7 pages/≈1925 words
Mathematics & Economics
STARBUCKS CORPORATION (Coursework Sample)
TO analyze the market and business data to explain how the core MICROECONOMICS principles impact the sustainability of the firm. source..
Starbucks Corporation Student’s Name: Institutional Affiliation: Starbucks Corporation Introduction The primary concern or objective of any business is the generation and maximization of profits. To achieve this objective it must undertake certain measures and strategies that ensure that it either lowers its operational costs, it increases its sales of goods and services or it develops products that are of superior quality than its competitors thereby ensuring it has a higher stake at the market. The modern business environment is characterized by increased competition that is mostly blamed on globalization and unprecedented technological advancements. The growth of the technosphere has first led to an increased flow of information and data all over the world. As such, it has established data and information as one of the most critical capital resources in the world today. Information has in equal terms created a level playing ground whereby all businesses have an equal chance of success thereby increasing competition for the global market. On the other, globalization has enhanced the increased flow of goods and services. It has also promoted global transport and the interaction between people and nations. This has allowed corporations to set up businesses in foreign jurisdictions thereby increasing the number of multinational corporations as well as the level of competition in the world. In this essay we shall look at how principles of microeconomics affect the operations and success of businesses with Starbucks corporation as our main example. Company Profile Starbucks Corporation is an American company that operates coffee shops all over the world. It was founded in 1971 by Jerry Baldwin, Gordon Bowker and Zev Siegl. At its inception its headquarters were at Seattle in Washington DC in the United States of America. Since its inception, the company was guided by the ideals of providing high quality coffee that was inspired by the roasting style of Alfred Peet. The company thus offers high quality coffee products that emanates from high-quality coffee beans that are roasted and prepared through high quality equipment. As such it has been able to dominate the market both in the domestic jurisdiction and also abroad. The company also serves a wide range of beverages and snacks which has allowed the company to diversify its products thereby allowing it to maximize its sales and revenues. From its humble beginnings from a single coffee shop situated at 2000 Western Avenue in Seattle, it has grown into one of the largest multinational corporations in the world with over 28, 218 locations globally. The increased growth of the company is largely due to its high quality products that have attracted a large consumer base (Sacks, 2014). However, the company also employs other positive strategies that have allowed it to promote its sales and thus allowing it to expand in size. These strategies are based on microeconomic principles that have had a positive impact on the company. These principles form the basis of this discussion and they are the strengths that promote the firms business all over the world. Supply and Demand Conditions Supply and demand are considered as the most critical concepts in microeconomics. Supply in this case refers to the ability and willingness of the seller to provide, make available and sell goods or services at a price. Demand on the other hand describes the consumer needs for certain goods and services and their willingness to spend money and buy these goods and services. In microeconomics, for a company to achieve profitability, the values of demand and supply must be balanced meaning that the seller must be able to reach the market demand while at the same time there must be demand for products in order to justify production of goods or the development of services. Coffee is among one of the most consumed beverages around the world especially in social or professional events or for individual needs. As such, it is one of the most traded products across the globe with millions of consumers. This has meant that many companies seek to venture in the business of selling coffee and coffee products. Starbucks is one of the major corporations holding a large portion of the supply of coffee in the world. This highlights the major demand for coffee and coffee products in the world. Demand and supply are equally important as they help determine the price of goods or services and at the same time the quality of the products on offer. In the case of Starbucks, their prices are based upon the quality of their products and services on offer. As such, while the prices of goods may be a bit expensive in most of jurisdictions that the company operates in, the prices is justified by the quality of their services and goods on offer. This has allowed the company to maintain a competitive advantage among its main rivals. This is because the quality offered increases the demand for their goods. Demand is based on the high preferences of Starbucks products across the globe which in turn equates to increased sales and thus maximization of profits and revenues. To ensure that they receive the best coffee beans for their coffee, Starbucks is highly recognized for their excellent remuneration standards in the market. The company’s management understands that to supply the best they must also use the best raw materials and that the best quality also requires the company to spend. This helps the company maintains its supply of high quality coffee and other products (Behar &Janet, 2007). Supply ensures that the company satisfies the demand for its products thereby ensuring that it maintains its market share and at the same time attracting potential customers. Costs of Production To ensure profitability, a company must ensure that the costs employed in production do not exceed the total sales. Otherwise it will be operating at a loss thereby meaning it is losing money rather than making it. Therefore, in order to maintain sustainability and survival, it needs to lowers it costs of operations. One of the most important operations involved is production of goods or services. For Starbucks, production involves the process involved in turning the coffee beans to the beverages that are offered to their various customers. As such, the cost of production describes the amount employed to first buy the coffee beans, roasting and then converting them to the coffee beverage. The production process costs will then include the price employed to the purchase of the various machines used, the wages and salaries of the employees and energy costs among others. Together they relate to the amount used to place the final product on the table. Therefore, in determining the prices of its coffee and other products, Starbucks have to consider the overall costs used to make their coffee. The price must be one that at the end of the day that helps the company make a profit. On the other hand, the price must also take into consideration the market, the income levels of its customers and the level of competition. This is because if the price it too high it may lead to low sales and consequently losses for the company. Thus the price must be balanced enough so as to ensure profits and also competitive enough to ensure that the company’s products remain affordable and attractive. Overall Market The most important element of business in economics is the market. Market in this case describes the presence and availability of consumers for the goods and services produced. In order to make profits and thus achieve its central goals, a company has to sell its goods and services. Additionally, the level of profits made depends largely on the size of the market. This means that the larger a company’s market share and reach increases its chances of making a profit. As earlier highlighted, there are many companies operating coffee stores and shops in the modern business environment. This has increased the competition for consumers especially in the American domestic market. To increase its market share, Starbucks has taken advantage of the increased globalization and has expanded its operations by opening stores in foreign jurisdictions across the globe (Clark, 2007). This has enabled the company to expand its reach and expand its market share. By assuming an international role, the company has gained a competitive advantage over its main rivals which allows it increase its sales and thereby maximize it profits and revenues. The market is however dependent on a number of factors that affects and influences the operations of the company. The first element is consumer preferences and lifestyle. Traditionally, coffee was mostly associated with the rich. However, there have been changes in the societal trends that have seen a rising preference for coffee especially in social and professional interactions. To further take advantage of the new trends, Starbucks invests highly in developing and establishing modern stores that have become a favorite place for...
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