Institutions:
Products and services of Starbucks and its competitors
Starbucks supplies its customers with a variety of coffee and tea products. The company also sells equipment from recognized manufacturers such as Bunn, and Krupps. Similarly, the company also sells for the office as well. It also has some physical stores where customers can go and make a purchase for coffee, tea, coffee accessories, hot chocolate and tea Starbuck. Com, 2016). Starbucks has several competitors, but in the recent years, it has faced stiff competition from Dunkin’ Donuts, and McDonald’s for the top position as the coffee king (Hawley, 2015). Moreover, the desire and preference of the customers greatly influence the competition. Therefore, Starbucks is struggling to expand its menu options, and the location of the physical stores to serve the greater base of their customers to draw customers away from the competitors.
Despite the inflated prices in Starbucks, the company has been able to create a sense of brand loyalty with the array of their loyal customers. Since coffee is fairly a homogeneous product, Starbucks falls under a monopolistic competitive market because it has been able to control its products over inflated prices. Similarly, the company has been able to create a standard for its coffee, and it requires its customer base to experience exaggerated prices for their variety brews. Therefore, Starbucks is operating under a monopolistic competition because several small companies offer similar products. Hence, Starbucks do not exert a complete market power in the industry.
Marketing Strategies of Starbucks
The main marketing strategy in Starbucks are mass advertising, and the established brand names and logos. Besides, the history of the company also gives it respect in leading other companies in the coffee industry. However, several coffee shops in the market are also providing tasty and aromatic coffee, but advertisement and the atmosphere of Starbucks shops attract more customers than the competitors. Additionally, customers are spending more on the brews of Starbucks because of the logo and the status that is attached to them. Therefore, the company is attracting more clients than its competitors through campaigns and good atmosphere of success.
Pricing strategies of Starbucks
Regarding the pricing strategy, Starbucks has positioned itself as a unique coffee retailer because it has a recognized brand image. Since the company is a premium coffee brand, it has targeted both middle and lower class that always has disposable incomes that can visit the coffee house frequently. Moreover, Starbucks focuses on the product quality rather than the price. However, since coffee is an example of an elastic good where the price controls demand, Starbucks has made a consideration on a small decrease in its prices to increase the demand and revenues to make the company remain more competitive than the competitors.
Competitive Monopoly
A monopolistic competitive company can make profits in the short run because the theoretical period where at least a single factor of production is fixed while other factors vary. However, its monopoly-like pricing will lead to a decrease in demand in the long run. The decline in demand and increased costs will make the average cost curve to be tangent to the demand curve at the product's maximizing price in the long run. The statement implies that a monopolistic competitive market like in the case of Starbucks will produce more goods (surplus products) in the long run, and the company will only be able to break even in the long run. Hence, it will not be able to make an economic profit (Sexton, 2007). Concerning the market entrance, new firms are likely to enter into this market because there is intense competition from other specialist retailers, especially from prime retail locations to operate both new and existing stores.
References
Hawley, J. (2015). Who Are Starbucks’ Main Competitors? (SBUX) | Investopedia. Investopedia. Retrieved 10 April 2016, from http://www.investopedia.com/articles/markets/101315/who-are-starbucks-main-competitors.asp
Sexton, R. (2007). Exploring Economics (4th ed.). Cengage Learning.
Starbucks.com. (2016). Products and Services Starbucks sell or offer. Retrieved 10 April 2016, from http://www.Starbucks. Com
