Opportunities and Threats for Starbucks

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Economic Forces

Economic factors are an important aspects that concern the nature and direction of the economy in which a firm operates. Since the relative affluence of various market segments will affect the consumption patterns, companies must take this into consideration when planning its strategy. In periods of normal price variation, the demand for coffee is price inelastic. However, when coffee prices show big increases, consumers tend to reduce their consumption commensurately.

The Company 's net revenues increased from $1.3 billion in fiscal 1998 to $1.7 billion in fiscal 1999, due primarily to the Company 's store expansion program and comparable store sales increases. As part of its expansion strategy of clustering stores
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People ages 15-64 make up the largest percentage of the population, and therefore will have greater control of the market than any other sector (CIA). This implies that the most important target market for Starbucks are people within this age group. The two largest ethnic groups in the U.S. are white 83.5% and black 12.4. The ethnic background is important to a company because it influences tastes, trends, perceptions, values and beliefs of an individual. Estimated GDP in 2000 was $9.963 trillion (CIA). GDP real growth rate was 5% (CIA). The growth rate of GDP suggests that the economy is growing, and therefore there is opportunity for Starbucks to expand business. A very large per capita purchasing power parity of $36,200 suggests that Americans have the opportunity to buy specialty coffee drinks from an expensive, quality-intensive organization such as Starbucks (CIA). An inflation rate in consumer prices in the year 2000 of 3.4% is a high inflation rate. This suggests that the economy could be heading towards recession. During a recession, it could be expected that consumers would spend less on premium luxury items such as Starbucks ' coffee.

Legal / Political Forces

Right now, Starbucks has two class action suits pending since 2001. The lawsuits entitled Carr vs. Starbucks and Sheilds vs. Starbucks are challenging the status of Starbucks California store managers and assistant managers as exempt employees under California wage and hour laws.

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