BYOMSPM

In this post I do a somewhat extended case study of Starbucks. Each section is centered around one source, which is listed at the beginning of each section. And, yes, one of those sources is Wikipedia. Oops.

Basic Info

_{Section Source: “Starbucks.” Wikipedia. 2024. https://en.wikipedia.org/wiki/Starbucks#Company_overview.}

Starbucks was founded in 1971, and with 35,711 stores in 80 countries it is currently the largest coffee chain in the world. Starbucks had 381,000 employees in 2023 between company-operated and partner-operated stores. It ranks 120th on the Fortune 500 list. Starbucks sells a wide variety of coffee, tea, and snack variations along with brand merchandise. In 2023, Starbucks did $35.976B in revenue .

Industry Overview

_{Section Source: “Coffee Market.” Straits Research. 2024. https://straitsresearch.com/report/coffee-market#:~:text=Market%20Overview,period%20(2022%2D2030).}

The coffee industry is an interconnected worldwide industry, so price and availability are determined by supply and demand on a global scale. There is currently pressure on companies to be more environmentally friendly with production techniques. A key restraining market factor is unpredictable, changing climate conditions because of their impact on coffee bean production. Along with that, a key opportunity in the global coffee market is consumers’ growing interest in buying products that are aligned with their sustainability and social justice values. While the industry is generally projected to grow over the next 10 years, another key focus for companies in the industry is creating personalized connections with their customers.

Key Company Strategies

_{Section Source: Kaurin, Ravpreet. “Understanding Starbucks’ Business Strategy.” Feedough. 28 February 2024. https://www.feedough.com/starbucks-business-strategy/.}

At a basic level, Starbucks offers a diverse range of high quality coffee and tea products, a welcoming cafe environment, a sense of community and personalized customer experience, a focus on environmental sustainability, and general good treatment of employees. They have been one of the trailblazers in creating a comfortable “third place,” or a place for people to spend time outside of home and work. Another key strategy that differentiates Starbucks has been their focus on developing and increasing usage of their mobile app, in which customers can quickly order ahead, store and reuse payment methods, and earn rewards. On top of that, Starbucks offers highly consistent products and services at very convenient and prevalent store locations. They have also taken part in strategic global expansion and partnerships, enabling them to establish a very consistent, highly regarded, and almost ubiquitously known brand image. One notable piece of their expansion strategy is that they failed to successfully expand into Europe and Australia, arguably because of cultural differences and a lack of awareness of local coffee culture.

Five Forces Analysis

_{The source of this section is the following, updated with some additional thoughts of my own because it’s from 2013: GeeReedy, Nithin. “Strategic Analysis of Starbucks Corporation.” Scholars at Harvard. 2013. https://scholar.harvard.edu/files/nithingeereddy/files/starbucks_case_analysis.pdf.}

• Threat of New Entrants: Barriers to entry are not too high for new entrants, though the industry is starting to become fairly saturated. Smaller, new, and local coffee shops can compete because the initial investment of opening a store is not too high and there is a moderate chance that they can be successful. Additionally, these local coffee shops have the advantage of being able to tailor their store to the exact aesthetic preferences of the hyper-local market. Advantages that Starbucks has over new entrants are that the brand image and product is highly established and regarded, and as a large corporation they have achieved cost and production efficiencies.
• Threat of Substitutes: The threat of substitutes is moderate. There are products that can be substituted for the plain Starbucks products fairly easily: coffee made at home or bought prepackaged; non-coffee energy drinks; and other “fun” beverages like juice or even alcohol. However, Starbucks is not just selling the plain products; they are selling the entire personalized, pleasant experience of ordering, seeing the product production, and having to be inside the store environment to get the beverage. Thus, potential substitutes would have to offer some of these experiential factors on top of just the plain product.
• Bargaining Power of Buyers: In the coffee industry and for Starbucks there are a very large number of buyers each with very small buying power, so they are not able to demand changes in prices or quality very effectively. For the most part, Starbucks has to price its products relative to its competitors, though it can charge a small premium for things like product quality, store convenience, and brand name/loyalty.
• Bargaining Power of Suppliers: Suppliers to Starbucks also don’t have much bargaining power because there are many global supplies that Starbucks can easily switch to, and Starbucks is also a dominant force in the supplier market due to its size.
• Intensity of Competitive Rivalry: Competition in the coffee industry is high, as there is not a high cost of switching for customers. That said, despite the number of rivals to Starbucks, its sheer size and brand loyalty keep the actual threat of competitors to a relatively moderate level.

SWOT Analysis

_{The source of this section is the same paper as the last section, again updated with some additional thoughts of my own because it’s from 2013: GeeReedy, Nithin. “Strategic Analysis of Starbucks Corporation.” Scholars at Harvard. 2013. https://scholar.harvard.edu/files/nithingeereddy/files/starbucks_case_analysis.pdf.}

• Strengths: Starbucks boasts global brand recognition & general positive sentiment toward the company. It also offers highly consistent product & store experiences along with stores that are highly accessible. Starbucks offers a wide variety of coffee & tea products with regular new products that are highly regarded, likely because they have access to so much market data. One of the biggest differentiating strengths of Starbucks is the high level of usage of their mobile app to order ahead, pay, and earn rewards.
• Weaknesses: Starbucks is a large corporation so it sometimes has difficulty tailoring the product and store experiences to hyper-local markets. They have also been criticized multiple times for their handling of various social issues. On top of that, there is arguably an over dependence on the US market with a saturation of stores around the country. Additionally, they have had difficulty expanding into large, international markets such as Europe and Australia.
• Opportunities: One opportunity for Starbucks is to expand their product offerings further based on their sales and customer data. Additionally, because the brand is so widely known they could extend their brand into new genres of products or services.
• Threats: There has continually been increased competition, in which there are many competitors who offer a similar diversity of products and personalized experiences. The market is also fairly saturated where Starbucks is already located. Lastly, there are changing consumer trends, including the fact that there is a growing preference for highly local and unique product experiences.

Thanks for reading.

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Works Cited

_{“Coffee Market.” Straits Research. 2024. https://straitsresearch.com/report/coffee-market#:~:text=Market%20Overview,period%20(2022%2D2030).}

_{GeeReedy, Nithin. “Strategic Analysis of Starbucks Corporation.” Scholars at Harvard. 2013. https://scholar.harvard.edu/files/nithingeereddy/files/starbucks_case_analysis.pdf.}

_{Kaurin, Ravpreet. “Understanding Starbucks’ Business Strategy.” Feedough. 28 February 2024. https://www.feedough.com/starbucks-business-strategy/.}

_{“Starbucks.” Wikipedia. 2024. https://en.wikipedia.org/wiki/Starbucks#Company_overview.}