Challenges that Starbucks Faces in Business

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Challengesthat Starbucks Faces in Business

Tableof Contents

Contents

1. Executive Summary 4

2. Introduction 5

2.2. Company overview 5

3.0. Countries of Operation 6

3.1. Financial Position 6

3.2. Corporate Social Responsibility 6

4.0. Challenges faced 7

4.1 Industry or Market Environment Challenges 9

4.2 Mode of Entry into International Markets 9

4.3 PORTERS FIVE FORCES 10

4.3.1. Bargaining Power of Buyers 11

4.3.2. Bargaining Power of Suppliers 11

4.3.3. Threat of New Entrants 11

4.3.4. Competitors’ rivalry 12

4.3.5. Threat of Substitutes 12

5.0. Future of Starbucks 13

6.0. Conclusion&amp Recommendations 13

8.0. Appendices 17

8.1. Appendix 1: PESTLE ANALYSIS 17

8.1.1. Political 17

8.1.2. Economic 17

8.1.3. Socio-cultural 17

8.1.4. Technological 18

8.1.5. Legal 18

8.1.6. Environmental 18

8.2. Appendix 2: SWOT ANALYSIS 18

8.2.1. Strengths 18

8.2.2. Weaknesses 19

8.2.3. Opportunities 19

8.2.4. Threats 19

Challengesthat Starbucks Faces in Business

  1. Executive Summary

Starbucksis one of the most and possibly the most, popular coffee retailers inthe entire globe. As much as it was established in the 70s, it wasnot until the 90s that the company’s reputation and growthincreased exponentially to the extent of its name being synonymouswith the best and highest quality of coffee retailers. Nevertheless,the company has been facing numerous challenges both within itsinternal structures and its external environment in which itoperates. This paper, therefore, examines these challenges whileincorporating the input of scholars and theories to provide a properinsight into the same.

  1. Introduction

Businessentities are primarily established with the sole aim of creatingvalue and enhancing profitability (Lazich, 2010). Indeed, all effortsof businesses, whether they are tied directly or indirectly to theprofitability, should be considered an investment that would cause anincrease in the initial investment. However, many are the times whenthe path of an organization towards sustainability and profitabilityis blocked by some challenges either in its internal structures oreven the environment or industry within which it operates (Lazich,2010). This is the case for Starbucks, a company that is consideredone of the most reputable coffee retailers in the entire world.

    1. Definition of Food Service Chain and the retail Coffee Sector

Afood service chain may be seen as a business entity that providesfood products to consumers in the company’s own established localessuch as cafeterias and restaurants. In the case of Starbucks, thecompany offers food products or primarily retails coffee products,offering the best coffee products across the globe to consumers(Lazich, 2010, pp. 43).

    1. Company overview

Thehistory of the Starbucks Company can be traced as far back as 1971Seattle, where three friends namely Zev Seigel, Gordon Bowker andjerry Baldwin who had a shared passion for gourmet coffee thought ofestablishing a venture where they would educate the Americanconsumers regarding the fine coffee drinking experience. Thiscompany, however, was taken over by Howard Schultz in 1987, whowanted to come up with Italian Espresso bar experience for hisclients in America through the creation of a personal relationshipbetween the consumers and the coffee makers. The company has grown inthe last few decades to become a multi-million dollar player in theindustry through the purchase of the best coffee available, as wellas the provision of unmatched store experience to its consumers (Seeappendix 3). Currently, Starbucks is touted as the top player in thespecialty coffee industry, having over 12000 shops located in morethan 35 nations. Its mission statement remains “Toinspire and nurture the human spirit – one person, one cup and oneneighborhood at a time”(Jargon, 2009, pp. 37).

