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An organization can use this tool. SWOT stands for strengths, weaknesses, opportunities, and threats. The internal environmental strengths and weaknesses and external environmental opportunities and threats are determined through this. In a SWOT analysis, the internal environmental factors analyzed for strengths and weaknesses usually are management, mission, resources, systems process, and structure. Whereas the external environment factors analyzed for opportunities and threats are consumers, competitors, suppliers, labour force, shareholders, society, technology, the economy, and governments. (Lussier, 2009: 127). In other words we can say that a SWOT is a tool for analysing an organization's competitive position in relation to its competitors. (Basu, 2004: 96)
What are our strengths within the product line, brand, distribution, and other business model considerations?
What are our weaknesses and those of our competitors?
What opportunities do we see based on market size, industry trends, gaps in our service, or distribution?
What threats do we face based on our competitors' strengths or changes in the marketplace or the technology?
Customer-centric product definition (Mello, 2002: 41)
Many people of the corporate world consider SWOT analysis to be one of the most effective tools in the analysis of marketing data and information. This is mainly because the SWOT analysis is a simple, straightforward framework that provides and serves as a catalyst for the development of viable future plans and to rectify the current plans. It fulfils this role by structuring the assessment of the fit between what a firm can and cannot do (in the form of strengths and weaknesses), and the environmental conditions working for and against the firm (in the form of opportunities and threats). (Ferrell & Hartline, 2008: 117)
Major Benefits of SWOT analysis
Simplicity: SWOT analysis does not require any extensive training or technical skills to be use it successfully. The analyst needs only a comprehensive understanding of the nature of the company and the industry in which it competes and a basic understanding of relating this information to his company.
Lower Costs: Because there is no need for any specialized training and skills therefore the use of SWOT analysis can actually reduce the costs associated with strategic planning. This is direct advantage for firms.
Flexibility: Other advantage of this tool is flexibility. It can enhance the quality in the organization's strategic planning even without extensive marketing information systems. However, when comprehensive system details are present, they can be easily added to the main framework of SWOT. Also the presence of a comprehensive information system can make repeated SWOT analyses run more smoothly and efficiently.
Integration and Synthesis: By the SWOT analysis the analyst can integrate and synthesize diverse information, both of a quantitative and qualitative nature. It can organize information that is widely known, as well as information that has only recently been gathered or acquired. Moreover SWOT analysis can also deal with a wide diversity of information sources. In fact, SWOT analysis helps transform information diversity form a weakness of planning process into one of its major strengths.
Collaboration: SWOT analysis fosters collaboration and open information exchange between different functional areas. By learning what their counterparts do, what they know, what they think, and how they feel, the marketing analyst can solve problems, fill voids in the analysis, and eliminate potential disagreements before the finalization of the marketing plan. (Ferrell & Hartline, 2008: 120)
Starbucks Coffee Company
The first Starbucks opened in 1970s. The name comes from Herman Melville's Moby Dick, a classic American novel. (www.starbucks.co.uk)
Every organization has some strength. In some cases this is very obvious and eye-catching, for example dominant market shares and good brand name. In other cases, it is a matter of perspective; for instance, a company is very small and hence has the ability to move fast and very innovative. Even the companies that are in a bad position also have strengths. But their weaknesses may have superceded their strengths. (Williams & Curtis, 2007: 221). The main areas of the strengths for this firm are:
"Currently, the company has about 6500 stores worldwide and about one-fourth of them are located in 29 countries outside the United States and Canada. " (Kurtz et al, 2010: 72)
Revenue : Its Q2 profit climbed eight-fold and it earned $217.3 million, or 28 cents per share, for the quarter that ended in March. This is showing its growth rate even in the present downturn. " (www.msnbc.msn.com)
"It has a strong brand image for quality products and offers a very relaxed ambience for its customers.
It has enforced very high motivation and commitment among its staff and it is also among the Top100 companies of the world to work with.
It has maintained a very positive reputation for social responsibility. This is seen both internally - e.g. treatment of own staff - as well as externally - e.g. links with Fair Trade Organisation (Griffiths & Wall, 2005: 613). " It has very strong ethical values and an ethical mission statement as follows, 'Starbucks is committed to a role of environmental leadership in all facets of our business.' (Williams & Curtis, 2007: 221)
'Capital light' and extensive global coverage of stores.
