Starbucks Review

Starbucks is one of the most successful companies in the contemporary business sector that attracts attention of financial analysts, competitors, potential partners, consumers, and thousands of prospective employees that are looking for the employment with decent career opportunities. In this essay, we prepare a brief report on the company’s performance emphasizing the strengths and weaknesses of Starbucks. Undoubtedly, Starbucks is the most recognizable company in the industry of coffee and food stores not only in the USA but also globally. The management of the company is proud of its growing revenue and current market position. Starbucks uses its strengths in addressing the problem of rising prices on coffee beans which are the main means of generating profits.

Overview

Starbucks is an American company specializing in coffee drinks and performing in the retail industry of beverages and food stores. Nowadays, Starbucks operates in more than sixty countries with almost 20,000 stores (Atzori, Shapoval & Murphy, 2016). A product mix of Starbucks includes high-quality coffee and tea drinks and the diversity of delicious food. The company’s marketing strategy comprises of several brand names, including Starbucks, Teavana, Verismo, La Boulange, Starbucks Refreshers, Seattle’s Best Coffee, Evolution Fresh, and Starbucks VIA. In 2016, total revenue of Starbucks reached the point of $21.31 billion (Atzori, Shapoval & Murphy, 2016). Starbucks remains an undisputed leader in the retail coffee and food stores industry, regardless of the significant impact of the economic crisis on the financial sustainability of the consumers. Starbucks is famous for its unique beverages because the company makes its drinks by using high-quality beans. The revenue of the industry has been growing in the U.S. market from 2008 to 2016 (Atzori, Shapoval & Murphy, 2016). Nowadays, the revenue is more than $30 billion. The number continues to rise due to the ever-changing menu offerings, the improvement of the economic situation, and consumers’ attitude (Atzori, Shapoval & Murphy, 2016). In 2016, Starbucks managed to hold 75% of the U.S. market share indicating the company’s dominance over competitors and consumers’ loyalty (Atzori, Shapoval & Murphy, 2016).

Key Products

Since every consumer associates Starbucks with delicious beverages and appetizing food, it is obvious that the company generates its profits from these products. The statistics prove that the income from the beverages and food comprises the larger portion of the Starbucks’ total revenue. In 2016, Starbucks generated $12.38 billion from selling beverages and $3.49 billion from food compared to $11.12 billion and $3.09 billion respectively in 2015 (Atzori, Shapoval & Murphy, 2016). In 2014, the revenue from beverages equaled $9.46 billion and $2.51 billion from selling food (Haskova, 2015). It proves that there is a positive tendency towards the increasing profits. It is difficult to outline specific products that are the most profitable since consumers’ preferences vary depending on the location of the Starbucks store. However, Starbucks latte, cappuccino, and butter croissants are the classic orders that became the most profitable products (Haskova, 2015). The value of coffee is an outlining feature of Starbucks that nourishes every coffee drink to welcome consumers with the delicious aroma and warm atmosphere.

Starbucks intentionally expanded its performance globally in order to ensure continuous growth of its profits according to the variety of tastes, needs, and preferences of consumers (Aiello & Dickinson, 2014). In addition, Starbucks pursues a flexible strategy towards the development of products, which requires adherence to the local environment and production of limited seasonal offerings (Haskova, 2015). For example, during fall, Starbucks generates its profits primarily from the sales of Pumpkin Spice Latte. The customers can win special breakfast offerings from regular purchases. In case a customer prefers tea to coffee, Teavana, one of the stores belonging to Starbucks, continues supporting revenue growth by selling various tea drinks.

Business Improvement

Starbucks is famous for its close relations with both employees and consumers. Starbucks’ consumers have developed a sense of belonging to the community of Starbucks’ fans. If there is a single person who is still not aware of Starbucks and its products, the company can impress him or her with high-quality products and services at every store. Nowadays, Starbucks has reached the high point in meeting expectations of the consumers and satisfying their needs (Aiello & Dickinson, 2014). However, the company can continue to strengthen its market position by improving relations with consumers. Since love for coffee unites employees and customers of Starbucks, it would be significant to initiate the development of short educational programs aimed to enhance knowledge on coffee and its usage in drinks. Starbucks should intensify connection with current customers in order to attract the new audience and to show the benefits of belonging to the global Starbucks community. This solution will allow tackling multiple problems, including economic fluctuations, consumers’ tastes, and competition issues.

The profitability proves that Starbucks takes the right direction to ensure its growth and financial sustainability. After the economic downturn in 2008, Starbucks managed to regulate its strong growth globally (Latif, Qurat-ul-ain, Gulzar, Bukhari & Sameen, 2014). Thanks to continuous adherence to the consumers’ tastes and needs, Starbucks generates revenue by offering innovative products and unique experience. In addition, well-organized and thoughtful allocation of resources does not reduce the company’s budget. Moreover, the company not only rewards the performance of the most productive employees but also spends a significant portion of revenue on the improvement of the local community (Morais et al., 2014). It means that Starbucks adopts successful strategies to manage its financial resources effectively and to ensure further growth.

Business Issues

One of the main problems of Starbucks lies in the inability to influence the prices of coffee beans. The company depends on its suppliers since high-quality coffee beans allow providing consumers with unique beverages. Starbucks understands that it cannot continuously increase the prices on beverages as long as they should be considerable, fair, and affordable. A myriad of the consumers belongs to the lower and middle class, which means that significant increases in prices will lead to the reduction of the revenue. Vietnam and Brazil are the main suppliers of coffee beans influencing the prices (Atzori, Shapoval & Murphy, 2016). Nowadays, the demand for coffee globally became too high to keep the charges at the same level. As a result, supply shortage and increasing prices are threatening the performance of Starbucks. The company should design the optimal solution to increase the prices in the way that will not affect the desire of the consumers to attend Starbucks stores. For example, the company can slightly increase the prices on food, tea, and coffee drinks. It will not create a significant tension on the consumers’ willingness and readiness to pay for the products and services of Starbucks. However, the threat of the growing prices on coffee beans requires complex measures towards retention of consumers and improvement of the pricing strategy.

Conclusion

A brief review of Starbucks performance outlined the company’s strengths and weaknesses under the influence of competition and the bargaining power of the suppliers. The success of Starbucks is dazzling and colossal thanks to the company’s dedication to meet the consumers’ needs. Beverages and food products comprise the main sources of the total revenue. Starbucks needs to work on the integration of consumers into the Starbucks community along with the improvement of the pricing strategy in order to keep products affordable.