  1. Countries of Operation

Underliningthe capabilities of Starbucks is the fact that it has over 21000 inmore than 65 countries including the United States, Japan, China,Canada, United Kingdom, Egypt, South Africa and Morocco, Costa Rica,New Zealand, Australia, Argentina, Brazil, Bolivia, Chile, Mexico,Peru, Puerto Rico, Guatemala, Curacao, Aruba, Indonesia, Macau,Malaysia, Philippines, Sri Lanka, South Korea, Singapore, SaudiArabia, Kuwait, Lebanon, Jordan and Hong Kong, Cyprus, France,Norway, Turkey, Greece and Portugal among others. All in all, thecompany has branches in three African countries, ten North Americancountries, two in Oceania, six in South America, twenty three Asiancountries and twenty six European countries (Ross &amp Gaddis, 2013,pp. 512).

    1. Financial Position

Starbuckshas been profitable since 1990, with its profits increasing everyyear except for the 2000 and 2008 fiscal year. Testament to itsincreasing profits is the fact that the company’s net revenuesincreased from $6.4 million to $10.4 million in 2005 and 2008respectively (Ross &amp Gaddis, 2013, pp. 513). The growth sloweddown slightly in 2008 from the $10.4 million to $9.8 million as aresult of the global economic crisis that affected the consumers’buying habits. Nevertheless, the 2010 net revenues increased to theprofits registered in 2014 of more than $3 billion (Ross &ampGaddis, 2013, pp. 513).

    1. Corporate Social Responsibility

Onthe same note, the company has established itself as a leader in thecoffee market across the globe through environmentally and sociallyconscious platforms. Indeed, the company is a well known brand as faras Corporate Social responsibility is concerned (Ross &amp Gaddis,2013, pp. 512). Previously, the company has been the subject ofprotests and rallies from Organic Consumers Association (OCA) as aresult of its practice of using milk that incorporates rBGH(Associated Press, 2007). rBGH refers to a genetically engineered cowhormone considered legal in the U.S but illegal in a large number ofother parts of the globe (Smith, 1996). The protests were aimed atputting pressure on the coffee retailer to cease using this milk asit is considered a health hazard (James, 2008). The company respondedalmost immediately and announced that all its product offerings wouldnot incorporate the hormone. Complementing this is the fact that thecompany set its goal as ethically sourcing 100% of its coffee by2015, a goal that it seems close to achieving given that 93% and 95%of its coffee was ethically sourced in 2012 and 2013 respectively. Onthe same note, the company recognized the fact that itssustainability is dependent on the health of its employees, as wellas that of its suppliers (Ross &amp Gaddis, 2013). In essence, itimplemented the Coffee and Farmer Equity (CAFE) Practices, which wereaimed at ensuring that farmers at the lower levels are soundeconomically and have the capacity to sustain the continued growth ofthe company in the long-term (James, 2008).

  1. Challenges faced

Oneof the key challenges has been the increasing level of competitionfrom other retailers that have similar and, in fact, identicalconcepts as is the case for McDonalds, Panera, Illy, Dunkin Donutsand Costa Coffee (Rivard et al, 2006). This is worsened by thebusiness’ deficiency of experience in operating in markets that areprice sensitive. This was particularly seen in its establishment inBeijing where its first store was forced to relocate from theoriginal spot in June 2013. Of particular note is the fact that aFrench Luxury brand called Goyard immediately erected its sign in thesame location thereby replacing Starbucks (Hunt et al, 2011). Thiscould only be an indication that the company has started losing itshold and share of the market to its competitors particularly luxurybrands in other countries. Researchers acknowledge that the companyappears incapable of handling competition with the global luxurybrands, with its competitiveness going down as a result of theoverpriced rentals (Kotler, 2007).

