|Type of paper:||Essay|
|Categories:||Starbucks SWOT analysis|
History of Starbucks Company
Starbucks Company was founded by one Jerry Baldwin, Zev Siegel, and Gordon Bowker. It first opened its first store in 1971 across the streets from a historic place known as Pike Market in Seattle. History has it that three founders of Starbucks Company had two things in common. The first thing is that they came from the field of Academia while the other issue was on their great love for tea and coffee. The opening of their first store was worrisome; they had to borrow some money which they later invested to open the first store in Seattle. The name of the store is referred to like Starbucks. The major inspiration to the company's founder was Alfred Peet who was a coffee roasting entrepreneur. Peet was a renowned Dutch immigrant who started his entrepreneurial life with the importation of fine Arabica coffee into the United States of America during the 1950s (Hong & Yang, 2009). In 1966, Peet opened a small store which would later be referred to as Peet's Coffee and Tea and was located at a place referred to as Berkeley in California. The company specialized in the importation of first coffee and teas. It was his (Peet) success that the founders of Starbucks Company saw the need of starting a company of their own. They asked themselves one simple question. If Peet can succeed, then it means they would do much better if only they could follow through his footsteps.
Starbucks founders, therefore, based their business on the sale of high-quality coffee beans to Starbucks. The partners then went ahead to consider the purchase of coffee beans equipment with Peet becoming the major supplier. The partners also went ahead to buy a used roaster from Holland and Baldwin. As the business was approaching the early 1980's Starbuck's company had opened at least four of its stores in Seattle, a place which stood out from the competitors with the production of top quality coffees. At the time (1980) Siegel considered pursuing other interests and left the other two remaining company partners with the Baldwin taking over as the President. He became the chief administrator of the Company and delegated most of the duties to other company officials and personnel (Hong & Yang, 2009). In 1981, the company experienced some challenges which were also coupled with the Howard Schultz era. The succeeding years were quite challenging with a major decision being made by Baldwin and Bowker in 1987.
They decided to sell the company and Schultz was quick in putting himself as one of the major bidders in purchasing the company. Schultz brought an idea of combining all the operations under the Starbucks brand and committed to the cafe concept for the growth of the business. He also introduced other additional sales of equipment, beans, and other necessary items which were relevant to the operation of Starbucks. The changes made the Company to into a meteoric period of expansion, something which continued after the Company went public in 1992. The company later came back into the public limelight with Starbuck becoming one of the largest coffeehouse chain known across the world. By the time the company's operation was approaching the 21st century, Starbuck had established its presence in many countries around the globe and operated over 20, 000 stores. It, therefore, became a major competitor for most of the companies, an issue which made the coffee and tea production industry acquire radical changes. The changes were mostly on other competitors who started to emulate the work of Schultz as a way of ensuring that their operations are at per.
Today, Starbucks is one of the leading companies in the production of coffee globally. The company's current directors include Howard Schultz who is the chairperson. Other directors are Mary N. Dillon, William W. Bradley, Kevin R. Johnson, Robert M. Gates, Joshua Cooper Ramo, Clara Shih, Javier G. Teruel and Craig E. Weatherup to mention but a few. The director's work with the aim of meeting the mission of maintaining uncompromising principles while it grows in the manner of its operation. Based on the mission, the board of directors has gone ahead to adopt the governance principles and the committee charters which offer assistance in leading the governing practices of the company. As things stand, the companies have ten directors with a substantial majority meeting the mandatory requirements of NASDAQ together with those of the U.S. Security and Exchange Commission (Schultz, 2012). It is also worthwhile to note that Starbucks has many competitors, the majority of whom are doing well in coffee or other related industry. Some of the competitors include Costa Coffee, McDonald's, Independent Fast Food Chain, and Bakeries. There is also the Dunkin Donut, Cafe Coffee Day, and the Kentucky Fried Chicken. The remaining ones are Twinings, Tazo, Dilmah, and Tetley. There is also the Republic of Tea and McDonalds McCafe to mention but a few.
For many years, the major competitors of Starbucks from the mentioned companies have been McDonald's and Dunkin Donuts. Even with the competition, Starbucks has always emerged as a go-to coffee place to work and socialize; the concept has been opined to correspond with the marketing approach of the company. The company has mostly strived to ensure that it becomes a stopping point for the consumers between their places of work and home. The step has ensured the existence of brick-and-mortar location which ensures the provision of a relaxed atmosphere to the customers.
