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The market mix of Starbucks


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The market mix of Starbucks

  1. 1. THE MARKET MIX 1 The Market Mix The Starbucks Market Mix entails Starbucks Corporation its history, product depiction, elements altering demand, supply, and equilibrium rates in marketplace. In addition the summary defines the market for selected product and analysis of competitors, potential consumers, or buyers. Furthermore, issues, and opportunities the industry may face that can affect its competitiveness and continuing profitability along with regard to product. Elements may include the following price technological innovation, elasticity of demand and capital employed, the relationship between the amount of labor, the law of diminishing marginal productivity, and finallycost structure. Also issues affecting varying cost, including productivity, and others that shifts supply and demand for work along with issues affecting fixed cost. Starbucks Corporation is a global American coffee-house chainsituated in Seattle, Washington, is the largest coffee-house company in the worldwith 20,891locations in 62 countries. The primary countries are the United States, Canada, Japan, China, United Kingdom, South Korea, Mexico, Taiwan, The Philippines, Turkey, Thailand, and Germanybut not limited to the aforementioned.Starbucks coffee-houseserves hot and chilled beverages, full leaf teas, micro-ground instant coffee, snacks, and pastries. Starbucks sells coffee and brand-ice cream in some grocery stores. Many coffee houses also vend, hot andcold sandwiches, packaged goods, mugs as well as tumblers.A variety of Starbucks stores cater to the evening public serving beer, wine, appetizers, and music entertainment. Starbucks coffee houses also markets films, books, and music. Numerous company produces are seasonal or sold in specific locations. Current Market Conditions Competitive Analysis
  2. 2. THE MARKET MIX 2 Starbucks Coffeehouse first opened in Seattle, Washington March 30, 1971, by three students from the University of San Francisco, Jerry Balwin, Zev Siegl, and Gordon Bowker. The men were stirred to sell quality coffee and equipment by entrepreneur Alfred Peet who taught each man his roasting coffee style. The coffee-house was to be named Pequod, Moby Dick’s whaling ship, but the name was unwanted by some co-founders. The coffee-house was instead named Starbucks.Starbucks primary location established in1971 was at 2000 Western Avenue. Then company relocated to 1912 Pike Place Market and stayed at this location permanently. Starbucks solely sold roasted coffee and did not sell brewed coffee until 1986 that Starbucks owners opened six new locations in Seattle and begun selling espresso coffee. The company purchased coffee bean directly from Peet’s company, but soon thereafter purchased from cultivators. The corporation rapidly expanded and began selling coffee outside Seattle in British Columbia, and Chicago, Illinois. Starbucks coffee house was roasting more than 2,000,000 pounds of coffee bean a year. In 2008 the company started a website named My Starbucks Idea created to collect ideas and feedback from the public. Starbucks also offered free Wi-Fi, flavored syrup, soy milk, tea, and free refills on brewed drip coffee, to registered customers of Starbucks card. Furthermore, Starbucks launched out a “skinny” line of beverages in 2008 and discontinued the use of milk fromrBGH treated cows.The skinny line sold salads, baked goods free of high-fructose, and artificial ingredients. In that same year the company introduced instant coffee packets via ready brew, and soon after created Trenta large cup size, and Verisimo a single serve coffee machine. Moreover, in November 2011 Starbucks purchased in San Bernandino, California, the juice corporation Evolution Fresh and started a chain of juice bars.
  3. 3. THE MARKET MIX 3 In addition, the Coffee House also sold iced beverages that contained green Arabica coffee bean free of coffee flavors, and by June 2013 calories counts will be displayed on menus for pastries and drinks in every Starbucks in the United States.Starbucks is present in 62 countries worldwide and 20,891 stores. Starbucks plans to establish 1,000 additional stores in America within five years. During the five-year interval the Starbucks Coffeehouse could encounter some factors that affect demand of the product within the market.These factors can vary in many forms and may be economic, social, and even political. Starbucks depends on market fluctuations to be in business and maintain a position of leadership that company has upheld since the 1990s. Given that coffee is the second most traded commodity in the world, next to oil, the demand for coffee will always be high, but this does not ensure that the demand for Starbucks Coffee will be high as well. Current Market Conditions Competitive Analysis New competition from local more personalized coffee shops have given Starbucks, a run for its money because it is seen by consumers as “big business” and many of its costumers drank the coffee because of its anti-big business feel.This is why many of its former customers have switched to local coffee shops. This dilemma made the demand for Starbucks Coffee low in recent times. Furthermore, this situation links also to the recent recession that has plagued the country. Starbucks Coffee is seen as expensive when compared to other small neighborhood coffee shops. Many consumers have also changed coffee shops for this reason.In addition to the many issues that can affect the Starbucks industryas a growing corporation, other factors that come into play are equilibrium, and price elasticity of demand. The threat ofnew entrantssets limitstothe potential profitability ofan industry.