Further,it is evident that the company has, in the past, lost its merchandisefocus. It goes without saying that Starbucks has had its main focusas coffee. Indeed, prior to 1997, Starbucks had merchandise thatprimarily consisted of whole bean coffee, endless tumblers, coffeemugs, coffee makers and home espresso machines alongside all theiraccessories (Kotler, 2007). A large number of its stores incorporatedmultiple merchandise bays, as well as in-aisle display racks thatfrom where all the coffee-related merchandise would be sold. At thistime, the coffee sales remained considerably strong, with themerchandise sales in some locations comprising close to 20% of thetotal store sales (Hill &amp Jones, 2009). However, all this changedin 1997 when the company took up other ventures that forever modifiedits merchandise strategy. As the business entity opened other storesin other neighborhoods, there was a decline in its merchandise salessince consumers needed only a few mugs and tumblers (Smith, 1996).Unfortunately, the company continued rolling-out new mug and tumblerdesigns every month. In essence, the company management introducedother merchandise such as plush toys (Hollensen, 2003). Analystsacknowledge that the plush toys did so well in the market that anentire line of Bearista Bears were incorporated in the stores.Indeed, a whole line of collectible toys was introduced includingvintage pedal car, die cast starbucks-branded trucks, holidayornaments and finger puppets (Talbot, 2004, pp. 56). Of course, it isunderstandable that the company would pay attention to thesecollectibles as they were pretty profitable, which means theycontributed to its bottom-line (Thompson &amp Zeynep, 2004). Indeed,it is noted that, dollar-wise, Starbucks recorded a higher level ofsales from the Finger Puppets compared to the Tazo Tea.

However,the sales from the non-coffee related merchandise caused the companyto lower its assortment of coffee-related merchandise. Indeed, thecompany undertook a significant reduction of its assortment ofespresso machines and coffee makers, with the low ticket items suchas coffee filters becoming pretty invisible in the company (Halpem,2008, pp. 3). At the same time, the company was particularlysuccessful in selling music compilations. Initially, the companydabbled in music through selling compilation CDs of jazz music(Associated Press, 2009, pp. 6). This triggered more musiccompilations from a larger spectrum of music genres. Analysts haveunderlined the fact that through venturing beyond the comfortablehome of coffee where the company had primarily honed its market, itabdicated its leadership position in the coffee market. Indeed, howwould it have been logical to expect customers to take Starbucksseriously as far as coffee was concerned, while it was becoming morepopular for the sale of plush toys? This is primarily a strategicfailure in the business operations of Starbucks (Ross &amp Gaddis,2013, pp. 526).

    1. Industry or Market Environment Challenges

Further,there are problems that revolve around the environment in whichStarbucks operates. Ford and Bryce (2007) have noted that the coffeeindustry has faced enormous challenge pertaining to the increase inits prices, which have decreased its profits margins as a result ofthe increasing cost of the coffee beans. This becomes a considerablydifficult challenge particularly considering the recessionary forcesthat the American economy is experiencing, in which case there is thelikely threat to the sales and demand for coffee. This has resultedto marketers looking for ways and strategies for lowering the pricesparticularly via technological advancements that would reduce thecosts, or even justifying the increase in the prices via creativemarketing and innovation (Ford &amp Bryce, 2007).

    1. Mode of Entry into International Markets

Further,there has been an immense challenge to the company with regard to itsinternational expansion. More often than not, Starbucks uses jointventures and acquisitions in instances where it is starting itsoperations in an entirely new country. This was the case for theChinese market, European, Asian and even the three African countries.Of course, this comes as pretty much advantageous as it enables thecompany to have a considerably higher level of comprehension of thevarying cultural values and preferences for each country (Golde,2009, pp. 47). In essence, this should be pretty much profitable forthe company in both the short-term and the long-term. However, thechallenge comes in as far as the introduction of its iconic culture,customer service and high quality products in a manner that is seenas respectful to the country in which it is expanding. Current marketanalyses have shown that as much as the company has made immenseexpansive efforts, it is still facing seemingly insurmountablechallenges in the gaining of acceptance in Europe. This hasparticularly been as a result of the company’s inability tocustomize or tailor its products to suit the European tastes (Rivardet al, 2006, pp. 36). Essentially, the challenges result in a drop inthe sales and profit growth far behind the Americas and Asia. It isimperative that Starbucks has the capacity to offer consistentcompetition to the competitors who are providing low-price strategiesthrough the use of more affordable prices (Lazich, 2010, pp. 43).Indeed, the company’s strategy pertaining to selling not just thecup of high-quality coffee but also a high-class and sophisticatedlifestyle that is associated with the brand has to transcend tovarying cultures so as to cement its success (Lazich, 2010, pp. 43).

