|Type of paper:||Essay|
|Categories:||Starbucks Business strategy|
In business, companies require comprehension of their anticipated market t the underlying economic structures to advance in prosperity. Starbucks is a formation majoring on coffee and tea, utilizing and formulating technological innovations corresponding to the brand becoming the leader of its marketplace! "The history of Starbucks and its growth will cover the elements influencing demand, supply, and equilibrium prices of the coffee, tea, and other drinks markets! It will likewise address the need to understand the issues and openings that Starbucks comes across, together with the impacts of intensity and long haul productivity! "The components utilized here will depict Starbucks; value flexibility request, mechanical advancement, the connection between the measure of work and capital utilized alongside the law of reducing minor efficiency and cost structure. Elements influencing variable costs, such as profitability and others indicate differences in the supply of demand for laborite. Resolute cost influenced by factorizations.
Starbucks has numerous competitors to contend with; currently, the top contender is Coffee Bean. It has quickly mirrored Starbuck's standards and association in the community. In any business, new product ideas and innovations need embracement towards establishing unbroken marketplaces. In the end, the team will lay out its recommendations towards competitors and long-term profitability analysis regarding selling a line of alcoholic designer drinks.
History of Starbucks
From Pike Place in Seattle, the name Starbucks came from the representation of the seas and the mermaid in 1971. Starbucks has grown from that little coffee shop -- years ago to establishing close to 21,000 outlets across 62 countries. It has premium selections of coffee and tea, along with a wide variety of sweets and sandwiches. Starbucks represents the neighborhood, a place to meet, talk, or network via the internet. Starbucks leads in the humanitarian direction, is engaged in the community, and devoted to quality and responsible business.
Factors Influencing Supply, Demand, and Equilibrium Prices
Starbucks provides a consideration of the components which influence changes in demand, supply, and equilibrium prices. Alterations in demand yield equilibrium price and product to move in the similar path; therefore, the bearing of the prevailing financial position and transactions direct this path. A demand reduction results to a decrease in the equilibrium price. A fade in demand results into surplus in supply thus depreciation in prices. Conversely, in case the need for the commodity fails to intensify, considerations are made on whether to decrease or ultimately halt the production of the commodity. "The alternate is also feasible; a hike in need will escalate the equilibrium price and the amount of products to put up for sale; a rise in commodity sale intensifies the output.
Changes in Supply and Demand
Alterations in supply make equilibrium price and output to alter in the inverse bearing, still leading to a decrease in the equilibrium price and the equilibrium in the amount of commodity. An increase in coffee supply causes surplus thus leading to a decline in the cost, and a corresponding increase in demand of commodity "Therefore, a fall in the availability of the product escalates the equilibrium price and a diminishing equilibrium amount of the commodity in contention. A reduction in the supply causes an increase in demand at the original price, leading to soaring of costs, and decrease in the commodity need. Elements influencing the demand curve include earning levels,, market equilibrium, commodity cost, value, appearance, and taxation. Comprehension of the congruity between supply and demand commends Starbucks to apply economics to scrutinize the changes in efficiency, supply, and demand curves. In case of limited markets, quantity will diminish. Increase in prices result to, less purchase, surplus output, thus leading to a deflation in prices and consequent demand.
Issues or Opportunities Facing Starbucks
Several issues and opportunities come to the forefront when it comes to selling alcohol in Starbucks establishments. Each store worldwide needs to assess and determine the abilities, concerns, and strategies to overcome them. Instituting alcohol sales in stores will be logistically challenging, but this product line is an excellent opportunity to surpass Coffee Bean and other major competitors. Transactions are tested and reassured success towards limited markets. "Troy Alstead of Starbucks declared having tested it adequately in considerable markets making it a functional curriculum."
Price Elasticity of Demand
Price elasticity of demand is an efficient tactic that organizations use to evaluate whether customers have specific brand preference or focusing on the cost of the commodity while buying. Launching designer alcoholic drinks could likely result in price elasticity of zero, including inflexibility due to the lack of competitors in the market. "The determination and reasoning by making changes to the product's price would not result in a shift in demand. When other competitors enter the market, an adjustment in price could result in a change because consumers would be able to get the same product at a lower price relatively.
