Course Project: Quality Analysis 2

Running head: GENDER 1

Running head: COURSE PROJECT 1

Course Project: Quality Analysis I

Patricia Jones

South University Online

Course Project: Quality Analysis I

Starbucks Corporation is one of the leading companies in the world in the beverage making industry. Founded in 1971 in Seattle, WA, Starbucks has established itself as a premier roaster, retailer, and marketer of specialty coffee in different parts of world. Starbucks operates in 62 countries where it has about 19,767 stores and about 182,000 employees. The company produces a wide range of products including roasted and handcrafted premium coffee and tea, as well as several other beverages and fresh food items. In addition, Starbucks sells an assortment of coffee and tea products. The company also markets its products with other brand names that fall within its group of companies such as Tazo, Teavana, Seattle’s Best Coffee, La Boulange, Starbucks Refreshers, Evolution Fresh, Starbucks VIA, and Verismo. As of September 29th, 2013, Starbucks had made revenue of $14.89 billion (Geereddy, 2013). Starbucks principally operates in the retail coffee and snacks industry. In 2009, there was a major economic crisis that had a severe negative impact on this industry. In addition, the changing consumer tastes affected its revenues, resulting in a decline of about 6.6 percent in the U.S. market, which translated into about $25.9 billion. Although this industry had experienced consistent growth before the economic slump, consumers significantly reduced their spending on luxuries such as eating out, opting to spend more on low-price items as opposed to the highly-priced coffee drinks. During the economic slump, the industry grew at a low rate, which had negative impact on its operations. Presently, Starbucks dominates the coffee retail industry where it commands 36.7 percent of the market.

Quality means everything for Starbucks; the company presents itself as the world leader in the roasting, retailing, and marketing of specialty coffee. To live up to these high standards, Starbucks strives to invest in the most qualified employees and uses the best raw materials (coffee beans) to produce its coffee and other beverages. Starbucks deals in roasted and handcrafted high quality coffee and sells it at premium prices (Geereddy, 2013). The company deals with suppliers who only supply the highest quality raw materials as this helps to ensure that the end product achieves the finest quality in the industry. Besides, the company avoids uses highly innovative methods to ensure that the end products achieve consistency in terms of quality.

SWOT analysis of Starbucks

Strengths · Global Brand Recognition · Human resources management · High quality products · Diverse product mix · Customer base loyalty · Social responsibility initiatives · Use of technology	Weaknesses · Expensive products · Overdependence in the U.S. market · Overcrowding/self-cannibalization · Culture clash in different markets · Negative large corporation image
Opportunities · Expansion into upcoming market · Technological advances · Expansion of its product mix · New distribution channels · Expansion of retail operations	Threats · Developed countries’ economies · Increased competition · Changing consumer tastes and preferences · Price instability in the coffee market · Market saturation in developed economies

Strengths

Starbucks is a large company with a global brand recognition and strong market position. This enables the company to generate high revenues in all its operations. This enables the company to gain significant competitive advantage over its rivals as it can invest well and achieves economies of scale, especially because it can also invest in effective distribution channels. The company also invests in highly knowledgeable and experienced employees, who play a critical role in ensuring customer satisfaction. These factors help to ensure that Starbucks produces the finest products even when production is high (Geereddy, 2013). In addition, the company produces a wide range of products, thus attracting diverse customers. Starbucks has implemented loyalty-based programs (Starbucks Rewards programs and Starbucks Card), which help to enhance loyalty among its customers. The loyalty programs not only provide convenience for customers, but also help to increase frequency. More significantly, Starbucks is involved in a number of social responsibility initiatives, which helps to attract and maintain customers to the company because of the goodwill that it creates. Moreover, the company leverages on technology efficiently, which has contributed a lot in its growth over the years (Boone & Kurtz, 2011).

Weaknesses

One of the major disadvantages that Starbucks has is the high cost of its products. This means that it is likely to lose a lot during times of economic crises because customers would opt for products that are more affordable. Starbucks also relies heavily on the U.S. market, which means that it is likely to lose a lot if that market does not perform well. The issue of self-cannibalization is also quite real at Starbucks because of its aggressive expansion strategies and overcrowding, especially in the U.S. market (Boone & Kurtz, 2011). This undermines its efforts to achieve long term growth in this market. The different markets have different cultures, which means that other countries many not easily accept the American/European coffee culture. In addition, being a large corporation, Starbucks faces a lot of pressure to meet strict regulations and to invest in corporate social responsibility (Longenecker, Petty, Palich & Hoy, 2011).

Opportunities

However, despite those weaknesses, Starbucks has numerous opportunities to improve its operations. For instance, the company may consider expanding its operations to emerging markets, which may also help to deal with the issue of self-cannibalization and saturation, especially in the U.S. market. Although Starbucks has leveraged on the use of technology, there is still room for it to improve its use of technology to further enhance the quality of its operations (Geereddy, 2013). Besides, Starbucks may also consider expanding its product mix to attract more customers and increase its revenue. While the company currently has an effective distribution channel, it has the opportunity to improve it and generate more revenue. In addition, Starbucks may expand its retail operations as the market is not fully exploited. This is bound to have a positive impact on its profitability and competitiveness in the long term (Longenecker, Petty, Palich & Hoy, 2011).

Threats

One of the possibly threats that Starbucks faces is that an economic crisis is likely to hamper its operations because of the integrated nature of world economies especially in the developed countries. There is also increased competition in the market as there are many other companies in the industry offering similar goods at relatively lower prices. Consumer tastes and preferences have also been changing over the years, causing the company to generate lower revenues. In addition, the high volatility of world coffee prices affects the company’s ability to have stable operations. Lastly, market saturation in the developing countries severely affects the company’s ability to generate more revenues (Geereddy, 2013).

Starbucks has the capacity to improve the quality of its products although the current levels are generally acceptable. To achieve higher levels of quality, Starbucks should invest in cutting-edge technology to improve its operations. Through technology, the company will be able to realize significant savings due to increased levels of efficiency and reduced wastage. Although the employees of the company have a culture of providing quality services, Starbucks can achieve more by offering better training and providing them with opportunities to advance their skills and knowledge (Boone & Kurtz, 2011). Starbucks has a wide range of customers as the coffee culture is quite dominant especially in America and many other European countries. This means that the company’s employees also form part of its customers because they also take coffee. To implement the necessary changes effectively, the company should consider offering special training to employees and motivating them through better pay. Starbucks should consider forming a strategic alliance with a major coffee and tea producer or suppliers as this would help to guarantee better prices and consistency in the availability of those supplies. The company should also consider partnering or acquiring other companies offering similar services in other countries as this would facilitate easier penetration into new and/or emerging markets. For instance, Starbucks acquired Seattle Coffee Company, which enabled it to penetrate the U.K. market (Geereddy, 2013).

References

Boone, L.E., & Kurtz, D. L. (2011). Contemporary business. Hoboken, NJ: John Wiley & Sons.

Geereddy, N. (2013). Strategic analysis of Starbucks Corporation. Retrieved from http://scholar.harvard.edu/files/nithingeereddy/files/starbucks_case_analysis.pdf

Longenecker, J., Petty, J., Palich, L., & Hoy, F. (2011). Small business management: Launching and growing entrepreneurial ventures. Mason, OH: Cengage Learning.