Company Starbucks essay
Starbucks is a global coffeehouse chain and coffee company which is headquartered in Seattle. The company started as coffee retailer and roaster, and then added coffeehouses to its services. The company was created in 1971 and incorporated in 1985 (Pride & Ferrell, 2013). Starbucks is the worldwide coffeehouse leader: the company operates more than 20,000 stores located in 64 countries (Pride & Ferrell, 2013). Among these stores, more than 13,000 are located in the United States (Pride & Ferrell, 2013).
Products
Starbucks sells the following types of products: coffee and tea, fresh food, handcrafted beverages and merchandise (Pride & Ferrell, 2013). The products sold by Starbucks include ground coffee, roasted whole bean coffee, various sorts of tea and coffee, bottled water and juices and various single-serve items. In Starbucks’s coffeehouses customers can also purchase fresh food offerings, lunch items, pastries, sandwiches and ready-to-drink beverages. It is possible to purchase merchandise such as coffee machines and coffee accessories in Starbucks. The company also licenses the rights to producing and distributing key Starbucks brands to Pepsi-Cola company and distributes its specialty coffee trademarks through the national foodservice chains, groceries and licensed stores (Pride & Ferrell, 2013).
Industry
Starbucks operates in the industry which is called “specialty eateries”. This industry includes the companies which operate various limited service restaurants serving specialty items. This industry is quite competitive and highly fragmented. The top 50 companies operating in this industry account for approximately 45% of industry revenue (Pride & Ferrell, 2013). Coffee and doughnut shops account for 40% and 20% of revenue in specialty eateries industry (Pride & Ferrell, 2013). There are several large players in this industry such as Dunkin Donuts, Einstein Noah, Krispy Kreme Doughnuts, Tim Hortons, etc (Pride & Ferrell, 2013). Companies like MacDonalds and Subway also partially relate to this industry. The demand in this industry depends on demographics in the chosen region, customers’ income and customers’ tastes. The threat of entrants in the industry is low, while competition is high and the threat of substitutes is also high. Bargaining power of suppliers is moderate as well as the bargaining power of customers (Pride & Ferrell, 2013).
Marketing and target customers
Starbucks sales account for about 33% of all coffee sales in the U.S (Pride & Ferrell, 2013). Such immense success is to a large extent caused by the efficiency of Starbucks’s marketing strategy. Starbucks’s target customers are people aged between 25 and 40 years old which bring almost half of revenue to the company (Pride & Ferrell, 2013). Most of Starbucks customers live in urban areas, are qualified professionals and pay a lot of attention to social welfare and going out (Pride & Ferrell, 2013). Starbucks attracts these customers with the help of innovative design, decor and advertising and by its famous coffee culture which encourages Starbucks’s customers to socialize and share their experiences.
In addition, Starbucks targets two more customer groups: young adults group and group including kids and teens. The former group accounts for about 40% of total revenue of Starbucks, and the latter group accounts for only 2% of sales (Pride & Ferrell, 2013). However, it is important to note that the majority of items for the latter group are purchased by their parents and therefore high sales of the primary customer group reflect a combined demand of adults and “kids and teens” group.
Competitors
The major competitors of Starbucks are two companies operating in the specialty eateries industry – McDonalds and Dunkin Brands Group, and one company operating in the food industry – Nestle S.A. McDonalds and Dunkin Brands largely compete with Starbucks’s chain of coffee stores, and the products of Nestle S.A. compete with Starbucks’s roasted coffee and tea products (Seaford, Culp & Brooks, 2012). McDonalds offers a relatively simple choice of coffees and it competes with Starbucks for those customers who choose basic coffee offers. The major advantages of McDonalds are the its large number of restaurants worldwide and its family-focused image.
Dunkin Donuts offers doughnuts and sandwiches which are almost similar to Starbucks’s offerings. The choice of coffees and other beverages at Dunkin Donuts is more limited compared to Starbucks, but the choice of doughnuts is more attractive. As for Nestle, it competes with Starbucks in the market of instant and premium coffee; Nestle has stronger business relationships with coffee suppliers and wider distribution network, but Starbucks is also quickly expanding into the coffee segment of the food market (Seaford, Culp & Brooks, 2012).
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