...few barriers to entry”. The market structure of Starbucks is a monopolistic competition. In the coffee industry, many producers and consumers exist, the goods and services are mixed, but firms are still able to differentiate their, products. Starbucks is a textbook example of a monopolistically competitive firm: many sellers, low barriers to entry, slight product differentiation. As an example of monopolistic competitive firm, Starbucks understands how that market structure works, thus giving them substantial profits in the past few years. Starbucks has managed to maintain its success even during unprofitable times with its other branches through customer loyalty, quality private goods, and knowing the labor market. Monopolistic competition also provides consumers with the greatest benefit of all: diversity in the world of coffee. Supply and demand analysis of Starbucks Price is a factor which affects Starbucks on both the demand and supply side. The price of coffee will determine how many individuals are willing to buy and will buy at a higher price. The company has to keep in mind the maximum price that the customer would be willing to pay or the reservation price beyond which sales would dip to negligible. In short an increase in the price charged by Starbucks will cause a decrease in the quantity demanded while a decrease in price will result in an increase in the demand for coffee at Starbucks. However, as Starbucks offers good quality freshly ground coffee and positions...
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...This paper will analyze a case analysis focused on Starbucks’ supply chain. Starbucks’ business model and supply chain strategy will be reviewed. Also, the global supply chain challenges the company faces will be analyzed. Further, the importance of aggregate planning and demand forecasting to Starbucks’ supply chain will be discussed. Finally, ways in which Starbucks utilizes pricing promotions to influence demand will be highlighted. Starbucks’ Business Model & Supply Chain Strategy Starbucks is a global coffee chain with over 21,000 outlets in 60 countries. The company is built on its brand which demands an experience and service above all other coffee chains. Until recently, Starbucks retained full ownership and control of its outlets. Franchising is relatively new transition for the organization. Yet, Starbucks takes a different approach to franchising than other large organizations like Dominos or Subway. Starbucks is extremely selective about who they franchise to. They take steps to ensure everyone they partner with will operate in sync with Starbucks’ culture and brand emphasis, as well as align with their environmental sustainability commitment. (Curtis, 2015) The fact that Starbucks was able to grow into a global organization with over 21,000 outlets speaks to the strength of their supply chain. Their supply chain strategy is built on a make to stock model which focuses on utilizing real time demand to efficiently meet the requirements of several...
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...purpose of this paper is to study the supply and demand mechanism through the case analysis of Starbucks in coffee market. This paper has three main sections. The first two section states the problems in coffee market and its ramifications. The first main problem is that Starbucks being the price maker in the oligopolistic coffee retail market, Starbucks exerts its market power to set its coffee retail price much higher than other coffee sellers. The second problem facing by the coffee retail market is unsteady supply of coffee beans. The third section states the proposed solution to the above two problems. Possible solutions for the first problem include introducing more sellers into the market, branding and product differentiation campaign by other coffee sellers and government intervention. Possible solutions for the second problem include backward integration and product diversification. Case Analysis Problem Definition 1 – Oligopolist Exerts Market Power over Prices Starbucks buys coffee beans at low prices but sells the coffee in retail market at relatively higher prices than other coffee retail sellers. This is what described as “buy low sell high” (Keat; Young, P. 61). Starbucks is able to buy low because of coffee beans prices goes down as a result of overproduction of coffee beans in 2000-2003. Starbucks is able to sell high because of its market position in coffee retail market as being an oligopolist. Starbucks being an Oligopolist in coffee retail...
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...Table of Contents Introduction 3 1.1 Brief Company Overview 3 1.2 Speciality Coffee Industry and Starbucks Coffee Supply Chain 3 1.4 Problem Definition 4 Literature Review 4 2.1 Current Situation of Starbucks and Older Supply Chain Method 4 2.2 Supply Chain Visibility 5 2.5 C.A.F.E (Coffee and Farmer Equity Practices) Practices 6 Findings 7 3.1 Starbucks’ Operations 7 3.1.1. Material Flow 7 3.1.2 Purchasing System 9 Discussion and Analysis 10 4.1 Starbucks’ 3PLs Strategy 10 4.2 Value Change Analysis 10 Conclusion 11 Appendix A 15 Appendix B 16 Appendix C 17 Appendix D 18 Appendix E 19 Appendix F 20 Appendix G 21 Appendix H 22 Appendix I 23 Introduction 1.1 Brief Company Overview Starbucks is the world’s #1 speciality coffee retailer with more than 20,000 stores n 65 countries (See Appendix G). It operates an estimate of 8,800 of its shops, while licensing and franchises operate the remainder of the stores. The company also owns Seattle’s Best Coffee, Torrefazione Italia coffee brands, Teavana, Tazo, Evolution Fresh, and La Boulange (SCC 2014). Starbucks offers consumers various products including: coffee, handcrafted beverages, merchandise, fresh food, and consumer products of coffee and tea and ready-to-drink (RTD) goods (SCC). 1.2 Speciality Coffee Industry and Starbucks Coffee Supply Chain The speciality coffee industry has seen drastic growth with increase in sales between the 1980s and 1990s. A great number of coffee specialists...
