Essay On Porter Analysis Of Starbucks

Topic: An examination into the rise and fall of Starbucks Coffee Company and its relationship to certain microeconomic principles.

The “Coffee Wars – The Big Three: Starbucks, McDonald’s and Dunkin’ Donuts” article focuses on the company analysis of the Starbucks brand and how its main competitors, McDonald’s and Dunkin Donuts, has affected their brand and driven competition higher. Even though there are many companies trying to enter the specialty coffee market, these three companies own the majority of the market share. With Starbucks’ top quality and above average prices they hold a different market than the fast coffee/food market of Dunkin’ Donuts and Starbucks; yet the competitive moves Dunkin’ Donuts has made over the years in order to compete with Starbucks and surpass McDonald’s has driven competition up between all three companies. The competition has stiffened ever more in the past ten years due to the changing economy. This led to “the big three” to come up with different techniques to gain competitive advantage over the other. Although the competition between these companies is to gain most of the market share, consumers are still loyal to a certain brand; this makes it difficult to gain each other’s clientele. McDonald’s continues to appeal to customers who want value and speed, Dunkin’ Donuts focuses on the middle-class, while Starbucks a customer who desires a higher quality product along with being recognized for using the brand.

starbucks Corp., an international coffee and coffeehouse chain based in Seattle, Washington, has expanded rapidly since its opening in 1971. These outrageous success was due to its well-developed strategy vision which lay out the company's strategic course in developing and strengthening its business. Starbucks is a global corporation that sells authentic coffee in 30 countries, reporting revenues of nearly $5.1 billion in 2006. The main goal of Starbucks is to embrace diversity by applying the highest standards of excellence. Starbucks strives to perfect the relationship with the working class by making the service as fast as possible because they believe that every customer has their own personal rate. One

2) Garthwiate, Craig; Busse, Meghan; Brown, Jennifer; Merkley, Greg “Starbucks: A Story of Growth” Harvard Business Publishing, July 2012.

Starbucks is known for their Frappuccino’s; unfortunately they are on a downward spiral in sales due to competitors such as McDonalds. In 2008 Starbucks admits to its losses due to their competitors. “Company executives now freely admit that such thinking is largely to blame for the woes that led to Tuesday’s announcement that Starbucks will close 600 U.S. stores and eliminate thousands of jobs. The coffee giant’s missteps have come at a spectacularly bad time, hitting as the economic slump deepens and consumers are seeing their discretionary spending eaten up by rising gas prices and grocery bills (Linn).”

In the food or restaurant industry there are many players within each marketplace. When an individual entity does not have full control over the market, related to price or market share, it is described as a monopolistic perfect competition market. Essentially, that is the type of market that Starbucks finds it in. The basic feature of the food and restaurant market is the large number of players in the market produces similar products but not identical products. In other words, there is a bit of differentiation among the products. It is an open market which allows for freedom of both entry and exit. Competition within the industry is very competitive with a limited amount of market control.

Imaging if there was no more coffee in this world, how would you feel? Nowadays, coffee becomes an important part of people’s life. People who often work overtime, they drink coffee because caffeine can make you awake; people who have to wake up early in the morning, they drink coffee because instead of making breakfast, coffee is more convenient; people drink coffee during the free time, because it also tastes good.

Starbucks is situated on State Street. A bustling area of Madison, occupied by the many university students. When you step into the café, the strong aroma of coffee spreads across your nose and the entire café. The invigorating aroma of brewed coffee from different countries has made the atmosphere of the café warm and welcoming. The café has a rustic appearance. When you first enter through the glass doors with black frames, on the left are wooden tables all across the wall. There are two options for seating, wooden chairs or plush green couches that are placed alongside the walls. Behind the couches, is a mural of Camp Randall Football Stadium, that fills the entire wall. Across each of the walls around the cafe are pictures with different countries. Each country represents the coffees that Starbucks offers their customers. The atmosphere behind each cup of coffee allows the customer to experience the tastes of different countries. Starbucks is constantly filled with people; your senses will be stirred by the multiple conversations and aromas.

In Canada, coffee represents 18% of all consumed beverages, making it the second most popular drink in Canada, water being the first. Fair trade coffee ensures that the coffee farmers who produce Canada’s second most popular beverage are paid fairly. Fair trade coffee is a partnership that relies on the collaboration of coffee producers, traders, buyers, and consumers to produce equitable and sustainable changes in the way we trade coffee (Liberman, S., R.N. 2008). Fair trade certification was developed in 1988 to guarantee that farmers are paid a stable minimum price for their product and to empower small-scale coffee producers (Cole, N. L., & Brown, K. 2014). However, due to a growing market, fair trade coffee certification is losing sight of its original goal to help create fair trade circumstances for small-scale coffee producers.

In Threat of new Entrants, as the market for coffee shops and stores is already stagnant, so the threat of new entrant is very low and significant financial capital is required to open a new shop in UK.

Starbucks’ lead in the specialty coffee industry exemplifies the result of deftly executing a well-planned business strategy. Moreover, Starbucks is well positioned for what is expected to be a continuing rise in the popularity of specialty coffee products. The question before Starbucks’ leadership, however, is what avenues will lead to Starbucks’ goal of remaining true to its core, the highest quality coffee products while providing a “total coffee experience” for its customers?

Describe the strategies employed by the coffee majors and by Starbucks. Describe main differences in their assumptions, mission, product/market scope, and sources of differentiation.

In general the coffeehouse industry in the United States was experiencing an increase in coffee consumption per capita due to the “Starbucks effect”. At this time Starbucks was operating approximately 20,000 stores in the United States and was living a fast expansion strategy worldwide.

Nothing like the fresh scent of brewed coffee in the morning – “Starbucks” a well-known coffee house that is still growing and expanding their operations today is considered the number one specialty coffee retailer around the world and abroad. Therefore, the supply and demand for coffee is on the incline and is regarded as one of the most rapid growing organizations in the world. According to the National Coffee Association, adults between the ages of 18 and 39 are more likely to purchase coffee out-of-home, then older consumers (2016). Even coffee statistics conducted in 2016 indicates “50% of the population, equivalent to 150 million Americans, drink espresso, cappuccino, latte, iced/cold coffee” (E-Imports, 2016). Other statistics numbers show that an estimated of total Americans consuming coffee would be up by 1.5% and specialty coffee up from 20% in this year alone. Even the global consumption will increase by 12% over the next years. Therefore, a key question is how will the “law of demand” predict how the consumers will behave (Lorenzetti, 2016)? Namely, will the higher demand for coffee beans impact what the consumer at Starbucks will pay for a cup of coffee? Therefore, companies such as Starbucks should analyze and understand the microeconomic model to get a clear picture of the price elasticity, cost to produce, and the overall market to make the most effective business decisions and recommendations that will have an

As Starbucks continues to expand, more profits and more risks are in store. The corporation’s brand and reputation may be put at risk as the quality of the products supplied by third parties is outside of the company’s control (―Starbucks Corporation Fiscal 2009 Annual Report‖, 20). Partnering with farmers and suppliers meant letting go of control over the quality of certain products. In order to retain customers and protect their brand, Starbucks must establish and maintain effective working relationships with reputable farmers and suppliers, which could increase costs.