Starbucks Company’s Risks in the Global Market

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Table of Contents

Introduction
Entry of New Competitors into the Market
Lack of Sufficient Product Diversification
Conclusion
Works Cited

Introduction

The case of Starbucks presents itself as an interesting quandary given the impact it has had in present-day popular culture wherein the brand and its various shops have become one of the “icons” of the current generation of consumers. However, it should be noted that the rise of Starbucks as a coffee chain was in part due to the general uniqueness of its aesthetic appeal wherein a combination of its ergonomic and stylish stores as well as the appeal of depicting one’s self as a consumer of their products resulted in its sudden rise in popularity. “Uniqueness” was the selling point of the company and allowed it to rapidly expand; however, within the past few years, its expansion has brought with it a greater degree of perception regarding how the aesthetic appeal of a Starbucks store works and what a potential rival can do to emulate it. The problem with Starbucks is that its business model has focused so much on developing the appearance of its stores and the cultural appeal of its products that the price and diversity of its products are lacking in competitiveness.

Entry of New Competitors into the Market

The article “Starbucks Corporation SWOT Analysis” (2012) explains that one of the main problems Starbucks has to deal with is the sheer amount of “imitators”. The problem with the market that Starbucks finds itself in at the present is that there are fewer barriers to entry as compared to other competitive markets. It is relatively easy for a small scale coffee shop to acquire the necessary equipment and supplies, hire an interior decorator to emulate the ergonomic feel and appeal of a Starbucks as well as hire the necessary staff to make and sell its products (Starbucks Corporation SWOT Analysis, 1-11). This low barrier to entry has resulted in a plethora of coffee shops around the world that imitate the concept utilized by Starbucks which threatens to erode its customer base. One solution to this problem is for Starbucks to utilize its current supply chain to implement a more competitive pricing model so that it can sell high-quality coffee at lower prices as compared to its small scale rivals (Starbucks Corporation SWOT Analysis, 1-11).

Lack of Sufficient Product Diversification

The problem with Starbucks at the present is a definite lack of insufficient product diversity. While it has attempted to remedy this by selling small snack items within its various stores, the problem is that the quality, as well as the pricing of such products, are far from ideal. It is recommended that Starbucks attempts to create its in-house product offerings instead of sourcing them from local suppliers (Company Spotlight: Starbucks, 29-34). For example, Dunkin Donuts and Krispy Kreme sell coffee as well as donuts and have become quite competitive within their respective markets. A similar product concept could also be implemented in the case of Starbucks resulting in better product diversification.

Conclusion

At the end of the day, coffee is just coffee, it is one of the most ubiquitous products in the global market place and can be easily sourced and exported to a variety of regions around the world. As seen by the sheer amount of imitators of the “Starbucks concept” entering into the coffee shop industry is not hard to do given the proliferation of coffee as one of the world’s most popular products. Unlike other markets though, new competitors in the coffee shop industry can sell their coffee at much lower prices as compared to Starbucks since the company’s current product pricing strategy is too expensive. Starbucks needs to lower its prices and diversify its products if it is to survive in the current competitive market.

Works Cited

“Company Spotlight: Starbucks.” Marketwatch: Drinks 9.3 (2010): 29-34. Business Source Premier. Web.

“Starbucks Corporation SWOT Analysis.” Starbucks Corporation SWOT Analysis (2012): 1-11. Business Source Premier. Web.

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Starbucks Company’s Risks in the Global Market

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