Starbucks Corporation

SWOT, PESTEL & GOTA Analysis with special reference to Indian

Market.!!!

-Bharti Dewan {BMI-25}

Starbucks Corporation - A Glimpse

 An American global coffee company and coffeehouse chain 

Based in Seattle, Washington. Largest coffee house company in the world,

20,891 stores in 62 countries, including 13,279 in the United States,

1,324 in Canada,

989 in Japan, 851 in the People's Republic of

China, 806 in the United Kingdom, 556 in South Korea, 377 in Mexico, 291 in Taiwan, 206 in the Philippines, 179 in Turkey, 171 in Thailand, and 1 67 in Germany.

Company BackgroundName Starbucks Corporation

Industries Served Restaurants, & Coffee Houses

Geographical Area served Worldwide

Headquarters U.S.

Current CEO Howard Schultz

Revenue $ 13.29 billion (2012)

Profit $ 1.38 billion (2012)

Employees 149,000 (2012)

Main Competitors McDonald's Corp., Dunkin' Brands Group Inc., Nestlé S.A., Green Mountain Coffee Roasters, Costa Coffee, Caribou Coffee Company

Products Serves hot and cold beverages, Whole-bean coffee, Micro ground instant coffee, Full-leaf teas, Pastries, and Snacks. Packaged food items, Hot and cold sandwiches, and Merchandiser such as mugs and 

tumblers.

Starbucks Evening Locations also offers variety of beers, wines, and appetizers after 4pm. 

Through the Starbucks Entertainment division and Hear Music brand, the company also markets books, music, and film.

It Also offers Ice-cream and coffee at grocery stores.

*Many of the company's products are seasonal or specific to the locality of the store.

Starbucks SWOT analysis 2013Strengths Weaknesses

• Sound financial records

• No. 1 brand in coffeehouse segment valued at $4 billion

• Starbucks experience

• Largest coffeehouse chain in the world

• Employee management

• Coffee beans price is the major influence over firm’s profits

• Product pricing

• Negative publicity

Opportunities Threats

• Extend supplier range

• Expansion to emerging economies

• Increase product offerings

• Expansion of retail operations

• Rising prices of coffee beans and dairy products

• Trademark infringements

• Increased competition from local cafes and specialization of other coffeehouse chains

• Saturated markets in the developed economies

• Supply disruptions

STRENGTHS Sound 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.

No. 1 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.

“Starbucks experience”. 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.

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.

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

WEAKNESS 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.

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.

Negative publicity. The corporate continuously receives negative publicity over its poor efforts of becoming greener company, tax evasions and poor treatment of some suppliers.

OPPORTUNITIES 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.

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

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.

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.

THREATS 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.

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

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.

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.

Supply disruptions. Due to political, economic and weather conditions Starbucks may experience supply disruptions, adding significant cost to the firm.

Starbucks PESTEL Analysis

PESTEL stands for political, economic, social, technological, environmental and legal factors affecting the business.

It is widely considered to be one of the most effective analytical tools used to analyse the impacts of external factors to the company (Dlabay et al, 2011).

The following table represents PESTEL analysis conducted for Starbucks Corporation:

PESTEL ANALYSIS OF STARBUCKS CORPORATION

Political•Industry-specific rules and regulations•The level of relationships between USA and countries that produce coffee beans•The level of political stability within a country

Economic•Buying power of consumers•Local currency exchange rates•Local economic environment within each market Starbucks operates•Taxation level

Social•Changing family patterns in USA and Europe•Consumer preferences•Changing work patterns•Changes in lifestyles of population•The level of education of population in local markets•Changing values among population

Technological•Emergence of innovative technology•Biotechnological developments•Developments in agriculture

Environmental•Environmental rules and regulations•Environmental disasters in countries producing coffee beans• Global warming and other environmental issues in a global level

Legal•Introduction of policies and regulations by health authorities  about caffeine production and consumption•Introduction of tougher customs and trade regulations•Licensing regulations related to the industry.

GOTA Analysis Of STARBUCKS CORPORATIONS

GOTA means GLOBAL OPPORTUNITY THREAT ANALYSIS. In 2004 Starbucks entered into a strategic alliance with Tata Coffee LTD., the largest coffee producer in India. With signing this agreement, Starbucks finally found the partner it needed. A company which met all the conditions and standards followed by Starbucks.

