McCafe breaching coffee market

Within the coffee industry Starbucks Corporations has grown from a small shop to a leading coffee distributor, proving to have financial strength and determination to continue growth. With the weakening economy the continued success of Starbucks

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.

With coffee consumption being transformed into a habit, with active market growth, with Starbucks being a North America market leader the distance between company and its competitors was reduced.

Substitute Products – The threat of substitute products poses a potential threat to Starbucks as competitors with like products offer similar products to capture the market.

Starbucks has created a competitive advantage with their product quality by setting themselves apart from their competitors. “The Company has stayed with the upper-scale of the coffee market, competing on comfort rather than convenience, which is the case with its closest competitors, McDonald’s and Dunkin Donuts” (Mourdoukoutas, Panos). Consumers believe they are receiving a better product and experience when they purchase from a Starbucks as opposed to another large food service company that may sell coffee.

McDonald’s has been in business since 1955. It has positioned itself in the market as a low-priced, fast food restaurant focusing on hamburgers and other convenience foods. The company is currently faced with competition from Chipotle, a restaurant which offers fast and healthy Mexican food in the fast-casual dining segment. Both restaurants are competing for customer dollars and while they both offer fast convenience there are differences in their food offerings. McDonald’s has always offered a fast, basic meal at a low price. In comparison, Chipotle offers fresh, quality Mexican food fast at a low price. Analyst have suggested that Chipotle would bring an end to the fast food burger chains that have long dominated the industry. McDonald’s must determine if Chipotle is a competitive threat and if so how to address the threat in the market.

Customers yearn for top notch coffee and pay willing high prices compared to others. Coffee drinkers, are not only paying for convenience, but know it is good coffee. Restaurants favor one of two business models: the standard retail business model or the franchise model. Starbucks is a standard model chain, which means it does not franchise out. The bulk of its profit come from locations the company owns. Sometimes this business model can hinder expanding. Starbucks beat the odds of this by going to high populated areas with lots of traffic. Meanwhile globalization is playing a role in how companies can

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).”

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?

However, data from the market research team has shown that there is a shift on Starbucks’ brand recognition in customers’

McDonalds has always been a company that shares in the happiness of a child. Recently after taking my own children to McDonalds, I have found that there is not a breakfast option for children. McDonalds should add a happy meal option to the breakfast menu. Current demands by consumers are to add a happy meal option allowing parents to purchase child sized portions of breakfast items. This option could help McDonalds to increase profits by attracting more consumers. Shareholder reports show a quarterly cash dividend per share increase of 15% and annual dividend of $2.80 per share. Comparable sales grew 5.6%. Cash by operations increased $808

Starbucks Incorporated is a Washington based international business who had a total revenue of over $22 million in 2017. Starbucks’ employees near 254,000 employees within 2016. This company is known for their coffees, especially around the holiday seasons, all over the world. Majority of their profits come from the American market while they are trying to expand into the eastern world. However, their customer experience and support allows consumers in other markets to want to be a part of the westernized experience. Starbucks has the opportunities to grow within their grocery store sales and to expand their brand, both in more products and in more stores. Starbucks is also affected by local coffee shop competitions and economic conditions constantly changing which hurt their profits. Regardless, Starbucks proves that they have a strong business model that allows them to stay as one of the international beverage leaders.

Starbucks is the world’s largest coffee roaster and retailer of specialty coffee in the world. We have enjoyed great dividend returns over the past 5 years, and our growth has been on the rise. We are currently saturating the US market, while the emerging markets of developing countries offer many possibilities for growth and increased revenues. In our US market we should look at offering more items on the menu that complement our long-standing tradition of pleasing our customers. Exotic Juices, and snacks served with the same service could add a nice margin to the bottom line. In addition, the ability to offer a drive through service for the consumer that loves fine coffee but does not have the time to stop

In terms of competition and the forces, which could limit the success of Starbucks it is important they stay ahead or even with other companies concerning innovative products. Many more micro companies are coming up with new products with a similar quality and a lower price/cost. It is important that Starbucks continues to search for innovative products to continually satisfy their customers. At the same time “rivalry” amongst Starbucks and smaller providers of coffee will continue to increase as the demand for coffee continues. The buyers bargaining power is significant as they can determine the cost, type of product, quantity and ultimately

Since McDonald’s is the most well know fast food chain in the world with a market cap of 69.35 billion, brand recognition is their biggest strength. The secret of McDonald’s success is its willingness to innovate and maintain consistency in the operation of its many outlets. In recent years McDonald’s has introduced Premium Salads, Snack Wraps, fresh Apple Dippers in the United States, and Corn Cups in China. Also, McDonald 's products are priced so low that economic conditions are almost insignificant.