Blogging about Competing as Starbucks

Starbucks logo

It's funny, in all my courses so far at SAIT, I've had to report on Starbucks in some way. They're such a large and popular company, so I understand why they make the news so much but I have to admit, it's often for the wrong reasons. According to our textbook the term perfect competition is: a market it which all buyers and sellers are price takers. What exactly is a price taker? A price taker is a(n):firm that can alter its rate of production and sales without significantly affecting the market price of its product.
Read more: http://www.investopedia.com/terms/p/pricetaker.asp#ixzz284JSJ8c4

Starbucks would be considered a part of a perfect competition market because their main product is coffee, coffee has a very large profit margin. No matter how many coffee's they sell in a day, the price of each coffee stays the same; without affecting the market price.

What I read in the articles made it clear to me that it was time for Starbucks to realign their business practice. I call it the "Starbucks Complex" it's where there is just too many stores, Starbucks has managed to saturate their market... with their own stores! Starbucks should focus less on expansion (that would help with store closeurs) and refocus on being the best store they can be, make the best coffee in the most efficient way, while being great at customer service. They've had to close so many stores because of poor planning. They didn't think enough in long term, they just wanted fast expansion in a poor economy. Also they didn't seem to think that too many stores could be a bad thing, well obviously it can be. The main reason for Starbucks having to close so many stores comes down to very poor long-term thinking.

Starbucks Japan

I'm not one who frequents coffee shops much, for me it's just not worth it. Starbucks is quite expensive. The reason: prestige pricing. By pricing their product(s) just a little higher than the competiton, it gives the illusion that their product is superior, therefore, they can charge a higher price. Starbucks gets away with these prices because they have been in the market so long that people are dependant on their coffee now and will pay what they have to to get it, they're almost addicted. Wheather they lower their prices or not, I'm not sure what happens, but one thing is fore sure; if they focused on being the best coffee chain, rather than the largest, they could increase profits and have much fewer store closeurs in the future.



References:
http://www.yourlogoresources.com/starbucks-logo/ Starbucks logo

http://www.databaseanswers.org/tutorial4_getting_started_with_db_design/index.htm Menu Picture

http://inventorspot.com/articles/starbucks_japan_grows_while_american_stores_close_15672 Store Picture
http://starbucksgossip.typepad.com/_/2007/02/starbucks_chair_2.html
http://www.cbc.ca/money/story/2008/07/01/starbucks-closures.html)
http://starbucksgossip.typepad.com/_/2007/02/starbucks_chair_2.html

The above links are links given to the class, articles used in my research.