Microeconomics and Starbucks
Topic: An examination into the rise and fall of Starbucks Coffee Company and its relationship to certain microeconomic principles.
Thesis: While Starbucks has been an industry leader in the specialty coffee market, rapid overexpansion and current economic conditions have caused it to lose its market dominance. Is the company strong enough to recover?
I. The origins of Starbucks
A. 1971 Beginnings
B. Starbucks goes public in 1992
C. Rapid expansion from mid-1990s to mid-2000s
II. Starbucks provides microeconomic principles
A. Supply and demand
1. Few stores and high demand
2. Oversaturation of stores and low demand
B. Price elasticity
1. The good ol’ days
2. All good things must come to an end
C. Income elasticity
III. Competitors (aka substitutes)
A. Dunkin Donuts
B. Tim Horton’s
C. McDonald’s
IV. What the future holds
In doing the research for my original topic, I found much more information on Starbucks as they have been around for longer than McDonald’s McCafe. Every article I read that compared the two brands raised questions in my mind about Starbucks’ price elasticity and how long the company could continue at their current pace. My hunch is that Starbucks will lose sales during the recession as people are not able to justify spending $4 for a daily latte. However, their experiential reputation will eventually win in the end.
Introduction
Starbucks Coffee Company revolutionized the coffee-drinking habits of millions of Americans. Starbucks, whose bright green-and-white logo is almost as familiar as the golden arches of McDonald’s, began in Seattle in 1971 when it opened its first location in Seattle’s Pike Place Market. It operated as the sole Starbucks coffee shop until 1984 and quickly became the world’s leading retailer, roaster and brand of specialty coffee. In 2007, Americans were willingly paying $3 or more for a cappuccino or a latté, and
Thesis: While Starbucks has been an industry leader in the specialty coffee market, rapid overexpansion and current economic conditions have caused it to lose its market dominance. Is the company strong enough to recover?
I. The origins of Starbucks
A. 1971 Beginnings
B. Starbucks goes public in 1992
C. Rapid expansion from mid-1990s to mid-2000s
II. Starbucks provides microeconomic principles
A. Supply and demand
1. Few stores and high demand
2. Oversaturation of stores and low demand
B. Price elasticity
1. The good ol’ days
2. All good things must come to an end
C. Income elasticity
III. Competitors (aka substitutes)
A. Dunkin Donuts
B. Tim Horton’s
C. McDonald’s
IV. What the future holds
In doing the research for my original topic, I found much more information on Starbucks as they have been around for longer than McDonald’s McCafe. Every article I read that compared the two brands raised questions in my mind about Starbucks’ price elasticity and how long the company could continue at their current pace. My hunch is that Starbucks will lose sales during the recession as people are not able to justify spending $4 for a daily latte. However, their experiential reputation will eventually win in the end.
Introduction
Starbucks Coffee Company revolutionized the coffee-drinking habits of millions of Americans. Starbucks, whose bright green-and-white logo is almost as familiar as the golden arches of McDonald’s, began in Seattle in 1971 when it opened its first location in Seattle’s Pike Place Market. It operated as the sole Starbucks coffee shop until 1984 and quickly became the world’s leading retailer, roaster and brand of specialty coffee. In 2007, Americans were willingly paying $3 or more for a cappuccino or a latté, and
Cited: Miller, Roger LeRoy. Economics Today. Boston: Pearson/Addison Wesley, 2008.