GOTA Of Starbucks Corporations with reference to Indian Market is as follows:

Global Opportunities For Starbucks In India

The Indian economy has been subject to series of positive economic reforms since 1991 which had created a better working environment for foreign companies and has made it possible for foreign investors to operate in the country more easily.

Taking into consideration the political environment in India as a whole, the bureaucracy complications and the regulatory FDI controls and regulations, it is safer for Starbucks to enter India via a joint venture or a strategic alliance with an Indian company that can provide a buffer from possible political tension.

With the westernization of the social trends more and more young people trust western brands and prefer foreign goods. They also go for the same trends and try to mimic the same status of exclusivity young people in the US and Europe look for. This places Starbucks at a very dynamic position, where it has a good opportunity and much possibility to capture quick customers.

India has shown significant improvement in reforms towards international business and investment. Due to these improvements the country’s has attracted FDI’s. Lower tariffs and lower barriers to enter have made the Indian market extremely promising and willing to change.

With increase in number of middleclass in India, Starbucks has a large enough target group which is willing and able to pay premium price for a high quality western brand. Starbucks has the potential to skim the Indian market, because of its positioning and brand image.

Global Threats For Starbucks In India

Starbucks can face some opposition from the existing competitors (CCD, Barista, etc.) through the use of political influence and delaying tactics.

the culture and cuisine of India poses a very interesting challenge. The mix of traditional tea-drinking population together with the various differences between Muslim and Hindu and the growing difference among various regions of the country, make it extremely to divide and place is concrete consumer groups

Corruption in the country is high and it raises concerns. Starbucks has already experienced some drawbacks from the legal environment in India. The case of “Starstruck” is being mentioned as an example of weak copyright and trademark protection in the country.

The coffee retail market in India consists of mainly home-grown brands. The biggest ones are Coffee Café Day (CCD), followed by Qwiky’s and Barista Coffee. These companies are considered as threats to Starbuck’s entry in the Indian market because they are offering similar and sometimes identical products.

the infrastructure in India is weakly developed, which might result difficulties or larger amounts of costs incurred in the business operations of Starbucks

In addition the retail environment in India is largely unorganized and dominated by small and individually owned businesses.

The threat from substitute goods in India should also be considered. The Indian population is still heavy tea drinkers.

Because of high competition Starbucks is also facing a problem regarding their suppliers. They signed a supply deal with Tata Coffee which is actually co-owner of the main competitor on the market.

Marketing Strategy Adopted By Starbucks To Enter India

The company follows an international expansion strategy through strategic alliances. Starbucks wants to prevent competitors from having a head start, build upon the growing interest for Western brands and take advantage of the higher coffee consumption rates.

Focuses on earning the trust, respect and the business of our customers. For us success is not an entitlement, we have to focus on the customers who walk in, focus on the beverages served, and we get to build that personal connection with our customers.

Customers are using the stores, sitting there, whether with family or friends, with coffee or food and enjoying the environment. We offer free wi-fi, we engage the customers in a way they want to be engaged, and allow them to use the stores the way they want to use them. We build stores close to where they work, where they live and where they go to have fun. You see a variety of footprints in our stores.

Highlighted local artists and craftsmen. In Delhi, we have worked with local craftsmen and what they wove has been placed on the ceiling of the stores. There are pictures of the artists and craftsmen themselves on the walls which tell their story and the story about the coffee. We want to elevate the local community.

We attract both a young and older crowd; the Starbucks experience is universal, it’s wanting to come to a place you feel comfortable in, having great-quality coffee and food. That’s what we focus on, and also how we attach our stores to the local community. It’s about doing business the right way and giving back to the community

We feel we have hit out of the park in terms of hitting the quality standard and the flavour profile the Indian consumer wants. But, each individual’s preference is different, we personalise it for you.

Indianised the flavors. There are some strong local touches on the menu too

Murgh Tandoori KebabKonkan Twist and something totally unheard of in most cafes - Elaichi Mawa Croissant.

THANK YOU!!