Starbucks may be considered part of a the perfect competition of the coffee market as buyers, they are a price taker in the coffee market, and the coffee market is a sample of a perfect competition market as its run under the all conditions of the perfect competition,
As sellers in their shops, we can’t consider Starbucks as a part of a perfect competition for so many reasons, one is they are not price takers and their prices changes according to many reasons.
Starbucks decided to close number of their stores and also to realign their business practices due to many reasons, they probably made some poor decisions, one reason is opening many stores close to each others, where the performance of these stores were unprofitable. Second, when they opened stores in fiscal 2006, they probably didn’t anticipate how much tough the economy would be and how the brand would be struggling.
In the short run and by closing number of their stores they will reduce the cost and they expect profits to drop. In the long term the benefits will be higher over the cost.
Starbuck’s coffee is expensive compared of others like Tim Horton or McDonalds. But still millions go for the Starbuck coffee for the good quality of the coffee they serve, the varieties, the warm and friendly environments created in their stores, all these reasons make drinking the coffee in Starbucks is a joy for many people which makes their coffee a normal good, one for which demand falls as incomes fall.
Starbucks unveiled a new product which was an instant coffee, which is considered an inferior product, and as the company’s chief executive declared that their decision to produce an inferior product is all about economics!
By this decision their benefits for the long run will be more and will increase even if they reduced their sales to the normal goods.
sources:
· The Seattle Times(http://seattletimes.nwsource.com/html/businesstechnology/2008028854_starbucks02.html)
