz and blues CDs, which in some cases were special compilations that had been put together for Starbucks to use as store background music.

Pepsico and Starbucks entered into a joint venture arrangement to create new coffee-related products for mass distribution through Pepsi channels, including cold coffee drinks in a bottle or can in 1994. In October 1995 Starbucks partnered with Dreyer’s Grand Ice Cream to supply coffee extract for a new line of coffee ice cream made and distributed by Dreyer’s under the Starbucks brand. The new line, featuring such flavors as Dark Roast Espresso Swirl, JavaChip, Vanilla MochaChip, Biscotti Bliss, and Caffe Almond Fudge.

Strabucks also sells coffee and tea products and licenses its trademark through other channels such as licenses retail stores and through certain of its licenses and equity investees , Starbuck produce and sells a variety of ready – to – drink beverages. All channels outside the Company – operated retail stores are collectively know as specialty operations.

Company-operated and licenses retail store summary as of Sep 2009

US

% US STORES

International

% Int’l Stores

Total

% total

Company operated stores

6764

61%

2068

38%

8832

53%

Licenses Stores

4364

39%

3439

62%

7803

47%

Total

11128

100%

5507

100%

16635

100%

2. Corporate Social Responsibility.

Starbucks is committed to being a deeply responsible company in the communities where it does business around the world. The company’s focus is on ethically sourcing high quality coffee, reducing its environment impacts and contributing positively to communities. Starbucks Global Responsibility strategy and commitment are integral to the company’s overall business strategy

According to the Starbucks website, in order to purchase Fair Trade Certifiedâ„¢ coffee as part of its supply chain strategy, Starbucks pays a minimum of $1.26 (U.S.) per pound ($2.77 per kilogram) for Fair Trade certified ingredients such as non-organic green Arabica coffee and $1.41 per pound ($3.10 per kilogram) for organic green Arabica coffee, which are substantially over and above the prevailing commodity-grade coffee price.

Furthermore, an example of this approach can be seen in the development project CARE International and Starbucks started in 2007 in Ethiopia in the Gewgew Dingete villages in West Harrarghe, Ethiopia. The project aims to provide farmers and their families with better food, safe drinking water and greater income, as well as diversified income opportunities. Through the project, community warehouse facilities were built, a haricot bean loan scheme and vegetable seed bank were initiated and farmers were trained in crop husbandry and marketing. These would thus help the farm become a more sustainable business for each farmer in the village. So far more than $6 million has been granted to help support water, sanitation and hygiene education programs in water-stressed countries – benefiting more than 420,000 people around the world. When customers drink any products of Starbucks, we will contribute a little cost for improving farmers’ living standard. Starbucks is bridge between consumers and farmers.

And, Starbucks also donates a portion of its pre-tax profits to corporate philanthropy as part of its efforts to be more socially responsible. Starbucks makes charitable contributions through the Starbucks Foundation created in 1997 with and/or a direct giving program in communities in which it operates and in countries where its coffee is sourced.

Starbucks provides funding to organizations that make loans to coffee growers, which will help them sell their crops at the best time to get the right price. The loans also help farmers to invest in their farms and make capital improvements. Over the years, we’ve committed over $15 million to a variety of farmer loan funds.

3. Crisis management

In the past few years, the most of company have to face the crisis. Starbucks also had some matters as competitions, commodity price risk, foreign exchange risk, high interest rate, reduce demand. Starbucks have some policies and actions usefully as below :

Starbucks used specialty coffee retailers primarily in the basis of products quality , service and convenience as well as price. Starbucks has been experiencing greater direct competition from large competitors in the US quick-service restaurant sector and continues to face competition from well-established companies in many International market and in the US ready-to-drink coffee beverage market.

Starbucks spent approximately $ 6.5 million, $7.2 million, $7.0 million during fiscals 2009, 2008 and 2007, respectively , on technical research and development activities, in addition to customary product test and product and process improvement all area of its business.