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...price of Starbucks coffee rising? Please explain. Answer: There are many factors to include when considering the economic reasoning behind Starbucks raising its prices. The company, in their news release stated that their costs are going up including energy and fuel, however there is much more to it than that. The coffee beans typically used by Starbucks are Arabica beans that are grown mainly in Brazil, Vietnam and Columbia, yet emerging growers on the Ivory Coast and Ethiopia are beginning to experience higher yield crops and quality beans. The rising cost of the green beans is largely due to a decrease in the available supply due to poor crop output which has driven the cost of Arabica beans to a 13 or 14 year high. While more affordable beans like the Robust beans are frequently more in demand causing their prices to rise considerably as well. Another contributing factor is Brazil’s response to higher global pricing for Arabica beans which has been to withhold crops to push the price of beans higher, resulting in supply and demand imbalances. Add to that the increases in fuel and energy prices and the supply and demand imbalances there, in which inevitability of increases in product prices on a global scale were bound to increase as well. The cost associated with distribution alone could be seen as reason enough for the increase. Q2. What will happen to the quantity of Starbucks coffee demanded, the quantity of Starbucks coffee supplied, and the supply of Startbucks...
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...chosen: Starbucks [pic] 1. Brief introduction to the company and its supply chain. Company Profile In 1971, a humble coffee house was opened in Seattle by three person- Jerry Baldwin (English teacher), Zev Siegel (History teacher) and Gordon Bowker (writer). The coffee house was named “Starbucks Coffee, Tea, and Spice”, inspired by the Melville’s Classic Novel “Moby Dick”. The original logo of Starbucks was a two-tailed mermaid circled by the name “Starbucks Coffee Tea Spices”. The company expended slowly and by 1980s, it had a roasting plant and 4 retail stores. In 1987, the owners decided to sell the business. Howard Schultz bought the company and became the president and CEO. Since then, Schultz brought in the experienced person, Howard Behar and Orin Smith to build the company. (1) By 1991, the company had over 100 stores and went listed in 1992. By 2011, Starbucks Corporation has 17,009 stores; 8870 owned stores and 8139 licensed stores. As of December 28, 2014, the total stores worldwide reached 21,878 in 66 countries. Products of Services Starbucks offers variety of premium products that customers can enjoy in the stores, at home, at office and on the go. The products offered are categorized into Coffee, Handcrafted Beverages, Merchandise, Fresh Food and Consumer products. In Coffee category, there are more than 30 blends and single-origin premium coffees offered. In Handcrafted Beverages category, Starbucks provides...
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...Coffee Supply and Demand Besides the high demand and cost for gasoline these days, coffee is considered the second most traded commodity on worldwide markets next to oil. "Coffee is grown in more than 50 countries in a band around the equator and provides a living for more than 20 million farmers. Altogether, up to 100 million people worldwide are involved in the growing, processing, trading and retailing of the product" (Spilling the Beans , ). In 2001, coffee farmers and plantations produced over 15 billion pounds of coffee while the world market only bought 13 billion pounds. The overproduction in the coffee industry is not a usual thing and is one of the major reasons why prices vary throughout the industry. One of the major corporations today that is trying to control a large portion of the supply of coffee is Starbuck. Starbucks Corporation is the leading retailer, roaster and brand of specialty coffee in the world. Starbucks purchases, roasts, and sells whole bean and rich-brewed coffees, espresso beverages, cold blended beverages, an assortment of food items, coffee-related accessories and equipment, a selection of quality teas and a line of compact discs. Starbucks has over 8,700 retail locations in North America, Latin America, Europe, the Middle East, the Pacific Rim and is continuing to grow. When coffee is considered Starbucks has developed a worldwide name for itself and has become a huge success. An article in the Seattle Post, describes the alliance that Starbucks...
