Is the Glass Half Empty? External Threats to Starbuck's Competitive Advantage

Starbucks redefined the coffee industry and changed the way that people buy coffee beginning more than 20 years ago. Starbucks became the first global coffee chain to normalize the idea that coffee shops could be as common a gathering place as your home or work. They continue to capitalize on their core competencies today—number of locations, customer experience, quality and social relevance in their customer’s lives. 

 Competitive advantage exists when a firm is able to create more economic value than its rival firms. Starbucks stands at a crossroads today. They have missed their projected sales targets for four quarters as of January 25, 2017, and in April of 2017 executed a change in CEO from Howard Schultz to Kevin Johnson. There are two significant external factors that stand to impact Starbucks’s strategy over the next few years: the threat of high-end niche coffee shops emerging throughout the U.S. and the changing dynamic of the way that consumers spend less money eating out.
Starbuck's new high end shop, the "Roastery" in Seattle

According to the National Coffee Association, “millennials seek out quality products with a story behind them.” The demand for high quality coffee has also increased worldwide. Many millennials are opting out of starbucks runs and are turning to high end, independent coffee shops. When Howard Schultz stepped down as CEO, his intention was to remain at Starbucks in order to spearhead the high-end brand refresh labeled “Siren Works.” Though there is no research backing the potential success of launching high end, boutique type coffee shops across the U.S., apart from the success of the single location that is currently open in Seattle, Schultz is willing to bet on it.

Additionally, the changing of the way that consumers spend money eating out is an external threat, which stands to greatly impact the profitability of Starbucks in the coming years. Industry tracker NPD group recently released data stating, “foot traffic at U.S. restaurants dropped 1% in the third quarter, the first decline in five years.” Because Starbucks relies heavily on foot traffic, any decline in this sector stands to negatively impact their future revenues. 
In order for Starbucks to continue to lead the coffee industry, they need to come up with a strategy to combat these external threats. By doing so, they should be able to strategically eliminate threats of competition and increase their competitive advantage within the coffee shop market.

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