On the other hand, if there were competitors and the price was raised, but demand did not decrease, this would indicate that consumers are more loyal to our products than the competitor. In the case of Starbucks launching a new commodity; the price elasticity of demand should be closely observed since competitors would supply identical commodities into the market at prices that would attract Starbuck's clients. Each emerging product possesses a life cycle, accompanied with alterations and could result to rise in costs, requiring fresh competition in the market portraying lesser costs.
Another area that the team must consider is if the new line involves technological innovation. Doing so provides a view of how easy it will be for a competitor to offer the same product. "Technological innovations usually reserved for electronic inventions or products and very rarely do they spill over to edible inventions because the knowledge or expertise is readily available to the entire market without having special training or skills. In the instance of Starbucks providing alcoholic beverages, is considered a technological innovation of the "new market," merely a marrying of two industries. Given that there is no real innovation, we then assume that if the idea becomes a big hit, it will not take long for competitors to follow the same path further saturating the market. Consideration of those mentioned above would be essential to assess the capital and labor needed to launch the new product.
Labor, Capital, the Law of Diminishing Marginal Productivity, and Costs
When an organization like Starbucks launches a new product derived from coffee, it is relatively easy. However, when the product is going to be alcohol; it changes things dramatically. Most stores employ younger people who fall into the age range that are not able to serve alcohol. Each store will require assessment when hiring new employees who can serve alcohol, due to regulations varying from state to state.
Furthermore, stocks will need to be a determined towards existing items used, and others obtained in inventory pro4ections for the product line. Stores will also need to factor in the equipment similar to setting up a new bar; achieved by looking into what equipment a typical bar employs. Other costs associated with adding alcohol to the Starbucks product line, things like existing real estate, licenses, and permits costs implemented into the equation for doing business.
Factors affecting fixed and variable costs
When a customer takes that first sip of a drink purchased from one of the many Starbucks locations around the world, all thought of what was paid for that drink disappears. Most consumers are blissfully unaware of what it takes to produce the perfect way to start a day. However, in reality, factors are going into making it attainable to remit fascinating cusp, each affiliated to a cost; prices are fixable. "Fixed costs are amounts which are consumed and fail to possibly face change in the period of time under consideration"( Colander, D., p 232). Some examples of fixed costs include rent on store locations leased or property taxes for stores already owned. Insurance and licensing, fall under the fixed cost umbrella and need further calculations as alcohol products become available in the marketplace. Variable costs also make up a portion of each cup sold. Variable costs are "costs that change as output changes" (Colander, D., p 232, 2013). For Starbucks, some of the primary variable costs include coffee beans (of course), dairy, sugar, cups, diesel fuel, and labor. "The marketing of the sale of alcohol in store locations depicts the need for management to evaluate labor, productivity, and the cost of labor due to increases in skills sets credentials for bartenders and servers.
In conclusion, as the team has evaluated the success of sell designer alcoholic beverage in limited test locations, it recommends that Starbucks expand the program this program to the rest of its customer base. There will be marginal costs associated with this ramp up. However, the marginal revenue will exceed the marginal cost. Marketing will need to approach this launch with sensitivity to the young demographic to ensure Starbucks brand shows that there is indeed something for every pallet. In the end, the team believes that this new addition to the product family will keep Starbucks on the cutting edge and the leader in its market.
Colander, D. Economics and Economic Reasoning. Economics (9th ed., p. 232). New York: McGraw-Hill/Irwin.(2012).
Patton, L. Starbucks to bring alcohol sales to thousands of stores. Bloomberg. Accessed from http://www.bloomberg.com/news/articles/2014-03-19/starbucks-to-bring-alcohol-sales-to-thousands-of-stores
Price Elasticity of Demand Definition | Investopedia. (2003, November 26). Accessed on March 16, 2015, from http://www.investopedia.com/terms/p/priceelasticity.asp
Starbucks Company information (2015).Accessed from, http://www.starbucks.com/about-us/company-information
Taecharungroj, Viriya. "Starbucks' marketing communications strategy on Twitter." Journal of Marketing Communications23.6 (2017): 552-571.
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