Professor Ana C. Corrales
ECO2023 MWF 11AM
Case Study #1 Starbucks
The cause of this case study is to evaluate and recognize Starbucks growth in the past decades. Starbucks was established in 1971. The industry for coffee at the time was in decline for almost a decade. The consumption of coffee back then was mostly at home or “Away from home” either with a meal at dinner or restaurant. In larger cities like New York or San Francisco they have specialty coffee roasters for example Peet’s. The main goal of Schultz was aiming with that mentality to roast and vend great coffee (CRAIG, BUSSE, BROWN, “Aplia” Kellogg 1). By 1982 they had five retail outlets that served coffee ...view middle of the document...
Now the new Starbucks were decorated in terrain tones with overstuffed chairs, wood floors, and cozy fireplaces. (CRAIG, BUSSE, BROWN, “Aplia” Kellogg 2).
Now Starbucks has a whole new face, differentiating its coffee most Americans are used to sipping. Despite the fact that they are way more expensive, they have a taste that was unique to Americans. Reason why is because they roast their coffee wisely, where they were given a full-bodied European flavor (CRAIG, BUSSE, BROWN, “Aplia” Kellogg 2). At this time they are the leaders of this industry. They have invented their “quasi-Italian” sizes (short, tall, grande, and venti) also the drinks (caramel Macchiato and Frappuccinos) (CRAIG, BUSSE, BROWN, “Aplia” Kellogg 3). The employees were trained to have an enjoyable tone and know the consumers specified order. For many clienteles getting the order right is desire for their loyalty, and a small win to the office.
By 1996, the Starbucks mermaid logo appeared on more than 1,000 stores (CRAIG, BUSSE, BROWN, “Aplia” Kellogg 3). They carefully chose the locations, aiming areas with highly significant number of wealthy educated professional workers. Now that these higher level professional people are drinking Starbucks coffee more and more American consumers want the product. “Consumers believed that their grande lattes demonstrated that they were better than others. Could be cooler, richer, or more sophisticated” (CRAIG, BUSSE, BROWN, “Aplia” Kellogg 3). Now since they’re an industry leader expansion starts kicking in. The first one is selling their products through mass distribution networks. Second Schultz played an important role in both initiatives in being the first as CEO in 2000, and subsequently as chairman and chief global strategist (CRAIG, BUSSE, BROWN, “Aplia” Kellogg 3).
Starbucks is very unique now, their product is differentiated but also standardized. How are the differentiated? First they were the first to get their product through mass distribution networks throughout the United States of America. Second, they have a joined journey with Pepsi-Cola North America. In the same time period Starbucks also partnered up with Dreyer, they produce high-quality coffee ice cream. By then this company is immense, they eventually tested the premium coffee-beans for supermarkets and grocery stores.(CRAIG, BUSSE, BROWN, “Aplia” Kellogg 4).
Since Starbucks coffee is “Differentiated” the market structure is Monopolistic Competition. They have thousands of stores worldwide, and the product could be found nearly anywhere in the world. Now that they have this power of monopolistic competition, Starbucks is a price maker. Charging customers whatever they like, from 1994 a tall coffee was 1.25, to 1.96 in 3013 (Vanessa “Starbucks Is, 2). Prices probably keep on increasing because they have to incur a high advertisement price. Lets say that they raise the prices from $3.00 to $3.25, they will lose some customers but there are also the loyal ones...