Starbucks - Competitive Environment

Starbucks - Competitive Environment

Starbucks is the largest coffeehouse company in the world, and its major competitors are

Dunkin Donuts, McDonalds, and Nestle. McDonald’s introduction of the rich-flavored “premium roast” coffee has increased its growth rate considerably, and thus has proved a threat to Starbucks. McDonalds in now in the midst of introducing lattes, and cappuccinos, and this is bad news for Starbucks. With more than 14,000 fast food chains in the U.S alone, Starbucks faces tough competition. Thus, the threat of new products from competitors is possibly high.

Competition between the two companies has already been brewing and to make matters worse, McDonalds now plans to open 14,000 coffee bars similar to Starbucks with “baristas” serving lattes and cappuccinos. Another major worry for Starbucks is the “price war.” Starbucks sells its coffee for around $1.50 to $4.00 depending on the size and flavor. McDonalds and Dunkin Donuts sell a cup of coffee starting from $1.00. Therefore, Starbuck’s fears it will lose its customers to its competitors.

Recently Starbucks planned to close its 7,100 stores for three hours in the United States to train all its employees. This was done to improve customer service as well as improve the taste of its espressos. They believed in providing the best products and keeping their competitors away from stealing their customers. "Your drink should be perfect, every time. If not, let us know and we'll make it right." (http://www.heraldnet.com/article/20080228/BIZ/171383199/1005). During this time, Olympia Coffee Company took advantage of these three hours by offering free coffee to consumers. This shows that Starbucks is facing tough competition not only from its top competitors, but also from the small-time coffee shops as well as the new entrants. Thus the threat for new entrants could possibly be high at this point.

Overall,