  4. 4. THE MARKET MIX 4 When the threatis high,incumbentsshouldkeep pricesloweror increase the investmenttodiscourage newcompetitors.In thespecialty coffeeretail, byexample,the barriers to entryare relatively low therefore,Starbucksmust investaggressivelyinmodernizing theirshopping andmenu offerings. The bargaining powerof consumersis lowbecause they areatomized andpurchases are notin large quantities.The probability ofbackward integrationis loweven whenentry barriersare not so good.The levels ofindustrygrowthspecialty coffeeindustrycould involvea lowcompetitionin the industry; however,we must considerthe cost ofexchangerate is nothigh sothat the rivalrytends tobeaverage.Moreso becausetheelasticity of demandis relativelyfacesignificant pricechanges. Those considerations include “competitive dynamics” in individual markets as well as costs related to distribution, store operations, and commodities, including fuel and ingredients for food and beverages. In addition to the aforementioned Starbucks has the competence of fastfood restaurants and coffee specialized stores. Starbucks markets a product that many other competitors market in America, and around the world. Coffee and specialty coffee is sold worldwide particularly in the United States Starbucks hometown. Moreover, Starbucks Corporation bases on the tastes, preferences, and socioeconomic level of the demography to identify the potential clients. Starbucks Corporation organizes the position of its divisions in sectors of high inflow of executives and foreigners who know the service and products of Starbucks on a global scale. At the moment of analyzing where the divisions are located, selected locales are the best (exclusive) sectors of the city for this reason Starbucks product is known at what socioeconomic level it points at the moment of the selection, its potential clients, and the tastes and income of such.
  5. 5. THE MARKET MIX 5 Conclusively, other issues relating to theStarbucks market and economic growth, is cost structure. The "cost structure" is a common expression in the media business and labor, especially when dealing with the government to discuss issues like those of involvement of movements in taxes, fuel costs, minimum wage, and in general, any cost of an input of a business sector.It is defined as the set of proportions regarding the total cost of the activity sector or company, representing each type of cost.In business costs can be classified by function: Production: including the acquisition processes of raw materials, supplies, knowledge, and comparable or similar Of commercialization Of support Financials These functions, according to its relation with the volume of production, have variable costs and fixed costs.Starbucks is subject to a significant number of risks, both qualitative, and quantitative, which can cause variations in the results projected in forecasts and in the goals.One of the biggest risks is the break in the chain of suppliers.Any interruption in the coffee supplied, beyond Starbucks control, affect production costs by having to find a way to fill the gap. These interruptions can be caused by: The casualty loss of any roasting plants. Failure of Suppliers Any disruption in transportation services within distribution channels Starbucks minimizes the factors that can affect its fixed and variable costs through contracts with suppliers of coffee. These contracts stipulate that the coffee will be provided at a fixed price and fixed quantity. In this way, variations in coffee prices in the international market
  6. 6. THE MARKET MIX 6 affect neither the price nor the quantity of coffee used by the company. These contracts usually last about a year.Finally, the current market conditions competitive analysis of the Starbucks industry, addressed the following points. Starbucks historydetailed information of the company worldwide growth. Factors affecting demand of the product within the market. Moreover, issues of equilibrium, price elasticity of demand, factors of competence, and characterizing potential buyers and customers. The lastanalysis dilemmas relating to cost structure like fixed cost, and variable cost.
  7. 7. THE MARKET MIX 7 References Holmstrøm, M. (2012, Septiembre 16). Starbucks And Commodity Costs: What Analysts Are Not Aware Of. Retrieved July 12, 2013, from Seeking Alpha - Stock Market News & Financial Analysis: Starbucks Corporations. (2013). About Us|Starbucks Coffee Company. Retrieved July 2013, from Starbucks Coffee Company: