The major strength of Starbucks is its number of stores worldwide with 16,858 stores in the year 2011(Starbucks Corporation, 2010). The second major strength of Starbucks is both domestic and international growth which provided Starbucks an advantage in the economic crisis when its stocks prices went down but it captured a hit in its profits (Starbucks Corporation, 2010). The third major strength of Starbucks is its brand recognition, where customers come to Starbucks and have a valuable experience. This strength will provide Starbucks an advantage over its competitors in the coming years.
Besides these strengths one of the major weaknesses of Starbucks is its higher price of coffee and specialist coffee beverages. This weakness is hurting Starbucks, when Macdonald’s uses lower price in its marketing against Starbucks. The second major weakness of Starbucks is its dependence on coffee for profits, where 75% of Starbucks revenues are generated from coffee and coffee based products (Starbucks Corporation, 2010). The rise in coffee beans price is more dangerous for Starbucks as compared to its major rivals Macdonald’s and Dunkin Donuts who focus food first and then coffee.
The opportunities which Starbucks have in front are expansion of its operations in growing economies like Brazil, China, India and Russia. In the near future Brazil, India and China can be a source of competitive advantage for Starbucks with their growing economies and industrialization (Burkitt, 2010, Murphy, 2011, Bose, 2011). The agreement between Starbucks and Tata Coffee of India which is the fifth largest coffee exporter will open new horizons for Starbucks as it can access China and Russia with cheaper cost (Bose, 2011).
The threat which Starbucks is facing is opening of McCafe by Macdonald’s in its franchises worldwide. This head on competition from Macdonald’s is alarming for Starbucks especially in Europe. In Europe to start a new store a company needs more than $350,000, while in Europe Macdonald’s needs only one third of that, because of its prior presence in the form of Macdonald’s franchise (Liu, 2009).
The Political/Legal, Economic, Social, Technological factors analysis (PESTEL) is an important tool for designing and implementing strategy.
The economic conditions are important for every company because these conditions direct the future of company. The Starbucks faced financial crisis in 2009-2009 because of recession and it resulted in reduction of its stock prices (“SBUX Basic Chart |Starbucks Corporation Stock – Yahoo! Finance,” 2011).