International business paper

Company history and top leadership

Financial information

4-quadrant SWOT with 4 bullet points in each quadrant

Detailed explanation of each bullet point

Strengths

1. Great financial records

Starbucks profitability has been rising for the past few years and is now 14%. The company also outmatches its nearest competitors with 24.54% return on investment and 29.16% return on equity.

2. The first brand in coffeehouse segment, valued at $4 billion. Starbucks has a strong brand reputation associated with quality coffee and excellent customer service. Its brand is the most valuable brand in coffeehouse segment and is valued at $4 billion.

3. Starbucks making their business more environmental friendly. One of the strongest advantages Starbucks has is the experience it delivers to its customers with perfectly blended coffee, premium music, friendly staff and warm atmosphere, which results in incomparable customer service.

4. Largest coffeehouse chain in the world. The company operates around 20,000 coffeehouses in 60 countries, making it the largest coffeehouse chain in the world.

5. Employee management. The company offers its employees extensive range of benefits and a pay rate higher than offered by competitors.

6. High technology use. Mobile phone applications to track the transaction and rewards. Free Wi-Fi in the store.

Weaknesses

1. Coffee beans price is the major influence over firm’s profits. Starbuck’s profitability and its coffee price are largely dependent on prices of coffee beans, which is a commodity and cannot be controlled by Starbucks. Due to hedge funds, weather conditions and many other factors, Starbucks cannot estimate the price of tis coffee and company’s profitability.

2. Product pricing. Starbucks offers great coffee and customer experience but that results in high price of its products. In comparison, McCafe premium coffee was price lower than Starbucks coffee and was better evaluated.

3. Negative publicity. The corporate continuously receives negative publicity over its poor efforts of becoming greener company, tax evasions and poor treatment of some suppliers. Also, the company has come under fire in recent times for its procurement practices with many social and environmental activists pointing to the unethical procurement practices of coffee beans from impoverished third world farmers. Further, the company has also been accused of violating the “Fair Coffee Trade” principles that were put in place a few years ago to tackle this precise problem. The company uses non-recycling cup, which increased the waste.

4. Menu focuses on adult customers, limited menu options on kids.

5. The business profits are highly dependent on coffee product.

Opportunities

1. To extend supplier network. Starbucks doesn’t grow its own coffee beans but has to buy them from various suppliers, which are mainly clustered in South America, Arabia or Africa. For Starbucks to ensure critical supplies for its operations in Asia, reduce the dependence of good or bad harvests in Africa and South America and to save on shipping costs, Starbucks has to extend its supplier network.

2. Expansion to emerging economies. There are great opportunities for coffeehouses in China and India, in which Starbucks has comparably only modest number of restaurants.

3. Increase product offerings. The business could expand the number of coffeehouses that offer wine and beer, plus adding some new products and reaching broader customer group.

4. Expansion of retail operations. Starbucks does not only manage coffeehouses and franchises but sells some of its products through other retailers. The firm should form more of such partnerships and offer to sell its coffee, for example, in supermarkets.

5. Whole bean sales in supermarkets.

Threats

1. Rising prices of coffee beans and dairy products. The chain strongly depends on the coffee beans and dairy products prices, which Starbucks cannot control or can hardly estimate.

2. Trademark infringements. The company is often involved in cases over illegal use of its trademark, which is costly and detrimental for Starbucks.

3. Increased competition from local cafes and specialization of other coffeehouse chains. Local cafes can offer much lower price and more suited menu for its customer. Big coffeehouse chains specialize so they wouldn’t need to compete head-to-head with Starbucks. In both situations, Starbucks experiences intense competition and loses market share.

4. Saturated markets in the developed economies. Coffee markets in the developed economies are already saturated and with intensifying competition, Starbucks will find it hard to grow in these markets.

5. Supply disruptions. Due to political, economic and weather conditions Starbucks faces significant challenges because of its global supply chain and is subject to disruptions in the supply chain because of any reason related to either global or local conditions.

Summary

References:

2013 Annual Report

2014 Annual Meeting of Shareholders and Proxy Statement