Starbucks Situation Analysis
Starbucks Situation Analysis
Starbucks, a leader in the specialty coffee industry, has recently decided to test the
feasibility of a new product. Known for its ability to maintain customer loyalty through a
rich environment and excellent coffee, Starbucks is trying to attack the instant coffee
market through its product, Via. Before analyzing the product itself and its potential
success, we must first look at the macro and micro environments.
The first aspect of the surrounding environment we must look at is the market
climate. The past year and a half has seen trying times for many businesses and
individuals. While the U.S. economy is recuperating, unemployment is still at 10%: a
5.3% increase since 2007 (Yandle, 2009). The average household income has dropped
from $145,000 to $138,000 in the same time period. Interest rates are extremely low but
look to increase by 50 basis points within the next year. The inflation rate is at 1% and
doesn’t look to move for a while. With the diminished average household income and
high unemployment rate, consumer spending is expected to be low for 2010. This
means low retail sales and purchases of non-commodities. Stronger government
regulations seem to be inevitable, in hopes of rebuilding suffering businesses. All in all,
many changes are to come from this economic state.
Besides looking at the climate, we should also look at the company itself and the
industry it is a part of. Starbucks Corporation is a retailer in specialty coffee that also
sells complementary food items, cold espresso drinks/related cold coffee drinks, and
beverage related accessories (Mergent, 2010). Starbucks is part of the Hot Drinks
subsection of Consumer Packaged Goods Industry. This part of the industry saw
revenues of $52.7 billion in 2005 and is expected to increase to $59 billion by the end of
2010 (Marketline, 2010). They are also part of the Food and
Starbucks, a leader in the specialty coffee industry, has recently decided to test the
feasibility of a new product. Known for its ability to maintain customer loyalty through a
rich environment and excellent coffee, Starbucks is trying to attack the instant coffee
market through its product, Via. Before analyzing the product itself and its potential
success, we must first look at the macro and micro environments.
The first aspect of the surrounding environment we must look at is the market
climate. The past year and a half has seen trying times for many businesses and
individuals. While the U.S. economy is recuperating, unemployment is still at 10%: a
5.3% increase since 2007 (Yandle, 2009). The average household income has dropped
from $145,000 to $138,000 in the same time period. Interest rates are extremely low but
look to increase by 50 basis points within the next year. The inflation rate is at 1% and
doesn’t look to move for a while. With the diminished average household income and
high unemployment rate, consumer spending is expected to be low for 2010. This
means low retail sales and purchases of non-commodities. Stronger government
regulations seem to be inevitable, in hopes of rebuilding suffering businesses. All in all,
many changes are to come from this economic state.
Besides looking at the climate, we should also look at the company itself and the
industry it is a part of. Starbucks Corporation is a retailer in specialty coffee that also
sells complementary food items, cold espresso drinks/related cold coffee drinks, and
beverage related accessories (Mergent, 2010). Starbucks is part of the Hot Drinks
subsection of Consumer Packaged Goods Industry. This part of the industry saw
revenues of $52.7 billion in 2005 and is expected to increase to $59 billion by the end of
2010 (Marketline, 2010). They are also part of the Food and