4.3PORTERS FIVE FORCES

Throughthe use of Porters’ Five Forces Analysis of the retail snacks andcoffee industry, it is considerably easy to determine otherchallenges that the company faces. Porters’ Five Forces analysis isa crucial tool for obtaining proper comprehension regarding the powerof a business entity (Grant, 2010, pp. 27). It assists individuals incomprehending the strength pertaining to the current competitiveposition, as well as the strength pertaining to the position that thebusiness entity intends to move into (Grant, 2010, pp. 27). Fivecrucial forces that have a bearing on the competitive power in aparticular business situation would be analyzed including supplierpower, power of the buyers, threat of new entrants, competitiverivalry, and threat of substitution. Using this tool, it is evidentthat the company has been facing immense challenges from newentrants, competitive rivalry and possible substitution (Ford &ampBryce 2007, pp. 29).

4.3.1. Bargaining Power of Buyers

Buyershave a high bargaining in the coffee industry. This is particularlyconsidering the fact that the variety and number of offers (sincethere are more than 35 different brands in the major market, UnitedStates) in the industry are way above the demand. Further, there islittle or no switching costs that consumers would incur if they wentto other coffee retailers (Ford &amp Bryce, 2007, pp. 30).

4.3.2. Bargaining Power of Suppliers

Similarly,suppliers of coffee beans have a considerable bargaining power. Thisis primarily brought about by the increased level of competition fromthe varied coffee chains for quality coffee beans(Ford &amp Bryce,2007, pp. 30). It is also worth noting that coffee Arabica, which isthe highest and best type of coffee, is produced in only limitedgeographical locations such as some parts of Asia, Latin America andAfrica, in which case the suppliers are often unable to meet thedemand for the same (Rivard et al, 2006, pp. 37).

4.3.3.Threat of New Entrants

Newentrants such as Nespresso, Peets Coffee, Enron, Costa Coffee andPanera in the market pose a considerable challenge considering thatthe barriers to entry are not sufficiently high to discourage newentrants from getting into the market. Indeed, new entrants do nothave to grapple with high initial investment as they have theopportunity for leasing stores and equipments at considerablymoderate investment levels (Ford &amp Bryce, 2007, pp. 30). Inlocalized levels, small coffee shops have the capacity to competewith huge companies such as Dunkin brands and Starbucks as thereexists little or no switching costs for consumers (Hill &amp Jones,2009b, pp. 56). Of course, it is well acknowledged that big brandssuch as Starbucks have the capacity to counter the easy entry to themarket through their economies of scale that would allow for thelowering of costs and enhanced efficiency with the immense marketshares, their high prices tend to be considerably limiting, in whichcase consumers have no qualms about going to the new entrants (Moon,2010, pp. 16).

4.3.4.Competitors’ rivalry

Thereis a considerably high rivalry among the existing competitors in theindustry with the major competitors like Caribou Coffee, Costa,Dunkin Donuts, Caribou Coffee and McDonalds. Further, there arethousands of cafés and small local coffee shops that eat into someof its potential markets (James, 2008, pp. 43). This is consideringthat they offer more or less the same commodities at similar qualityand at the same and in some cases lower prices

Brand

Market capitalization (Billion Dollars)

Price (Dollars)

Countries in operation

McDonalds

54.01

3.52

118

Starbucks

54.01

3.50

73

Dunkin Brands

4.95

6.96

32

Sources:Ross,R. &amp Gaddis, D., (2013). Product Differentiation. StrategicManagement Journal 34(5), pp. 509-532