On the financials of the company, Starbucks is viewed to have existed for more than 46 years and has become one of the highly respected and admired companies across the globe. The company exists as an enduring global merchant that currently delivers the Starbuck's experience more than 85 million times weakly in above 28,000 stores in at least 76 countries. According to the year 2017, the company is argued to have acquired a total revenue of about $22,386.8 hence acquiring a gross profit of about $13,348.6 (Schultz, 2012). The operating income during that financial year was $3,896.8 hence showing that the net income was above $2,888.4. The financial figures given should be viewed regarding millions.
SWOT Analysis of Starbucks Company
Globally defined brand image backed up by huge clientele base. Starbucks has clinched 36.7% of the US Market share and has operations in 60 countries and above. As a prominently recognized brand ranked 91st in the list of best brands 2013, has given the company an edge over its competitors.
Excellent product quality. The company pays credence to the grade and value of products putting them at top-notch, an aspect that has been consistent all time.
Location and aesthetic appeal of its stores. Starbucks boasts of many stores dotted at strategic places, globally. The location and aestheticism ensured better market penetration and consumer convenience. The design of the stores, made to appeal to the eyes coming along with perks like; free Wi-Fi, conducive environment and ample services for clients gives them an upper hand in competition.
Positive employee culture. The company is famous for human resource relations. The company provides its employees with favorable benefits and motivation which puts the company profile ahead. The staff is a representative of the brand.
Brand loyalty. Starbucks has amassed a reputed image characterized by effective rewards and recognition program that increases customer loyalty. An example of this is the Starbuck's loyalty card that gifts the most frequent customers. State of the art service would ensure that the customer always comes again.
Embraced technology. This can be attributed to the download of its mobile application as well as its contribution to technology. It is innovative and progressive, participative in technology
Concern for the environment. Starbucks initiatives are based on environment-friendly and recyclable products hence reduces wastes and pollution on the environment.
Market overdependence. Starbucks depends a great deal on the U.S. market making it prone to prospects of the US market and economic policies. Starbucks stores are oversaturated and could cannibalize its market.
Pricey products. Instances have been witnessed, of consumers preceding the Starbuck experience in preference of cheaper products from competitors. The drawn puts the company on slow motion.
Tarnished reputation. Starbucks labor practices and social scrutiny in may damage its image since it may be viewed as extremely profit-making. Also made headlines over the arrest of two black men in Philadelphia, April 2018, forcing them to recall employees for racial bias training. Also, the fair trade conflict with African farmers.
The fifth concern is on diversification of product mix. Starbucks could also extend its services to ensure a product line via venturing into products such as tea, juice to attract even more customers.
The sixth issue is on embracing technology. Starbucks is going digital by use of the mobile application and authorizing online payment and cashless systems to make the app even more convenient and friendly.
Venture into new markets. There emergent markets for the product that Starbucks would want to tap into. Its international strategy and would result in the potential for growth in developing nations. Global retail operations would spur the growth of Starbucks (York, 2010).
Based on the various weaknesses, I would argue that Starbucks need to change the manner in which they engage with the United States particularly on overdependence and also review new other new and affordable techniques which will ensure that it operates efficiently without many limitations.
Overreliance on international trade. The raw product-coffee beans is an import product from markets like South America, Africa to mention but a few thus compelling the company to comply with foreign governments for production and distribution. The mentioned would hurt the company during limiting policies and tariffs or trade wars (York, 2010).
Competitive environment. The market is very competitive both generically and specifically; this drops Starbucks in the lists of options, clients may prefer other beverages and restaurant outlets (York, 2010).
Dynamic consumer lifestyle and choices. These brands are being demonized by a lobby that are urging consumers to shift toward a healthier product putting the future of Starbucks at stake.
Fluctuation of prices. In the worldwide coffee market price has been volatile, thus the unpredictability of coffee beans as a product. The drawn is an external factor that would threaten the growth of Starbucks.
In consideration of the issues discussed above, the company needs to change a few objectives and bring on board recommendations which will ensure that its operation is smooth and efficient. Some of the objectives are on focusing the company resources to customer satisfaction and establishing in branches in more continents as a way of monopolizing the market. The recommendation which I would give is for the company to reduce its dependence from the United States and work hard towards rectifying on its weaknesses and those of its competitors.
Hong, S. Y., & Yang, S. U. (2009). Effects of reputation, relational satisfaction, and customer-company identification on positive word-of-mouth intentions. Journal of Public Relations Research, 21(4), 381-403.
Schultz, H. (2012). Pour your heart into it: How Starbucks built a company one cup at a time. Hachette UK.
York, E. B. (2010). Starbucks gets its business brewing again with social media. Advertising Age, 81(8), 34.
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