Starbucks - Early 2008

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. What is Starbucks' product?

Starbucks sells gourmet coffee, tea, bottled coffee drinks, pastries, coffee makers, and accessories. Starbucks also sells "the coffee drinking experience."

2. What advantages does McDonald's have in competing with Starbucks for coffee sales?

First, McDonald's already has existing locations. Emphasising coffee sales in McDonald's only required the installation of new equipment and minor modifications to existing stores' interiors. This is a major advantage over Starbucks because Starbucks must build a store should it wish to enter a particular geographic market.

Second, McDonald's has a larger customer pool (ie: those individuals who go to McDonald's for the burgers, etc). Prior to McDonald's emphazizing coffee sales, some of McDonald's "food customers" would visit Starbucks to get their coffee. After the McDonald's push to introduce gourmet coffee, the regular McDonald's customers find it more convenient to get their food and coffee at McDonald's thus taking away some of Starbuck's customers.

3. What changes in society helped Starbucks become successful?

The biggest change which led to the success of Starbucks was the increase in the amount of "out-of-home coffee drinkers." Coffee drinkers aged 25-29 incrreased their out-of-home coffee consumption from 42 to 66 percent. Coffee drinkers aged 30-59 incrreased their out-of-home coffee consumption from 33 to 46 percent. Coffee drinkers over 60 incrreased their out-of-home coffee consumption from 14 to 20 percent. Another key factor is the at-work coffee consumption rate, and the fact that most workers no longer purchase/make their coffee at work.

4. What strategic factors account for Starbucks' long-term success in building brand equity?

First of all, Starbucks does not discount any of its products or offer any promotional or sale prices. This maintains brand equity by emphazising the "quality" of the product. While high prices might "turn...
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