Topic: Strategic Management and Planning
Assignment:
Utilise the SWOT analysis from assignment 1 to perform an external analysis that
Identifies the implications of opening a franchise in your local area.
Your case study should include:
• an overview of the franchise organisation, its characteristics and strategic directions and objectives
• a discussion of the external analysis tool that is being used to undertake the analysis
• an evaluation of the external analysis outlining the key opportunities and risks that need to be considered
• details of some strategic considerations for opening a franchise in this location, with options for additional research or analysis required
• reference to relevant
Starbucks SWOT Analysis:
Starbucks is the world’s leading coffee house, which has more than 20,000 stores across the world (Datamonitor: Starbucks Corporation, 2010). In Australia, Starbucks did not perform as good as it had done in other countries, but it remains a strong brand in the market. Initially, Starbucks had opened several branches across Australia; at least every city had a branch. However, with time they were forced to close down a number of them since the market did not as fast as they had expected. SWOT is a management tool that is used to evaluate these aspects in the business, to observe its situation, viability and access its future. There are several strengths, weakness, opportunities, and threats related to this franchise. Although the company has previously faced challenges and Starbucks has had its weaknesses, the company has strengths, and opportunities in this industry are very viable. These give the industry a lot of potential, and any interested investors can feel free to invest.
Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis
Strengths:
The first major strength of the company is its brand across the world. Being the largest coffee brand in the world, it has an advantage over all other coffee outlets in Australia. Before it entered the Australian market, people were well aware of the brand. Now that it is in the market, people can sample the experience of the much-appreciated brand. This is captured in their motto- the Starbucks experience (Datamonitor: Starbucks Corporation, 2010). This shows that they aim to give their customers an experience that is incomparable, something that most customers expect in a global market leader There is a strong relationship between the organisation and the employees. This has helped the company to get the most qualified personnel in the job market and to maintain them. In the Australian employment market, Starbucks is a highly rated employer, something that encourages most people to work for them. Their remuneration, employee training, and working schedules are very friendly, something that has led to the high approval ratings. For example, the hourly remuneration rate ranges from 12 to 20 dollars.
The company has been functional for more than four decades since it was started in the year 1971. This means that they have immense experience, on different aspects of production and marketing. Coupled with the fact that they have franchises across several countries in the world, this gives immense options and experience that has helped them to compete with other coffee marketers in Australia.
The last strength that Starbucks hold over other coffee companies in Australia is the fact that they are financially very strong. Finance often has an impact on several aspects of the operation, since most of them require a lot of money to implement. Starbucks, being a very financially strong company can compete with its competitors on these aspects since they can outspend them. For example, they can be able to do expensive marketing, they can attract the best employees, and they can afford to open their branches at the most strategic locations, which are often more expensive.
Weakness:
Their biggest challenge is the price of coffee beans, something that has affected theirprofit margin. Over time, the price of coffee beans has been on the increase. This has made them incur huge costs of production, which affect their profits. This has gone to affect their pricing too, giving rise to another challenge. With the high price of coffee beans, coupled by their brand, they have to sell their coffee at exorbitantly high price. With a higher price than their competitors, it is highly likely that most customers will opt for the cheaper options (Australia Food & Drink Report, 2013).
Starbucks also has a challenge in addressing its international markets, since it is viewed as an American company in the global market. Often, consumers in the Australian market want a company that they can associate. Having been viewed as an American company in the global market, it will be very hard for them to succeed in the Australian market, which is cultural based.
The last challenge that Starbucks face is that they seek perfection from their employees. Although they have received applauds for having employee friendly packages, they demand their employees to deliver high-quality services. Although this is good for the customers, the weakness is that most employees have raised this as an issue against their management. This could affect their ability to retain employees.
Opportunities:
One big opportunity for Starbucks lies in the fact that Australian customers are not very much price oriented (Australia Food & Drink Report, 2013). These customers are concerned with the quality of services and products that they receive, and the fact that the provider can get into their culture. Considering that Starbucks sell their coffee at very high prices, this should not be much of a concern to them if they can be able to tap into the market if they can address other market aspects that the customers are elastic.
Considering their challenges when entering into the Australian coffee market, they could consider selling their beans to retailers who have already established their markets. Other options include selling their beans in supermarkets or installing coffee dispensers in shopping malls and supermarkets where customers can buy their coffee.
Threats:
Increased competition from small outlets is a major threat to their business. Most of these small business are cultured to fit the Australian market, and are located more strategically than Starbucks. For example, most of them are located near shopping malls, supermarkets, and famous streets (Australia Food & Drink Report, 2014). Consumer negativity in Australia is another threat, as most consumers view them as an American company that is attempting to succeed in the international market while these consumers are seeking an Australian cultured company.
Recommendations:
Although most people say that the price of Starbucks products is very expensive, the Australian coffee market is not price elastic largely. Most customers are concerned with other aspects of the products such as organizational culture, quality, and services. This means that Starbucks can continue selling their coffee at high prices, but can get more customers if they attempt to improve their customer service and organizational culture.
Conclusion:
Starbucks is an international coffee marketer, which has experience for over four decades. However, they have not enjoyed much success in the Australian market as they could have been tipped to do. This is because they failed to tap the cultural orientation of the Australian market. Most Australian consumers prefer organizations that get closer to their culture, but Starbucks brought an America culture.
References:
Australia Food & Drink Report. (2013). Australia Food & Drink Report, (4), 1-115.
Australia Food & Drink Report. (2014). Australia Food & Drink Report, (3), 1-115.
Cole, G. A., & Kelly, P. (2011). Management: Theory and practice (7th Ed.). Hampshire, England: Cengage Learning EMEA.
Datamonitor: Starbucks Corporation. (2010). Starbucks Corporation SWOT Analysis, 1-9.February 7, 2009, from
https://www.thetimes100.co.uk/downloads/skoda/skoda_13_full.pdf
Hambrick, D., & Fredrickson, J. (2001). Are you sure you have a strategy? Academy of Management Executive, 15(4), 48-59.
Montgomery, C. A. (2008). Putting leadership back into strategy. Harvard Business Review, 8 6(1), 54-60.
The Times 100. (n.d.). SWOT analysis in action at Škoda. Retrieved