Starbucks Coffee and Rivalry among Existing Firms
Rivalry Among Existing Firms
The coffee industry is a highly competitive industry in that coffee is served at almost every restaurant, diner, and convenient store in the nation. Most homes brew their own coffee as a more convenient and less expensive way of getting their daily coffee fix. Thirty years ago people who wanted a premium cup of coffee would head to their local coffee houses or their corner cafes in order to obtain the highest quality of coffee. Today with the onslaught of corporate chains these local establishments have become an archaic symbol of the past.
Starbucks has differentiated itself from its competitors by offering higher quality of coffee which it charges a premium price for. While its prices are much
7
higher then that of its competitors Starbucks has such a strong brand loyalty that it has been able to consistently outperform other coffee houses. Starbucks, as with all local cafés, also has to compete against home coffee producers such as
Procter & Gamble’s (NYSE: PG) Folgers brand of coffee and Kraft Food’s (NYSE:
KFT) Maxwell House brand. With a high concentration of competitors Starbucks has been able to thrive by offering a high quality product that commands a high brand loyalty.
Starbucks has a differentiated itself from its competitors by offering a vast array of coffee flavors from all ends of the spectrum. This allows them to create unique flavors that can only be found at Starbucks. Starbucks also offers baked goods, sandwiches, and recently added movies and music to its ever expanding line of goods. With such a wide variety of specialty goods available for sale
Starbucks is able to differentiate itself from its competitors.
2001 2002 2003 2004 2005
Sales Volume $2,648,980,000 $3,288,908,000 $4,075,522,000 $5,294,247,000 $6,369,300,000
Total Assets $1,851,039,000 $2,214,392,000 $2,729,746,000 $3,386,541,000 $3,514,065,000
Stock Price
Performance
(per share)
$7.14–$12.23 $9.40–$12.59 $10.05–$16.58
The coffee industry is a highly competitive industry in that coffee is served at almost every restaurant, diner, and convenient store in the nation. Most homes brew their own coffee as a more convenient and less expensive way of getting their daily coffee fix. Thirty years ago people who wanted a premium cup of coffee would head to their local coffee houses or their corner cafes in order to obtain the highest quality of coffee. Today with the onslaught of corporate chains these local establishments have become an archaic symbol of the past.
Starbucks has differentiated itself from its competitors by offering higher quality of coffee which it charges a premium price for. While its prices are much
7
higher then that of its competitors Starbucks has such a strong brand loyalty that it has been able to consistently outperform other coffee houses. Starbucks, as with all local cafés, also has to compete against home coffee producers such as
Procter & Gamble’s (NYSE: PG) Folgers brand of coffee and Kraft Food’s (NYSE:
KFT) Maxwell House brand. With a high concentration of competitors Starbucks has been able to thrive by offering a high quality product that commands a high brand loyalty.
Starbucks has a differentiated itself from its competitors by offering a vast array of coffee flavors from all ends of the spectrum. This allows them to create unique flavors that can only be found at Starbucks. Starbucks also offers baked goods, sandwiches, and recently added movies and music to its ever expanding line of goods. With such a wide variety of specialty goods available for sale
Starbucks is able to differentiate itself from its competitors.
2001 2002 2003 2004 2005
Sales Volume $2,648,980,000 $3,288,908,000 $4,075,522,000 $5,294,247,000 $6,369,300,000
Total Assets $1,851,039,000 $2,214,392,000 $2,729,746,000 $3,386,541,000 $3,514,065,000
Stock Price
Performance
(per share)
$7.14–$12.23 $9.40–$12.59 $10.05–$16.58