Starbucks
To: Professor
From:
Subject: Starbucks
Starbucks
“To say Starbucks purchases and roasts high-quality whole bean coffees is very true. That’s the essence of what we do- but it hardly tells the whole story…(Starbucks, 2013, pg 1)” Starbucks is known for not only their high quality products but also their great efforts in social responsibility. They give back to the community while striving to have genuine service and an inviting atmosphere. Their mission statement is as follows, “It has always been, and will always be, about quality. We’re passionate about ethically sourcing the finest coffee beans, roasting them with great care, and improving the lives of people who grow them. We care deeply about all of this; our work is never done (Starbucks, 2013, pg 1).” They have done a tremendous job at having their mission statement hold true to their regular consumers while keeping them paying the higher costs of their product.
Analysis
Starbucks, in 2009, used economic analysis on elasticity in order to increase sales of their famous coffee drinks and use its reputation and premium brand drinks to take away sales from McDonalds which introduced a new line of lower priced espresso drinks that have proved to be popular. Starbucks has decided to increase the cost of some of their drinks like the Frappuccinos and caramel Macchiatos by an average of 10 cents to 15 cents. In some cases they are raising costs as mush as 30 cents which is about an 8 percent increase. Consumers that were regulars of Starbucks considered this beverage product to be in-elastic and were willing to pay anything because they need this product. An example of an in-elastic demand product would be anything that would be considered a necessity. For example, “the more necessary a good is, the lower the elasticity, as people will attempt to buy it no matter the price, such as the case of insulin for diabetics (Gillespie, 2007, pg 28).” These regular consumers of Starbucks would be
From:
Subject: Starbucks
Starbucks
“To say Starbucks purchases and roasts high-quality whole bean coffees is very true. That’s the essence of what we do- but it hardly tells the whole story…(Starbucks, 2013, pg 1)” Starbucks is known for not only their high quality products but also their great efforts in social responsibility. They give back to the community while striving to have genuine service and an inviting atmosphere. Their mission statement is as follows, “It has always been, and will always be, about quality. We’re passionate about ethically sourcing the finest coffee beans, roasting them with great care, and improving the lives of people who grow them. We care deeply about all of this; our work is never done (Starbucks, 2013, pg 1).” They have done a tremendous job at having their mission statement hold true to their regular consumers while keeping them paying the higher costs of their product.
Analysis
Starbucks, in 2009, used economic analysis on elasticity in order to increase sales of their famous coffee drinks and use its reputation and premium brand drinks to take away sales from McDonalds which introduced a new line of lower priced espresso drinks that have proved to be popular. Starbucks has decided to increase the cost of some of their drinks like the Frappuccinos and caramel Macchiatos by an average of 10 cents to 15 cents. In some cases they are raising costs as mush as 30 cents which is about an 8 percent increase. Consumers that were regulars of Starbucks considered this beverage product to be in-elastic and were willing to pay anything because they need this product. An example of an in-elastic demand product would be anything that would be considered a necessity. For example, “the more necessary a good is, the lower the elasticity, as people will attempt to buy it no matter the price, such as the case of insulin for diabetics (Gillespie, 2007, pg 28).” These regular consumers of Starbucks would be
References: Boyes, W. (2012). Managerial economics: Markets and the firm. (2nd ed.). Independence, KY: South-Western Cengage Learning. ISBN: 978-0-618-98862-4. Gillespie, A. (2007). Foundations of Economics. Oxford University Press. ISBN 978-0-19-929637-8. Perloff, J. (2008). Microeconomic Theory & Applications with Calculus. Pearson. ISBN 978-0-321-27794-7. Miller, Claire Cain (2010). Will the hard-core Starbucks customers pay more? The Chain plans to find out. The New York Times, August 20, 2009. Retrieved from http://www.nytimes.com/2009/08/21/business/21sbux.html?_r=0 Paper Rubric