Competing as Starbucks

Perfect Competition is stated that it is the idea that no producer or consumer can determine the price of the product. Starbucks speciality coffee products are the highest prices in the coffee industry. Starbucks has sacrificed the customers preferences over increasing efficiency. The demand for Starbucks has decreased due to they have introduced automatic espresso machines, no in-store coffee grinders and bagged roasted coffee. These factors increase efficiency and decrease the customer service and the coffee aroma in the stores. Starbucks has decided to close numerous stores due to decreasing sales. The store closures will have an impact in their short-run and long-run costs. In the short-run they will have less stores which will decrease the amount of stores available to the customers. In the long-run Starbucks will be paying the pre-tax charges, severance costs and the costs of future lease obligations. Increasing the efficiency in their stores has now forced them to re-evaluate their business practises.

Starbucks coffee prices are expensive for the size of their products. Starbucks offers high-end speciality coffee products. I like Starbucks lattes and when I decide to purchase one, I think of opportunity cost. The opportunity cost is the choice of an alternative product to a product. Starbucks competitor is Tim Hortons as they have started to offer speciality lattes. I can purchase two Tim Hortons coffees for the price of one Starbucks latte.

Below are links to the articles indicating the store closures and examples of increased efficiencies in the stores.

http://starbucksgossip.typepad.com/_/2007/02/starbucks_chair_2.html
http://www.cbc.ca/news/business/story/2008/07/01/starbucks-closures.html
http://seattletimes.nwsource.com/html/businesstechnology/2008028854_starbucks02.html