8 pages/≈4400 words
Business & Marketing
Commoditization of Starbucks: How to Prevent Commoditization (Article Sample)
commoditization of starbuckssource..
THE COMMODITIZATION OF STARBUCKS
The Commoditization of Starbucks
Starbucks is one of the major coffee products provider in the United States. However, the company has been subjected to various challenges on account of the environment within which it operates. Contrary to Quicksey (2012) argument that, “Starbucks continues to thrive in US beverage market”, most consumers have resolved to move to coffee products providers such as McDonalds whose products are relatively low priced as compared to Starbucks’. Despite their relocation due to high pricing at Starbucks, the Company still has the opportunity to control the consumer buying power using the best possible model that will grant it competitive advantages over its rivals. This can be done through offering cheap and more affordable alternatives to the consumers.
Using the 5 forces analytical tool, the major challenge facing Starbucks is the threat of substitution. According to his findings on the corporate challenges facing beverage companies, Bansal (2002) deduced that, “Most consumers would prefers using readily available beverages that are considerably cheaper to coffee. These consumers may also decide to grab fast foods such as snack foods and burgers as opposed to pastries and muffins sold within most coffee stores.” This forces companies such as Starbucks to work on a pricing strategy that would help in retaining and maintaining of consumer loyalty. Under the social-cultural aspect of the PEST tool of analysis this substitution is as a result of cultural norms of individual communities.
New entries in the coffee industry in the US market possess one of the major threats to Starbucks. Large firms that are well funded with minimal or no capital cost anomalies thrive more as compared to this firm. Such companies include Burger Kind and McDonalds who major in coffee products as Starbucks (Bansal 2002.p 129).
According to Quicksey (2012), “US beverage market continuous to exhibit competitiveness among most companies allied to the beverage industry. This competitive rivalry possess one of the major challenges to Starbucks.” Coffee chains such as Gloria Jeans Coffee and San Francisco Coffee have exerted a lot of competitive pressure on Starbucks. Other smaller and privately owned coffee houses that continuously provide coffee products at low prices have also stiffened competitiveness upon this firm. As mentioned earlier, secondary coffee companies such as McDonalds and Burger King have also presented competitive rivalry to Starbucks in the beverage market.
The buyers bargaining power that was not there in the past greatly impacts on the profitability at Starbucks (Clancy 2001.p 34). This is as a result of entry of premium coffee providers such as McDonalds who allow customers to bargain for their low priced commodities. In return, Starbucks is forced to do the same in order to maintain and retain its customer loyalty.
Starbucks possesses a vital competitive advantage over most retailers through mobile technology. This has been a major game changer in Starbucks economic elevation as compared to most retailers in the United States (Mooney 2007. p 112). The company recently disclosed its mobile order and pay technology. This new technology enables its coffee consumers to make orders prior to their pick up schedule at the Starbucks store which is in accordan...
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