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...Letia Mangum-Patterson, Current Market Conditions Competitive Analysis: Starbucks ECO/365 Ed Hartman February 24, 2014 Abstract Economics as we know it today was born to a premise of thought. From the idea of how individuals could express their freedoms to sell or produce goods was the founded basis for which the world of economics evolved. “Economics is the science that concerns itself with economies, from how societies produce goods and services, to how they consume them. It has influenced world finance at many important junctions throughout history and is a vital part of our everyday lives.” (Beattie, 2011, para. 1). Introduction Economics as we know it today was born to a premise of thought. From the idea of how individuals could express their freedoms to sell or produce goods was the founded basis for which the world of economics evolved. “Economics is the science that concerns itself with economies, from how societies produce goods and services, to how they consume them. It has influenced world finance at many important junctions throughout history and is a vital part of our everyday lives.” (Beattie, 2011, para. 1). The United States of America sets the bar for what other countries strive to replicate and the reason why many from around the world seek to live in the land of the free market dream. According to Colander, (2010), “the powerful U.S. economy generates a high standard of living and sense of economic wellbeing (compared to most other...
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...Economics & Institutions TReNDS Martin Pitek MGMT - 7730 March 20, 2009 Starbucks Coffee Table of Contents Introduction 3 Product Analysis 3 Product Overview 3 Market Structure 4 Competition 5 Dunkin Donuts 7 Krispy Kreme 3 McDonalds 8 Panera Bread 8 Elasticity Estimates Pricing Strategy 10 Forecast 12 Determants of Demand 13 Forecast Model 15 Forecast Error! Bookmark not defined. Summary 15 Works Cited Introduction With the economy in trouble, the stock market tanking it is important to start your day with a good cup of coffee to take on these challenges. Can Starbuck’s sustain it business model and place in the market? The paper examines Starbucks business and it respective practices. In 1971, the original Starbucks opened in Pike Place Market in Seattle, Washington by three partners named Jerry Baldwin, Zev Siegal, and Gordon Bowker. Their focus was to sell coffee beans and equipment. They purchased green coffee beans from Peet’s, a specialty coffee roaster and retailer, during their first year of operation. Later, they began buying coffee beans directly from the growers. In 1983, an entrepreneur by the name of Howard Schultz joined the company; Schultz felt that the company should sell coffee and espresso drinks as well as coffee beans. The partners felt that selling coffee and espresso...
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...Coffee Supply and Demand It was always well known that there is very high demand of gas in United States! After gasoline the next product that is high in trade with other countries is coffee. It grows in more than 55 countries across the world and supports lives of around 23 million people in farming sector. More than 115 million people in the world have their involvement in business of coffee. Growth, process, trade, and retail of coffee are the different stages all these people are involved in. In 2002, people around the world bought 14 million lbs of coffee, while around 17 million lbs was grown. This over production isn’t usual and leads to variation of price in the entire coffee industry. A world wide known firm, Starbucks, is the most popular corporation in today’s market. It is known for controlling a major part of coffee that’s being produced. In fact, Starbucks is the lead corporation in retailing of this product. It offers people a special braded coffee. They start by purchasing, roasting and then finally selling whole coffee beans and rich brewed coffee, espresso drinks, cold-blended drinks, and a variety of fresh made items, equipments, and a wide variety of high-quality teas. They have more than 9000 retail locations worldwide. When people consider coffee, Starbucks has gained a worldwide name by leading with high success. It was mentioned in a news article that Latin America is where Starbucks has been producing huge amounts and quality of coffee for ensuring...
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...Economics & Institutions TReNDS Martin Pitek MGMT - 7730 March 20, 2009 Starbucks Coffee Table of Contents Introduction 3 Product Analysis 3 Product Overview 3 Market Structure 4 Competition 5 Dunkin Donuts 7 Krispy Kreme 3 McDonalds 8 Panera Bread 8 Elasticity Estimates Pricing Strategy 10 Forecast 12 Determants of Demand 13 Forecast Model 15 Forecast Error! Bookmark not defined. Summary 15 Works Cited Introduction With the economy in trouble, the stock market tanking it is important to start your day with a good cup of coffee to take on these challenges. Can Starbuck’s sustain it business model and place in the market? The paper examines Starbucks business and it respective practices. In 1971, the original Starbucks opened in Pike Place Market in Seattle, Washington by three partners named Jerry Baldwin, Zev Siegal, and Gordon Bowker. Their focus was to sell coffee beans and equipment. They purchased green coffee beans from Peet’s, a specialty coffee roaster and retailer, during their first year of operation. Later, they began buying coffee beans directly from the growers. In 1983, an entrepreneur by the name of Howard Schultz joined the company; Schultz felt that the company should sell coffee and espresso drinks as well as coffee beans. The partners felt that selling coffee and espresso...
