After reading Starbucks’ “Management Discussion and Analysis” portion of its 10-K, it is apparent that the company currently possesses a highly competitive position and progressive management strategy. Starbucks’ top position in its industry and management strategy comes from the fact that this company has multiple areas of strength and lacks overwhelming weaknesses. Strengths and weaknesses with regard to a firm like Starbucks are based on the internal factors relating to a company.
The internal analysis of Starbucks shows that it enjoys much strength as a company. When analyzing the strategic management of a company, a strength is defined as a firm’s “resources and capabilities that can be used as a basis for developing a competitive advantage” (QuickMBA). The “Management Discussion and Analysis” section of the Starbucks Annual Report features many strengths according to this definition. Starbucks’ capabilities go way beyond simply selling coffee at Starbucks shops in America.
In fiscal 2012, Starbucks experienced a 7 percent growth in global store sales, 50 percent increase in “Channel Development,” and 20 percent raise in licensed stores revenue (SBUX 2012 Annual Report, 25). This fact alone presents multiple strengths Starbucks has. Starbucks has stores and a positive presence implanted in multiple countries divided into the three sectors of the Americas, “EMEA” (Europe, Middle East, and Africa), and “CAP” (China/Asia Pacific). Additionally, Starbucks maintains the operating segment of “Channel Development” which focuses on the sale of Starbucks and Tazo branded K-Cups and other beverage innovations.
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As stated before, this segment of Starbucks’ operations witnessed a 50 percent increase in revenues in fiscal 2012 which shows how strong Starbucks as a firm really is. On top of these optimistic facts, Starbucks simply continues to show its strength with regard to its market dominance and brand-name recognition throughout America and other countries. On the other side of the internal analysis of Starbucks, few weaknesses are present within the company. A weakness can be looked at as “the absence of certain strengths. For example, a lack of patent protection, weak brand name, poor reputation among customers, high cost structure, lack of access to the best natural resources, or a lack of access to key distribution channels can all be classified as a Company’s weaknesses (QuickMBA). Starbucks, however, does not appear to possess any of these weaknesses. Especially since Green Mountain Coffee’s expiration of their patent for K-Cup, Starbucks has not been hindered by access to key distribution in their Channel Development sector (Daily Finance).
This area of focus may be one of Starbucks’ weaknesses though because, unlike Starbucks franchises throughout America that basically stand untouched compared to other coffee shops, Starbucks branded K-Cups compete with many other viable brands such as Green Mountain Coffee in the home-brewed portable coffee sector of the coffee industry. Additionally, Starbucks’ expansion into other countries, although proving to produce positive income, can be looked at as a weakness. For example, Starbucks’ presence in Europe has received some resistance due to the strong European “cafe culture” and preference for different “regional tastes” (NY Times).
In summation, Starbucks has a positive future and experienced a fiscal year filled with strengths and few weaknesses in 2012. Its main strength as a firm is the powerful brand and presence that has been established by Starbucks. This strength is supplemented by Starbucks’ expansion into multiple countries and different areas within the market for coffee including K-Cups. Starbucks’ weaknesses seem to be associated with its strengths stemming from expansion, which is seemingly normal and acceptable.
To increase the firm’s strengths and mitigate its weaknesses, Starbucks senior management plans to “focus on achieving sustainable growth from established international markets while at the same time investing in emerging markets, such as China” (Starbucks Annual Report, 27). Additionally, Starbucks management seeks to expand upon its Channel Development segment by developing new innovations and ready-to-drink beverages, which will simultaneously bolster their internal strength and disintegrate the current weakness of having less establishment and dominance in this area of the coffee industry.
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