Starbucks purchases commodity inputs, including coffee, dairy products and diesel that are used in its operation and are subject to price fluctuations that impact its financial results. In addition to fixed price contracts and price -to-be-fixed contracts for coffee purchase. Company had entered into commodity hedges to manage commodity price risk using financial derivative instrument.

Starbucks had forward foreign exchange contracts that hedge portions of anticipated international revenue stream and inventory.

Starbucks utilizes short term and long term financing and may use rate hedges to manage the effect of interest rate change on existing debt as well as the anticipated issuance of new debt.

Starbuck have many policies to attracting customers comeback again and again, and finding new customers as they raise products in their menu, door to door service, reduce price, ………….

4-Objectives & Strategies:

4.1 Objectives :

Here are the following objectives of Starbucks: Our Coffee .It has always been, and will always be, about quality. We’re passionate about ethically sourcing the finest coffee beans, roasting them with great care, and improving the lives of people.

4.2 Strategy :

The main goals of Starbucks also look like any company in the world is increase profit as well. In order to complete this, Starbucks emphasis a variety strategies that permit the company to maintain a competitive advantage and continuously reinvent its approaches.

Starbucks always success with open the new stores. Starbucks likes develop company as increase their assets and also raise its brand name and accomplishes this by luring new customers to opening stores in their communities. The both of old and new store locations maximize convenience, may be, increasing the frequency of visit by existing customers. With this, Starbucks is focusing a particular segment of its customers base that is comprised of professional and on the go parents. To measure the effectiveness of these strategies , Starbucks is always comparing data between newly opened stores and newly other, new stores and old stores and old other, trying to raise the profitability of both them while maintaining a steady growth rate.

Another strong point of Starbucks ‘ strategy is “the value placed on customer satisfaction”. “By extensively training employees for twenty hours before full employment”. Employee will maximize responsibility and attentiveness with their works, resulting in customers don’t have to wait long time for serving. Furthermore by closely tracking consumer’s demand Starbucks is able to introduce more popular products with a decrease in time between new product introductions. By increasing choices for customers and decreasing wait time . Starbucks hopefully attract new customers and hopes to increase loyalty among current customers. Starbucks always create good condition for employees as training well, good environment working, some policy and benefits packages. Starbucks take care employees well because they believe that ” the work environment should be family – oriented and that a happy employee makes a happy customers”. Starbuck is focusing and expanding to invest for the infrastructure. Starbucks believes that they have to introduction to new countries and culture if they want to develop in sustaining

Overall, the starbucks’ corporation is professional and knowledgeable when they advance approaches to further their profit and market share while maintaining a closest relationship with customers and their demand. Every aspect of their strategy as been carefully considered and thoroughly planned out and the immediate future only seems to hold great success for the company and its associates.

* Starbucks focus on markets :

– Domestic Business Unit: starbucks should focus on more differentiation to face the hard local competitions. Buyer have distinctive preference , special requirements.

– International Business Unit: Should focus on reducing costs to reduce

prices; this will help in entering new low cost markets and gain more

profits. Also continue with alliances in countries to reduce

management focus and concentrate more on the Domestic Market.

4.3. SWOT analysis.

4.3.1 External environment.

Opportunities:

More than market share opportunities internationally

New business opportunities

Good health drink

Juice drink

Power drink

Door to door service

Starch drink

Some drinks and meals famous in international markets with local flavor

Using bottled drink to sell in supermarkets.

kids’ drink

small meals with drinks at a set price,

enhance products for starbucks merchandise,

Threats :

Starbucks’s distributed resources

Intense competition from restaurant, shop

Heavy Competition from supermarket sales.

High transportation free

coffees prices change follow reasons

the bad effect of caffeine.

Weather .

Insecure world .

Illegal logo, brand…

4. 3.2 Internal environment.

Strengths :

Good brand and image in market.