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...Starbucks ECO/365 May 4, 2015 Christopher Rakovalis Starbucks Starbucks is the leading retailer in specialty coffee in the world, serving 50 million customers globally every day (Bussing-Burks, 2009). Starbucks is proposing a new delivery service to maximize profitability and increase its competitive advantage in the marketplace. There are different factors that affect demand, supply and equilibrium prices in the market. To be successful and have long-term profitability the strategic planning group must explore the price elasticity of demand, fixed cost and cost structure. History of Starbucks The name Starbucks was inspired by the first mate of the whaleship from the novel Moby Dick (Bussing-Burks, 2009). Starbucks started out with three friends, Gorgon Bowker, Jerry Baldwin and Zev Siegel (Bussing-Burks, 2009). Their goal was to serve the world’s finest fresh-roasted whole bean coffees in a warm and welcoming setting where friends and family can meet. They open their first store named Starbucks Coffee, Teas and Spices in 1971 (Bussing-Burks, 2009). The three friends invested $1350 each and borrowed $5000 from a bank. The rent only cost $137 a month, and overhead costs were fairly low (Bussing-Burks, 2009). The first store was located in a storefront at Pike Place Market in Seattle. Within ten years, Starbucks grew to four stores and owning a roasting plant. Howard Schultz, CEO of Starbucks, joined the company in 1982 (Bussing-Burks, 2009). Howard was...
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...point A to point B whether it’s by car, airplane, or bus. There are many factors that play a part in gas prices –I will be focusing on are supply and demand due to economic issues and the supply of oil. One factor that affects gasoline prices are economic issues. Our current economic status plays a part because people are more cautious of their money during economic hardships than when the economy is doing well. While people will still by gas some are weary of long vacations that require driving far. Gas tend do go up during the summer months usually due to families traveling with their kids. “The more people are on the roads, the less gasoline is usually available and so the more that gasoline costs consumers. The higher the prices serve in some ways as a checks and balances system to prevent the overuse of gasoline during the summer months.” Some companies (including my job) allow employees to telecommute some days which is a great way to save on gas. When people drive less gas usually go down – which still goes back to supply and demand as a result of the economic status. Lastly, the supply of oil affects the price of gasoline prices. There are times when there is a great supply of oil available and gas prices tend to be lower. But then there are times when oil supply is not as available and gas prices go up. Oil supply can be affected by natural disasters and human error. For example, I...
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...Introduction Starbucks is the premier roaster, marketer and retailer of specialty coffee in the world, operating in 63 countries. In 2007 the company was in a need of transformation. Peter Gibbons was hired to manage the supply chain of Starbucks. The company was reorganized and the supply chain has changed dramatically since then (Starbucks, 2012). Here is a diagram showing the supply chain network of Starbucks in 2014: ... Components of the supply chain Starbucks has commitment to sell only the finest coffees and coffee beverages. To ensure compliance with their coffee standards, they control coffee purchasing, roasting and packaging, and the global distribution of coffee used their operations. The company purchases green coffee beans from multiple coffee-producing regions around the world and custom roast them to the exacting standards for our many blends and single origin coffees. The price of coffee is subject to significant volatility. Although most coffee trades in the commodity market, high-altitude Arabica coffee of the quality sought by Starbucks tends to trade on a negotiated basis. Both the premium and the commodity price depend upon the supply and demand at the time of purchase. In addition to coffee, Starbucks also purchases significant amounts of dairy products, particularly fluid milk, to support the needs of Company-operated stores. Products other than whole bean coffees and coffee beverages sold in Starbucks® stores include tea and a number of ready-to-drink...
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...Everyone’s Gasoline Problem When it comes to issues in fluctuation in gasoline prices, supply and demand play a huge role. When prices fall, quantity demand will rise, when prices rises, quantity demand will fall. In most situations these are true statements, and it would seem that the demand for fuel would decrease when prices for fuel increase. Because fuel is a large necessity, this isn’t always the case. In the past few years oil prices have risen to an all-time high. The change in resource price has caused the supply curve to shift to the left. The increase in the price of oil, have reduced the supply of gasoline. Recently, especially in town’s similar Seattle where I live, People have begun to find alternatives to using gasoline. The current gas prices in Seattle are up to $3.88 per gallon, and this is just for regular. In the past month alone, gas has jumped from $3.76 per gallon, to $3.88 per gallon. Prices fluctuate for a variety of economic reasons, one of the main being supply and demand. The price of gasoline is determined by supply and demand. When the there is a decrease in supply, demand rises, and prices will increase. When consumers noticed the increase in price, they began looking for alternative solutions in transportation in order to save money, which have caused gas prices to slowly decrease. When the demand is less, the price may still decrease even when there is a lack in supply. In conclusion, last summer when gasoline was priced at over $4.00 per gallon,...
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