A Case Study Of Starbucks

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Module 1: The organization that I am going to use is Starbucks. This is an interesting company because of a few factors. It dominates its industry, is able to charge premium prices, and some of its inputs are priced on the world market. Also, as a retail operation, Starbucks should fit fairly neatly into economic concepts. The first big idea is the idea that choices always involve tradeoffs. This is important for a company like Starbucks. They charge premium prices for coffee you can almost always find coffee elsewhere for less money. This means that Starbucks needs to find a way to convince the consumer to spend more. The problem with spending more is that this extra money comes out of the consumer's pocket. It would otherwise have been saved or spent elsewhere. When you ask somebody to pay more for something, automatically there is a tradeoff. If Starbucks cannot convince consumers that spending more on its coffee is better than whatever other use the consumer would have had for that money, then nobody will go to Starbucks. The company, therefore, needs to create additional value from which the consumer will benefit. The second big idea is idea #3, the idea that voluntary exchanges make buyers and sellers better off. Markets are an efficient way to organize that exchange. This time, I will make the point using the supplier side of the business. Coffee is a commodity that is traded on world markets, so the price for most coffee is fixed. A farmer in, say, Guatemala

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