Big market share.

Good quality and service

Low casher.

Good condition for Employees

Global attend

Emphasis customer satisfaction

Central locations.

Application technologies.

Low inconvenient

Comfortable for customers

Add value (wireless ).

Split smoking areas.

Weaknesses.

So much product in the market.

Not cheap products

Lack of rich music

Some problem in Reliance

Lawer and policy

Not fit in sales

Not expand international stores

The conflict of interest and relationship with coffee growers

Lack of expansion

Lack of customer acceptance of new product in existing and new market

Non-smoking areas

5. Vision, mission, and goals.

5.1 Vision.

Coffee is the second most consumers drink after water. The most of people drink coffee or beverages to replace for water when they come stores, so that they are very easy drink, and cheap, some people can drink them at home of office. They have high demand in the market.

There are many people in the world. They substitute specialty coffee for alcohol. Beer and wine are not good for health, they can get accident in ways when we drink to much.

Coffee shops are a great place to meet people. The first, the location of shop is central of city or they are so easy for finding and coming there. Our conversations are so easy to discuss.

Coffee is a affordable luxury. There are many kind of drinks specially. We can enjoy them. They suitable with every body from the poorest to the richest, normal, luxury…

They are the professional place to enjoy music and art.

5.2- Mission

“To inspire and nurture the human spirit- one person, one cup, and one neighorhood at a time”

“The mission of Starbucks is to establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow”

None of this success would have been possible without a set of goals that the company aimed to achieve and a set of principles, which governed the decision making process. The eleven principles of Starbucks are stated as:

1. Building a company with Soul.

2. Opposing Franchising because of quality control and culture .

3. Only selling coffee bean without artificial flavor.

4. Satisfy customers by all means.

5. Employ’ contribution and involvement in making Starbuck a better company.

6. Provide a great work environment and treat each other with respect and dignity.

7. Embrace diversity as an essential component in the way we do business.

8. Apply the highest standards of excellence to the purchasing.

9. Roasting and fresh delivery of our coffee.

10. Develop enthusiastically satisfied customers all of the time.

11. Contribute positively to our communities and our environment, and recognize that profitability is essential to

our future success,.

Application of these principles can be used as a guideline for

all employees from managers to workers to aim to achieve

the company’s goals, while maintaining a certain type of

standards

This mission statement along with the set of guidelines provides a focus for employees as they make strategic decisions. It not only supports the employees, but supports the customers as well, making a note that they should be satisfied all of the time. The mission shows alignment with the vision by stating how the company plans to reach the broad goals set by the vision statement. Another supporting sentence in the mission statement is that the “company applies the highest standards of excellence to the purchasing, roasting and fresh delivery of its coffee.” This statement supports the idea that Starbucks uses the best available resources to give it a recognized and respected name.

5.3 The motivating employees.

Working at Starbucks is a lot like working with your friends. Starbucks understand, respect, appreciate and include different people. And they believe in keeping each other informed, so their senior leaders regularly hold Open Forum events to answer your questions. The Starbucks Total Pay package is called “Your Special Blend” because it’s just for you. Your Special Blend might include:

Competitive pay

Insurance: medical, prescription drug, dental, vision, life, disability

Bonuses

Paid time off

Retirement savings plan

Stock options and discounted stock purchase plan

Adoption assistance

Domestic partner benefits

Emergency financial aid

Referral and support resources for child and eldercare

A free pound of coffee each week

A Starbucks career is a journey that starts with learning about coffee, often through coffee tasting and roasting events. Beyond that, you’ll also learn how to help our business – and your partners – grow and thrive.

6. Desirability as an employer :

Would you like to work for this company ? – yes. After I lean about this company, I understand and wish working for this company as some reasons as below :

The good environment.

The specific and clear strategy.

The good motivation .

The high promotion.

The central location.

The high wage.

The training well.

There are many opportunities contact with many kind of people.