4.3.5.Threat of Substitutes

Onthe same note, the threat of substitutes remains considerably high asthere are numerous substitute beverages to coffee, which is the mainbusiness line for Starbucks. While this threat may not be the same inall countries, it is quite high in the United States where 85% ofStarbucks branches are concentrated. These substitutes include energydrinks, tea, water, sodas, and fruit juices among others. This isalso the case for non-alcoholic beverages that may substitute thesocial experience on which Starbucks rides (Omer, 2008, pp.59).Further, consumers could do just fine with their home-made coffeeparticularly in instances where they have premium coffee makers at asubstantially lower cost than purchasing coffee from Starbucks andother retailers (James, 2008). Of course, Starbucks and otherindustry leaders have been striving to counter the threat through thesale of coffee makers and premium coffee packs in grocery stores (Patton, 2012). However, the threat of substitutes continues exertingpressure on their profit margins.

  1. Future of Starbucks

Asa company that is well recognized and significantly established, itis evident that Starbucks has quite a bright future ahead. Theinvestment that it has made and alliances that it has made with otherbrands, distributors and suppliers are likely to propel the companyfurther up and allow it to capture other markets both locally andinternationally. However, the small coffee establishments pose quitea formidable challenge to its operations and profitability, in whichcase Starbucks needs to come up with a mechanism that will allow itto capture the markets appropriately particularly through eliminatingthe “luxury” and “high class” tag, without sacrificing onquality.

  1. Conclusion&amp Recommendations

Inconclusion, Starbucks faces quite a number of challenges that it hasto combat if it has to remain at the top of the ladder in the retailcoffee industry. These touch on its internal structures, as well aschallenges from the environment within which it operates. Ofparticular note is the fact that the company has made quite a numberof missteps that are actually profitable in the short-term but wouldbe detrimental to its sustainability in the long-term. In essence, itneeds to re-evaluate its structures and decision-making so as toenhance its position today and in the future. In essence, it isrecommended that the company strives to expand its reach to otheremerging markets such as China, India and even African countries. Onthe same note, the company needs to diversify its operations withoutnecessarily compromising on its core operations. Co-branding withother companies also needs to be done so as to expand its reach andenhance its competitiveness in the long-term. Further, it isimperative that the company finds measures of lowering its priceswithout compromising on quality so as to reach a higher number ofconsumers who may be discouraged by the high prices.

  1. Bibliography

Acey,M. (2006). “Ethiopian Coffee Trademark Dispute May Leave Starbuckswith Nasty Taste – Times Online.” The Times

Adamy,Janet. 2007. “Starbucks, Ethiopia Agree on Licensing.” TheWall Street Journal

Allison,M (2010). “Starbucks has a new growth strategy — more revenuewith lower costs.” Seattle Times. SeattleTimes

AssociatedPress (2007). Starbucks’ Rivals Brew Up a Coffee War. MoneyCentral.

AssociatedPress (2009). Coffee Wars Heat Up As McDonald’s, Starbucks Pump BigBucksInto Marketing. Fox News.

David,F. R. (2013), StrategicManagement: Concepts and Cases ,&nbsp14th &nbspEdition, NewJersey: Prentice-Hall International

Ford,H. M., and Bryce J. M.. 2007. “Starbucks and Ethiopia Settle“Brewing” Dispute.” The Licensing Journal 27(8): 29-30.

Gallaugher,J., &amp Ransbotham, S. (2010). Social Media and CustomerDialogManagement at Starbucks. MISQuarterly Executive 9&nbsp(4).

Golde,M. J. (2009). Starbucks vs. McDonald’s: Filtering Through theCoffee Wars. Seeking Alpha.

Grant,R.M. 2010. Contemporary Strategy Analysis: Text Only John Wiley &ampSons.

Grundy,T. 2006. Rethinking and reinventing Michael Porter`s five forcesmodel. Strategic Change, 15, (5) 213-229

Halpern,Steven. (2008). The Coffee Wars: Starbucks (SBUX) vs. McDonald’s(MCD). BloggingStocks.

