Principles of Marketing
Topic 1: Understanding Marketing – SWOT
The following examples were found from the internet. Please apply the SWOT principle from the
handout and spot out the faults of the below examples. Do they match with the SWOT principle?
Source: [Link]
STARBUCKS
Strengths
Sound financial records. x
- 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. x
- 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”. x
- 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. yes
- The company operates around 20,000 coffeehouses in 60 countries, making it the largest
coffeehouse chain in the world.
Employee management. x
- The company offers its employees extensive range of benefits and a pay rate higher than
offered by competitors.
Weaknesses
Coffee beans price is the major influence over firm’s profits. x
- 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. x
- 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. x
- 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. x
- 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. yes
- There are great opportunities for coffeehouses in China and India, in which Starbucks has
comparably only modest number of restaurants.
Increase product offerings. x
- 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. x
- 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. yes
- The chain strongly depends on the coffee beans and dairy products prices, which Starbucks
cannot control or can hardly estimate.
Trademark infringements. x
- 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. yes
- 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. x
- 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. yes
- Due to political, economic and weather conditions Starbucks may experience supply
disruptions, adding significant cost to the firm.