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Starbucks is working in the food chain. Starbucks Company
was started in 1971 with the limited product line. Continuous improvement and
effective strategies resulted in the success of the company as a result of
which company is now working in more than 70 countries around the world. Some
of these selected geographical segments are China, UAE, Turkey, United States,
Kuwait, Australia, and Germany. According to an estimation currently, 24000
retail stores are included in the supply chain of Starbucks Company. In this
assignment information is presented about the Starbucks Company to elaborate its
product line specification, competitor market, and economic strategies.
Products and Services
of Starbucks Company
Starbucks Company offers products such as coffee, fresh food,
and handcrafted beverages. Fresh food includes salads, yogurt, fruit cups,
baked pastries, oatmeal, hot and iced espresso beverages, smoothies, and
sandwiches. The company sells out niche products that related to the specified
group of people and market segments. The company creates differentiation in the
market by offering the best tastes and best quality food items. Basically, most
of the products offered by Starbucks Company are perishable products like coffee
and fresh salad falls in the category of fresh food. While we can distinguish
these products as the normal product rather than inferiors because an increase
in consumer income can result in the increase of demand rather than a decrease
in demand. Furthermore, most of these products are luxury products that people
usually take as fashion. These products are not necessarily products because
these are not based on the basic need of human being. Moreover, coffee and
fresh food items offered by the Starbucks Company are non-durable goods. According
to the
Price Elasticity of
Starbucks Company
Price elasticity is the economic term that represents the demand flexibility of products and services in the market. Price elasticity project response of market towards fluctuation (increase or decrease) in the prices of offered product and services. In light of this concept, we can say that Starbucks products are price inelastic. As a result of the increase in the prices, quantity is getting very little change. The demand curve is shifting towards left that indicates that demand is decreasing as a result of price change but the total change is from quantity 4 to 3 (or 6 to 5, as only one product is reduced).
As discussed earlier, coffee and fresh food items offered by
the Starbucks Company are not need-based. The target market of these products
is above average who can easily afford a cup of coffee or a small box of fresh
salad. Therefore changes in the prices
bring only limited change in demand. But huge changes in prices can encourage
customers to try new substitutes and alternative products offered by the
competitor companies
Competitors of
Starbucks Company
Starbucks Company is working in a highly competitive market.
Food sector usually has more competition as compared to the other industries. Particularly
in the United States and developed areas fast food and junk food items are
quite trendy. Considering the potential of sales many companies are working in
this sector that increases competition for Starbucks Company. Anyhow, we can
say that total key competitor companies are 4 that includes McDonald's, Café
Coffee Day, Costa Coffee, and Peet’s Coffee. All these competitor companies are
also offering the same products and services in the same targeted market and
geographical segments.
Threats of Starbucks
Company
Starbucks Company is facing some threats from the market. Threats
from competitor companies, technological advancement, and decline in the trend
of coffee are quite common. Somehow, the company will response to different
scenarios in different ways. For instance, an increase in national income will result
in an increase in sales. While the decrease in the national income will bring
limited change in the demand for coffee. Anyhow, weather can influence sales of
Starbucks products. For instance, hot weather can reduce sales of coffee. While
at the same time hot weather can increase sales of fresh salad. While on the
other hand, prices of complement goods and substitute products can also
influence sales of Starbucks Company. For instance, increase in the prices of
these products can cause to increase sales of Starbucks Company. Moreover, decrease
in prices of substitute and complement goods may also support increase in the
sales of Starbucks Company.
Conclusion on
Starbucks Company
Summarizing the whole discussion, we can say that Starbucks
Company is operating successfully in more than 70 countries of the world. The
key product of Starbucks Company is coffee that has strong customer equity in
the market of China, the United States, Germany, and Turkey. Most of the
products are perishable, non-durable, and normal products. The company has high
competition in the market as other competitor companies such as McDonald's, and
Café Coffee Day is also offering the same products and services in similar
geographical segments. The analysis presents that company will get an increase
in sales if national income and competitor prices go up.
References of Starbucks Company
Dransfield, R. (2013). Business Economics.
Routledge. Retrieved 2019
Dwivedi, D. N. (2002). Microeconomics:
Theory And Applications. Pearson Education India.
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