Competitors Analysis and Market Structure of Starbucks Paper Example

Introduction

The market structure that Starbucks cooperation operates in is monopolistic in nature. In the current case, the company ensures that all customers have appropriate services whenever they need them by using a convenience mechanism. According to Geereddy (2014), of all United States' operations, Starbucks holds 75% and it also holds 25% of coffee business around the world. The two main competitors of Starbucks are Donald's Donuts which offer competition locally and Mc Donald that offers competition both at an international and local level. The barriers to entry in this market include the cost involved in starting such a business and a strong brand that major players such as Starbucks have in the market (Geereddy, 2014). Additionally, large companies such as Starbucks have partnered with other international firms such as Pepsi further promoting their business worldwide and making it difficult for other businesses to enter the market (Geereddy, 2014).

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Trends in Current Macroeconomic Indicators

Impact of Starbucks on the GDP

Starbucks development has had a significant impact on the gross domestic product (GDP) of most countries it has been established but more so in the United States. Because of increase in its revenue, Starbucks have in turn paid high taxes to the government increasing the overall GDP of various countries and enhancing economic development (Hill, Jones & Schilling, 2014).

Current stage of the business cycle

In terms of stage of business life cycle, Starbucks is at its maturity. At this stage, Starbucks Corporation has managed to completely change its customer's living style. This is so because the business has been able to create a reputable brand in the major countries such as the US and other Asian nations (Geereddy, 2014). Its dominance in some of these countries has enabled it to gain high revenue and consequently lowering its prices and attracting more customers.

Inflation as measured by the consumer price index (CPI)

The consumer price index measurement shows that the growth and development of Starbucks in the US have influenced inflation. Through its business activities, the company has been a significant controller of the money present in the United States economy. According to Hill, Jones and Schilling (2014), the various strategies of lowering prices has enabled the company to increase consumer's purchasing power thereby affecting money flowing in the economy.

Impact of Starbucks on borrowing rates

The growth and development of Starbucks Corporation have influenced the current rate of borrowing funds in the United States. There has been a significant growth in the numbers of loans requested because of the increased bargaining power that arises from a high number of employees (Geereddy, 2014).Impact of Starbucks on unemployment rates

The level of unemployment In the US has continued to decrease over the years and most especially after the inception of Starbucks. This can attribute to the increase of highly functional Starbucks branches (Geereddy, 2014). These branches offer the wide variety of job employment such as chefs, cooks among others.

Trends in Demand of coffee and Impact on the Industry and the Firm

The consumption of coffee-related beverages has continued to increase over the years with the year 2017 showing significant increment. Considering this increase, it is therefore clear that this industry will continue to rise hence there is a need for Starbucks to diverse its operation as the market increases (Jancenelle, Storrud-barnes & Javalgi, 2017). Additionally, this increment can also be observed in the upsurge of revenue that Starbucks experienced in 2017.

Price Elasticity of Demand

Since its formation, Starbucks has shown growth in various many occasions. Globally and in the US, the company offers its products at low prices thereby attracting most customers. Consequently, the price elasticity of demand hardly impacts the demand for products from Starbucks. Additionally, even if the company decides to increase the price a little, many customers will still afford its products (Haskova, 2015). In any situation, Starbucks revenue continues to rise as it continues to dominate the coffee market in the US (Haskova, 2015). Nevertheless, it is key to determine Starbucks price elasticity of demand for the various products it offers. This can be achieved by increasing the price of coffee in a particular state so as it reaches the level of other competitors and thereby determine if pricing does facilitate the price elasticity of demand (Hill, Jones & Schilling, 2014).

Variable Cost and Fixed Cost Analysis

Starbucks output decision is not influenced by the fixed cost. Fixed cost is usually constant and always known and in Starbucks firm they are only used when there is a pricing element. This means that the final cost of the product is not influenced by factors such as equipment and rental cost. Conversely, variable cost does have a significant impact on Starbucks operation. The employment cost is one aspect that affects Starbucks with constant changes in employees' salaries and wages (Haskova, 2015). Another factor is changes in the price of component and materials of production that affects overall production cost (Geereddy, 2014). Starbucks must balance and when to increase or decrease price depending on these factors.

Conclusion

For Starbucks to remain relevant and profitable in the coffee industry, it is important that it develop and adopt a low pricing strategy that will ensure the majority of its customers can afford. Lower prices mean more affordable products which then translates to an increased customer base (Hill, Jones & Schilling, 2014). Another strategy that Starbuck can embark on is the use of technology mainly its services delivery and the production process. The use of technology will ensure that the firm offers best products and customers are always satisfied. Technology can also be utilized in marketing where the company can look into the best ways of utilizing various social media platforms (Jancenelle, Storrud-barnes & Javalgi, 2017).

Strategies Recommended

Starbucks already has a remarkable reputation among its customers, however, for the company to remain relevant, there are various strategies that can help. One is that Starbucks should build a leadership position around different coffee production activities such as brew, coffee roasting, and sourcing so as to have enhanced customer satisfaction (Haskova, 2015). Secondly, it is important for Starbucks to continue partnering with other large corporation to reach more customers and improve its quality standards. Additionally, the company should now develop proper meals that can be eaten other times not only during breakfast. This will go well with their already established market reputation. Also, it will be an added advantage if the corporation was to invest and develop other brands such as tea to reach more market. Their millions of people who love tea over coffee and this a market that Starbucks can venture in considering it has the means (Geereddy, 2014).

References

Geereddy, N. (2013). Strategic analysis of Starbucks corporation. Harvard University.Haskova, K. (2015). Starbucks Marketing Analysis. CRIS-Bulletin of the Centre for Research and Interdisciplinary Study, 2015(1), 11-29.

Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.

Jancenelle, V. E., Storrud-barnes, S., & Javalgi, R. (2017). Corporate Entrepreneurship and Market Performance: A Content Analysis of Earnings Conference Calls. Management Research Review, 40(3).