Starbucks

Situation Analysis:

In 1996, the coffee consumption patterns had changed in the United States to 1.7 cups per day per person. Compared to the two or three cups a day in the 1960s and 1970s, 1.7 cups was a significant decrease. However, now it seemed that coffee consumption was on a rise. The recent popularity of specialty coffee was a result of consumer trends. First, consumers adopted a healthier lifestyle that led North Americans to replace alcohol with coffee. Next, coffee bars offered a place where people could meet and specialty coffee became an affordable luxury. Lastly, consumers were becoming more knowledgeable about coffee.

Currently, Starbucks is the leading player in specialty coffee. They have more locations than any other coffee shops nationwide. Starbucks has built strong relationships with suppliers and real estate agents to meet the demand that they have. While saturating the domestic market, Starbucks has also succeeded in the international market as well. With well educated and trained employees, a variety of products, high brand equity, and partnerships with other companies, Starbucks is doing very well for themselves and right now the sky is the limit.

SWOT Analysis:

Strengths:

- Dominated specialty coffee and is a very profitable organization

- Nationwide and Global coffee brand built on a reputation for quality products and service (High brand equity)

- Have more specialty coffee products in stores

- Employee training (product knowledge)

- Was one of the Fortune Top 100 Companies to Work For in 2005.

- Drive through

- Licensing agreements (Tazo, Apple iTunes, Ethos, etc.)

- Innovated products (Frappachino, Coffee Liquer, etc.)

- Established brand (started in 1971)

- City merchandise for collection

- Starbucks stands for ethical causes in the environment (Ethos Water)

- Store clustering

Weaknesses:

- Store set up and size

- Store cannibalization

- Too many middle men in the distribution chain

- There are too many managers within a store (store manager, shift manager, etc.)

- Customers may have Starbucks overload with seeing them everywhere

- Reliance on US market (approximately 85% of its revenue from domestic market)

- Product innovation (how many drinks can you invent?)

Opportunities:

- Product line growth (Smoothies)

- New global markets

- New local markets (small towns)

- Store set up to allow better flow

- Loyalty card

- Live music

- New target markets

- Co-Branding with others (Starbucks Chapstick)

Threats:

- Bad reputation from dominating a niche

- Disgruntled employees

- Business model copy cats

- Loosing the small welcoming feeling as they grow corporately

- Family friendly coffee shops

- Will coffee still grow and stay in favor with the public

- Prices are dependent on the cost of coffee

Problem Statement:

At this moment, Starbucks is doing very well for itself and currently does not have problems. However, Starbucks does not have a future plan.

Alternatives Development:

1. Build larger stores in the United States' market.

2. Focus more on the global market.

3. Diversify product line

4. Don't do anything

Evaluation of Alternatives:

1. Build larger stores in the United States' market. **

Starbucks will have to cooperate with real estate agents across the country to build larger stores. There are numerous reasons why building larger stores would be more logical. First, larger stores would be able to service more customers and with the larger space there can be two counters instead of one and this would help with the flow of the customers. Next by having more space there will be no need to build so many stores in close proximity to each other. This will stop Starbucks' from cannibalizing each other's sales and profits. Finally with a larger space Starbucks could save money. First the real estate property tax would be lower for one building instead of two or three. Next, Starbucks would not need as many managers and staff to work a shift so the company can save money by decreasing staff.

2. Focus more on the global market **

Approximately 85% of Starbucks' revenue is from the domestic market even though they are a global market. About a third of the stores are in the United States.

3. Diversify product line

The company is still turning over profit with the way they are running synergy now. There are kinks in the system, but not large enough to focus on it and turn all the energy towards it with the time and effort risking hurting another area that needs attention. Customers are not confused, by the product, product lines and different mediums and images that the Company holds, so