It also pays importance to 'Local' responsiveness of products and services via use of locally licensed partners. (Griffiths & Wall, 2005: 613)
"Starbucks has also developed its own names for coffee types to differentiate itself in the crowded cafe category. Here customers usually ask for a skinny latte rather than skinny milk cafe au lait. This comes as an advantage for Starbucks as it allows Starbucks to own that type of coffee and make it more difficult for competitors to copy it. " (Ellwood, 2002: 236)
"As is the case of strengths, every organization also has some weakness. In some cases, this is obvious; say for example as very inflexible way of working. In other cases, it is a matter of perspective; for example a company has 99 per cent market share and is open to attack from every new player as it is not possible for any company to be filled only with strengths. But for a big company the impact of strengths may be more than its weaknesses. (Williams & Curtis,2007: 221)
"It is sometimes associated with the alleged excesses of global capitalism and can become the targets of anti groups.
Despite laying focus on product differentiation via localization, still it is largely homogenous in terms of product and ambience.
It incurs higher costs per head than its rivals "(Griffiths, & Wall, 2005: 613)
"Starbucks has a reputation for introducing new product and laying focus on creativity. However, they remain vulnerable to the possibility that their innovation may falter over time.
The organization has a strong presence in the United States of America and Canada with more than three quarters of their cafes located in these two countries. It is often argued that they need to look for other countries, in order to spread business risk and increase their popularity.
The organization is dependent on a main competitive advantage of the retail trade of coffee. But this could make them slow to diversify into other sectors when the need arise. " ( Williams & Curtis, 2006: 223)
"It is a fact that no organization is immune to threats. These could be internal, such as falling productivity or they could be external, such as lower priced international competition." (Williams & Curtis, 2007: 221)
"It has suffered a decrease in demand in city centre Starbuck locations via terrorism.
The price may further increase if either 'sin taxes' are levied or coffee producer cartel is reinstated.
Although it has its cafes in many countries but still it is usually association with US and global capitalism which makes it a target for protests and damages brand image.
Along with the above factor, it is also associated with unhealthy lifestyles and obesity.
The new ready-to-drink (RTD) coffee substitutes for home use." (Griffiths & Wall, 2005: 613)
"A threat is that it cannot be afforded by most of the people of the world. And other consumers could switch to something else instead of paying $3.50 or so for cappuccinos and lattes of Starbucks.
The company also has begun addressing threat with the introduction of gourmet tea products and other healthier options. (Boone & Kurtz, 2009: 285)
All organizations have some opportunities that they can gain from and can boost profits from it. These could range from diversification to sale of operations. Identifying hidden opportunities is the main task of the business game. (Williams & Curtis, 2007: 221)
"The living standard of most of the countries is increasing mainly because of international trade. This higher incomes are increasing demand for Starbucks products given that they have a high income elasticity of demand ('luxury' category)
The new coffee bar locations available in city centres as Coffee Republic sell unwanted outlets.
The production of coffee is increasing mainly because of using high technology products this has an advantage as it reduces the price of the coffee.
The gain in 'public esteem' via Fair Trade coffee sales, annual Social Responsibilities reports, etc. strengthens brand image. "(Griffiths & Wall, 2005: 613)
"New products and services that can be retailed in their cafes, such as Fair Trade products.
The company has the opportunity to expand its global operations. New markets for coffee such as India and the Pacific Rim nations are beginning to emerge and can be very fruitful for it.
Co-branding with other manufacturers of food and drink, and brand franchising to manufacturers of other goods and services both have potential to understand the local market better and increases it market share."( Williams & Curtis, 2006: 223)
"Starbucks saw an opportunity in the growth of the Internet and the interest in online shopping. Its website sells coffee and related accessories. " (Boone & Kurtz, 2009)
As it is seen that SWOT analysis gathers and collaborate the information of Starbucks for different sources and then generates a complete picture of the scenario. For this we analyse that Starbuck has a very big market share but it is mainly in it home land. This can be planned to increase its influence and other countries especially in new lands such as India. It must also try to add more products under its basket and this can be eased by the service of internet.