Coffee Background Starbucks

Topics: Coffee, Supply and demand, Elasticity Pages: 3 (680 words) Published: July 27, 2010
Company: Starbucks Coffee

Starbucks Corporation is the largest coffee company in the world, with over 17,000 stores located around the globe. Headquarters are located in Seattle, Washington, United States. Starbucks offer beverages- mainly coffee and tea, food- salads, snacks, sandwiches to customers. The company also markets books, music, and film.


Is the demand for Starbucks elastic or inelastic?
Starbucks mainly sells coffee, and coffee is an inelastic good, it is addictive and therefore a necessity. Starbucks is the most expensive coffee seller among competitors such as McDonald’s McCafe, coffee from supermarkets, etc. Yet, it will still be able to retain its’ customers as they sell more than coffee, they sell the coffee experience. “We’re not just selling a cup of coffee, we are providing an experience.”- Howard Schultz, chairman, president and chief executive officer of Starbucks Customers have become accustomed to the services they provide and the convenience they bring, therefore the demand for Starbucks is inelastic.

How Economic Downturn affected Starbucks sales
According to Wall Street Journal, “Starbucks is struggling to attract and retain consumers in a recession. Starbucks said U.S. comparable-store sales fell 8% in its latest quarter as traffic fell 5%, and average transaction totals fell 3%.”

Market strategy
Starbucks differentiates its product by location, hours of operation, service, and quality of products. Starbucks open up many chain stores in a small geographical area, to dominate the market by saturating the market and fighting down competitors by buying out their leases. Besides that, Starbucks has set up cafes and carts in hospitals, banks, office buildings, supermarkets, and shopping centers. Some Starbucks (depends on location) are open 24/7. They provide a comfortable environment for customers to hang out. Starbucks coffee is strictly arabica, and the company ensures that only the...

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