James,A. (2008). Starbucks Won’t Slug it Out in Ad Wars Coffee ChainSays It’ll Take High Road. Seattle Post – Intelligencer.

Jargon,J. (2009). Corporate News: New Ads Will Stir Up Coffee Wars – AsStarbucks Touts ‘Perfect’ Cup, McDonald’s Promises anAffordable Lift. WallStreet Journal.

Hill,C. &amp Jones, G., 2010. Strategic Management Theory. USA:South-Western Cencage Learning.

Hill,C. &amp Jones, G.R. 2009b. Strategic Management: An IntegratedApproach : Theory South-Western/Cengage Learning.

Hollensen,S. 2003. Marketing management: a relationship approach FinancialTimes/Prentice Hall.

Hunt,K.A., Durango, C.O., &amp Fate, J. 2011. Cultural and SocialInfluences on the Perception of Beauty: A Case Analysis of theCosmetics Industry. Journalof Business Case

Kotler,P. 2007. Framework For Marketing Management, 3/E Pearson Education.

Lazich,R. S. 2010. Market Share Reporter 2011: an Annual Compilation ofReported Market Share Data on Companies, Products, and ServicesVolume II. Detroit, MI: Gale Cengage Learning,

Moon,H.-C., 2010. Porter`s Generic Strategies. In: Global BusinessStrategy. Singapore: World Scientific Publisher Limited, pp. 10-20.

Omer,2008. Porter`s Generic Model. Porter`s Model of Generic CompetetiveStrategies, 43(3), pp. 55-64.

Patton,L. 2012. Starbucks Falls After Cutting Forecast Below Estimate.BloombergBusinessweek

Rivard,S., Raymond, L., &amp Verreault, D. (2006). Resource-based view andcompetitive strategy: an integrated model of the contribution ofinformation technology to firm performance. TheJournal of Strategic Information Systems,15, (1) 29-50

Ross,R. &amp Gaddis, D., (2013). Product Differentiation. StrategicManagement Journal, 34(5), pp. 509-532.

Smith,M. D. (1996). The empire filters back: consumption, production, andthe politicsof Starbucks Coffee. UrbanGeography&nbsp17&nbsp(6),502-525.

Thompson,A. A., Strickland, A. J., &amp Gamble, J. (2007). Crafting andExecuting Strategy: Text and Readings. Boston, MA: McGraw-Hill/Irwin.

Thompson,C.J., and Zeynep A. (2004): &quotThe Starbucks brandscapeandconsumers’(anticorporate) experiences of glocalization.&quot&nbspJournalof Consumer Research&nbsp31.3631-642.

Talbot,J.M. 2004. Grounds for Agreement: the Political Economy of the CoffeeCommodity Chain. Lanham, MD: Rowman &amp Littlefield.

  1. Appendices
    1. Appendix 1: PESTLE ANALYSIS

PESTELanalysis underlines the political, economic, social, technological,environmental and legal factors that affect the business. The toolhas been seen as one of the most effective tools for analyzing theimpacts that external factors have on the business.

      1. Political

Keypolitical concerns revolve around the sources of raw materials.Starbucks remains keen on adhering to the environmental and regionalnorms in conformity with the “Fair Trade” Practices agreed on bygovernments of developing and developed nations. Further, there arelaws and regulations in the source countries, as well as regulatorypressures in the home market.

      1. Economic

Keyeconomic pressures affecting the profitability of the business arethe persistent global economic recession. Nevertheless, consumers areshifting to lower priced alternatives, in which case Starbucks couldexploit such an opportunity. In addition, there are high operationaland labor costs, as well as high costs of coffee beans, which eatinto its profits.

