Swot / Tows Starbucks

Strengths

• Global presence

Starbucks has a widespread global presence. The company operates about 13,168 retail store locations. The company’s widespread presence provides it with widespread brand recognition and a strong customer base.

• A disciplined innovator

Starbucks is a disciplined innovator. The company effectively manages its innovation time line generating consistency in same store sales. Starbucks’ ability to roll out new products relatively quickly is a considerable competitive advantage for the company.

• Increase in revenues and profits

The company recorded revenues of $5294.2 million during the year ended September 2004, an increase of 29.9% over 2003. The company’s revenues grew at a compounded annual growth rate of 25% from fiscal 2000 and fiscal 2004.

This significant rise in revenues provides the company with a strong financial base and enables it to undertake new business ventures.

• Clustering of company units

With the continued growth of the coffee market, the company has looked to expand its business, including those areas where it has an established presence. Starbucks has targeted clustering its units so as to dominate particular areas. A strategy of unit clustering, and a focus on stores that have convenient access for pedestrians and drivers, represents further opportunity for Starbucks to capture an increasing share of the coffee market.

• Fortune Magazine’s 100 best list of companies to work for.

Weaknesses

• Reliance on US market

Starbucks’, headquartered in Seattle, derives approximately 85% of its revenue from its domestic US market. Given the company is an international brand with wide ranging operations, it should be looking to generate a greater proportion of revenues from outside the US.

• Reliance on beverage innovation

An important long-term risk to the company’s stock is a lower valuation caused by a slowdown in US sale store growth. Starbucks’ store sales growth has been largely driven by beverage innovation, but there are questions over how long this can last.

• Lower revenues and income per employee

The company generates lower revenues and income per employee as compared to the industry average. Its revenue per employee was $71,544 during 2004, as compared to the industry average of $110,841. The company’s lower returns per employee as compared to the industry average reflect adversely upon its employee efficiency.

• Problems in some international operations

The company has been facing certain difficulties in some of its international operations. Starbucks’ has faced problems of expansion, with a number of openings failing to be successful one are is Japan. This adversely affects the international operations of the company and thus the growth prospects in the region.

Opportunities

• Growth in coffee market

Starbucks has a market share of over 40% of the specialty coffee market, and the anticipated growth in this category will offer the company considerable opportunities for further growth and expansion in the near future.

• New product

Starbucks has expanded its beverage categories by signing an agreement with the wine and spirits group Jim Beam Brands to develop and market a Starbucks branded coffee liqueur drink. The link up with Jim Beam Brands will give Starbucks access to a nationwide sale and distribution network, and a partner with proven track record in product development and marketing.

• Market expansion

The company is targeting 15,000 international stores in the next few years. Starbucks expects major expansion potential in China. The company is also looking towards markets such as Brazil, India, and Russia for expansion opportunities. This would provide the company with new opportunities for revenue growth.

Threats

• Volatile coffee markets

The supply and prices of coffee experience high volatility. The company’s requirements for quality standard coffee exposes it to multiple factors in the producing countries, including weather, political and economic conditions which may adversely affect the company’s business. The actions of