Starbucks - Where the Market Is Directed?

4. WHERE THE MARKET IS DIRECTED

Economic factors are an important aspect that concern the nature and direction of the economy in which a firm operates. Since the relative affluence of various market segments will affect the consumption patterns, companies must take this into consideration when planning its strategy. In periods of normal price variation, the demand for coffee is price inelastic. However, when coffee prices show big increases, consumers tend to reduce their consumption commensurately.

Starbucks has a well-seasoned management team that continues to develop winning strategies for the company. One of its best decisions thus far is its strategy of foregoing franchisees and making sure that its stores are company-owned. This strategy allowed the company to maintain a tight grip on its image and provide a consistent quality of excellent service.

The Company’s retail goal is to become the leading retailer and brand of coffee in each of its target markets by selling the finest quality coffee and related products and by providing superior customer service, thereby building a high degree of customer loyalty. Starbucks strategy is directed towards increase of Starbucks’ market share in existing markets and new markets worldwide to support the Starbucks brand through the introduction of new products and the development of new distribution channels. Starbucks strategic expansion till now was achieved via its joint ventures with Pepsi and Dreyer's, its move to sell coffee in supermarkets, the possibility of marketing fruit-juice drinks and candy under the Starbucks label, and World Wide Web presence represented an ongoing drive of the management to continually reinvent the way Starbucks did business.

Starbucks' expansion carries inherent risks. Many brands cannot do both retail and packaged goods. Too many extensions can erode a brand's identity. Many say that Starbucks should move onto supermarket shelves under a dual-brand strategy, but Schultz says that will not happen because the brand might suffer. In addition to fluctuating coffee prices, management believes that in the future, the Company's results of operations and earnings could be significantly impacted by other factors such as increased competition within the specialty coffee industry, the Company's ability to find optimal store locations at favourable lease rates, the increased