      1. Socio-cultural

Thekey social-cultural challenge revolves around the expansion ofcheaper alternatives without sacrificing its quality. Further, thereis the challenge of the “ethical chic” and “green” consumers,who have been exerting pressure regarding the environmental andsocial costs pertaining to the brand. Moreover, there is the agingbaby boomer generation , which eliminates a crucial market for thecompany. In essence, it should seek ways of tapping into thegeneration X and Millennials.

      1. Technological

Theadvent of computers and internet provide an opportunity for reducingits marketing costs, expanding its markets and increasing itsprofits. Indeed, it could also introduce mobile payments. However,the competitors have similar opportunities, in which case there isbound to be more competition.

      1. Legal

Starbuckshas a hard time ensuring that it does not contravene the laws andregulations in the nations from where it obtains its raw materialsand the home markets.

      1. Environmental

Therehave been concerns regarding its business practices amonginternational advocacy groups, consumers and advocacy groups, whichthreaten its reputation. The company must consider the concerns if itplans on retaining its market leadership in the retail coffeeindustry.

    1. Appendix 2: SWOT ANALYSIS

ASWOT analysis allows for the examination of the internal strengthsand weaknesses of a businesses, as well as the external opportunitiesand threats that stand in its way so as to craft a proper marketingstrategy that would allow for the use of its strengths in exploitingits opportunities, while suppressing its weaknesses and eliminatingpossible threats.

      1. Strengths

Starbuckshas quite a number of strengths that it could exploit. First, thecompany has an immense financial backing given its high profitabilitythat is in excess of $1 billion as at 2010. Indeed, the companygenerated revenue of over $5 billion that year (Hill &amp Jones,2010, pp. 43). With such financial muscle, the company has thecapacity to exploit opportunities and explore other markets.

Inaddition, the company is a globally recognized brand, which has builta formidable reputation for its high quality products and services.This has been reflected in its close to 9000 café in around 40countries (Hill &amp Jones, 2010, pp. 43).

      1. Weaknesses

However,the company has some weaknesses that threaten its profitability.First, Starbucks has a strong presence in the US where over 75% ofits cafés are located. This means that it is yet to spread its risk. In addition, the company has remained highly dependent on its maincompetitive advantage which is retail coffee. This may make it slowin diversifying to other sectors when necessary (Thompson et al,2007, pp. 89).

      1. Opportunities

Nevertheless,varied opportunities for enhancing its profitability exist. First,the company could expand its global operations into emerging marketssuch as India, as well as the Pacific Rim nations that are alreadycoming up. In addition, it could co-brand with other food and drinkmanufacturers, as well as franchise its brand to manufacturers ofother services and goods.

      1. Threats

Still,there are numerous threats to its success in the future. This isparticularly with regard to competitors considering that they havemore or less similar products as those of Starbucks. The competitors,in this case, include Timothy’s, New World Coffee, Dormans amongothers. Of course, a SWOT analysis of the company reveals thatStarbucks should have the capacity to defend its position and competeagainst the other retailers particularly as a result of the extensiveinitiatives that it has carried out so as to sustain its brand image(David, 2013, pp. 36). Indeed, it has complemented these initiativeswith the formation of distribution alliances with companies such asCapital Records, Nordstrom, Capital Records, Dreyer’s Grand IceCream, Pepsi-Co, as well as Barnes &amp Noble Booksellers so as toenhance or expand its distribution and product portfolios (Smith,1996, pp. 517). However, as much as it remains to be seen whether thecompetitors will catch up with Starbucks, particularly consideringthe lead time that the company, being a market pioneer , has had forthe development of its retail mix and the formation of all thecrucial alliances, some strategic missteps have particularlychallenged the position of the company and its prospects for thefuture (Gallaugher &amp Ransbotham, 2010, pp. 53). Even in instanceswhere the company retains its strength in the market, it is evidentthat the competitors continue eating into its market share andeliminating its say as far as the coffee retail market is concerned.Coupled with the high cost of coffee and the subsequently high priceat which the company offers its products, it is evident thatStarbucks runs against considerably tough competitors in achallenging market (Halpem, 2008, pp. 3).