The paper "Business Analysis of Starbucks Corporation" is an outstanding example of a marketing case study. The first Starbucks outlet was opened in 1971 in Seattle, Washington and was the brainchild of three friends, two teachers and one writer, who got their inspiration from Alfred Peet, founder of Peet’ s Coffee and Tea. With its 20,891 stores in 62 countries worldwide, Starbucks is able to fulfill its mission which is “ to inspire and nurture the human spirit, one person, one cup and one neighbourhood at a time. ” This high number of outlets makes Starbucks the largest coffeehouse chain specializing in quality speciality coffee in the world (Starbucks Corporation 2012).
Today, Starbucks has become the largest coffeehouse chain globally and in just over four decades, the company has rapidly risen from its humble beginnings as a local coffee roaster to a market leader in the beverage industry. This growth can be attributed to the ambitious move of opening at the least, one coffee outlet every other day, a feat it was able to sustain for the better part of 1900s and 2000s.
Presently, international outlets account for one-third of the company’ s total stores and of its 20,891 outlets; a staggering 13,279 are in the United States (Company Factsheet 2013). Starbucks Corporation has a wide variety of products in its menu and this enables it to meet its demands, presented in the form of diverse customer markets. Whether one is in a hurry and would want a takeaway coffee, enjoys taking coffee at home, prefers to take his/her coffee at Starbucks outlets, Starbucks caters for all these needs and even goes further to customize customers’ coffee (Schulz 2011). Despite the successes that Starbucks has enjoyed over the years, it is still faced with numerous external and internal business problems.
The primary issues include competition, an unstable industry macro environment and market maturity and decline. Increasing competition is choking the industry and although there are only a few major competitors, fast food outlets such as McDonald's are increasingly offering coffee products to their customers. McDonald's, for example, has added McCafe products to its line of fast foods at very low prices (Liu 2009). Such restaurants have thus ‘ stolen’ a portion of Starbucks’ Corporation market share since they act as substitutes to what they offer.
Secondly, the beverage industry has continued to mature over the last couple of years, thus saturating it. This is because, although major industry players are few, many small local coffee outlets dot major towns today. Thirdly, prices of coffee products are ever on the high and since there are only a few areas where quality coffee can be grown, supplier power increases. By and large, Starbucks Corporation is still a force to reckon with and remains the market leader in speciality eatery market although there is need for the company to constantly evaluate market forces in order to stay ahead of the game (Lingle, 2010). External Analysis Starbucks Corporation is within the Specialty Eatery Industry where it has direct and indirect competitors.
It major direct competitors include Dunkin’ Donuts, BIGGBY Coffee and Caribou Coffee with some being global and others domestic (Dicarlo, 2004). On the other hand, its indirect competitors come in the form of McDonald's, 7– Eleven, Panera Bread and Einstein Bagels. The difference between the two kinds of competitors is that direct competitors offer the same products as Starbucks at low prices and additional products.
Looking at Appendix A, fig. 1 it is clear that the largest market share is owned by Starbucks’ indirect competitor, McDonald's. While this large market share can be attributed to McDonalds’ global dominance, the strategy they applied in marketing their McCafe gourmet product has allowed them to gradually take over the market and increase their share in this speciality eatery industry (Liu 2009). McCafe products are substitutes to Starbucks products and McDonald's offers them at cheaper prices.
A large market portion includes competitors from diverse demographics who apply different strategies in gaining a chunk of this share. McDonald's, unlike Starbucks, carries its operations following a cost leadership business strategy whereby they price their products in such a way that they appeal to a larger crowd (Dicarlo, 2004). Starbucks, on the other hand, does the opposite in that its operations are in the premium end and while it has an overall smaller market share, the company still commands a considerable market share consisting of customers interested in speciality products.
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