Question 1
1.1 Name of Business and services provided
Starbucks Corporation, an American corporation established in 1971 in Seattle, is a
world-class roaster, marketer, and specialty coffee distributor. Starbucks has about 182,000
staff operating & authorized shops in 62 nations across 19,767 companies. Their product mix
includes high-quality and premium-priced coffees roasted and handmade, tea, a range of fresh
foods and other beverages. The company buys and roasts coffees it offers also with
handcrafted coffee, tea and other drinks and a variety of healthy meal products, including
snack items, through company-operated shops. The company also offers a variety of coffee
and tea products and registers its trademarks through other outlets, such as authorized shops,
grocery stores and food service reports. In relation to its Starbucks Coffee brand, the
company also offers products and services under multiple products, including Tazo, Teavana,
La Boulange and Ethos, Seattle's Best Coffee and Evolution Fresh. (Essays, UK. (November
2018)).
1.2 Owner of Business
Starbucks Corporation is led by Mr. Howard Schultz as Chairman, President and Chief
Executive Officer. His main responsibility and duty is to overlook Starbucks’ entire company
structure in ensuring that each of the members work towards achieving the company’s
mission. Furthermore, he is also assisted and equally supported by the Board of Directors
(BOD) consisting 10 members who have adequate knowledge, experience and skill in the
industry. (Essays, UK. (November 2018)).
Starbucks Corporation was initially incorporated by 3 entrepreneurs, Jerry Baldwin, Zev
Siegl and Gordon Bowker in Seattle in 1971. They met at the University of San Francisco
while they were pursuing their education. They were inspired to sell quality coffee beans and
equipment. Due to the economic downturn at that point, the 3 entrepreneurs sold the
Starbucks Company to Mr. Howard Schultz, the former manager who transformed his
Giornale coffee outlets as Starbucks and began to expand quickly. (Essays, UK. (November
2018))
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Question 2
2.1 Inputs
There are some inputs for the Starbucks Corporation to produce their services or products.
That input for Starbucks produces their products or services which are the quantity of
coffee beans, tea leaves, cakes, breads, paper cups, and number of employees, Starbucks
uniform for employees, souvenirs, thermos, espresso machines, ice blenders, soda
makers, and Starbucks outlet stores.
2.2 Variable Inputs
The variable input is the input quantity will easily change because of the various factors.
For example, the factor that leads quantity of variable input change and demand change
which is weather, taste of customer, trend and others. So that, there are some variable
inputs for Starbucks to produce their products or services which are the quantity of coffee
beans, tea leaves, paper cups, breads, cake, number of employees, Starbucks uniform for
employees, souvenirs and thermos.
2.3 Fixed Inputs
Next is the fixed input that is the quantity input cannot easily change and will not affect
the quantity of demand. So that, the fixed input that Starbucks needed to produce the
services and products which are the number of the espresso makers, ice blenders, soda
makers, Starbucks outlet stores.
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Question 3
3.1 Starbucks’s Competitors
Starbucks Corporation is a popular coffee company that operates worldwide.
However, Starbucks has a strong competitor, Costa Coffee which they both sharing the same
achievement that they wanted to expand their business at worldwide.
According to Top 11 Starbucks Competitors (2018), Starbucks was operating in over
than 23,500 places at international which about 240,000 employees at year 2016; its assets
were at 12.5billion dollars with the 2.80billion dollars as their net operating income. For
Costa Coffee, it has been recognised as the second largest coffeehouse in worldwide which it
has expanded to 3882 shops in 32 countries; it has generated net income about 153million
with revenues exceeding 1.167billion (Top 11 Starbucks Competitors, 2018).
By comparing the average prices in British Pounds, Starbucks offer £2.4 and Costa
Coffee offer £2.25 for Americano, Starbucks offer £2.7 and Costa Coffee offer £2.5 for Latte,
and Starbucks offer £1.75 and Costa Coffee offer £1.55 for Espresso (London coffee shop
prices 2017, n.d.). Based on the price, Costa Coffee offers lower price compare to Starbucks
but customers are still preferring Starbucks as Starbucks’s coffees are higher satisfaction
compare to Costa Coffee’s coffees.
Besides, by comparing the services, Starbuck’s employees are required to have
trainings to ensure all the employees have an in-depth knowledges about their company’s
products in order to provide the best services to customers and Costa Coffee’s employees are
trained to be positive and polite with the customers in order to make sure all customers are
happy with the services (Comparing Costa and Starbucks, n.d.). Starbucks also provides
unique service which is to write the customer’s name on the cup of coffees or drinks that the
particular customer ordered and this unique service attracts the customers. Majority of
customers prefers Starbucks more compare to Costa Coffees as the services provided from
Starbucks to customer are special.
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Question 4
4.1 Difference between Starbucks’s Services with Its Main Competitor
Starbucks Corporation‘s products and services are different from its competitor,
which is Costa Coffee. It is different from various types of aspect. Firstly, product wise.
Starbucks has a higher product variety and quality compared to Costa Coffee. Starbucks has a
huge product line that serves special coffees, tea, juice, smoothie and hot chocolate. For
example, Starbucks offers experimental flavour drinks that Costa Coffee does not offer, such
as Caramel Popcorn Frappuccino, Cotton Candy Frappuccino, Pumpkin Spice Latte and
many more. Meanwhile, Costa Coffee only provide authentic blend coffees.
Secondly, the difference between their services. Starbucks has always been known for
their friendly and welcoming services. They believed that a coffeehouse should be an inviting
and familiar place for people to connect, thus, the design of Starbucks outlets reflects the
special character of the neighbourhoods they serve. Starbucks allows customers to customize
their drinks just like Costa Coffee could, but the difference is customers can order a skinny
version of their coffee, which is healthier. Not only that, customers can also choose between
different types of coffee and even tea.
Lastly, Starbucks provides special training to their newly baristas. This is to ensure
that all the staffs are well trained with essential skills and knowledge. It is one-to-one
delivery and hands on training so that the trainees can obtain better experiences. Besides, the
training programme is efficient because this can enhance the baristas’ confidence while they
face certain obstacles in the business. On the other hand, Costa Coffee’s training programme
is not as advance as Starbucks as they focus more on customer service. For instance, the
staffs are trained to be polite and rational while serving the customers.
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Question 5
5.1 Market Structure of Starbucks
Starbucks has been consider as a monopolistic competition market structure. The
definition of monopolistic competition is a firm that sells differentiated products with few
barriers to entry and exit (Market Structure and Supply and Demand of Starbucks, n.d.).
Starbucks has sells different products such as cappuccino, tea and latte, it also provide drive-
thru service for their customer convenience. This is the different between Starbucks and its
competitors. They has many sellers with no important barrier of entry in the coffee industry
due to low entry and exit costs if compare to others industry like agriculture, manufacturing
and petroleum. Besides that, anyone who has interest to sell the coffee can just start selling
anywhere and anytime. Some even can start selling coffee from home (Market Structure,
2013).
Starbucks understands how the market structure works. Therefore, they able make
normal profit in long run and positive economic profit in short run. During the unprofitable
times, Starbucks also manage to maintain their business because they always ensure high
quality control on sources for their coffee (Market Structure and Supply and Demand of
Starbucks, n.d.). Starbucks always maintains good services and comfortable dine in
environment for their customers. This can help them set their price which customer willing to
pay if they are satisfy with the quality and services provided.
Non-price strategy is being used by Starbucks for doing branding. Starbucks provide a
green and white coffee cup as a powerful advertisement tool to attract customers.
Furthermore, they also provide celebration and offer beverage to the customers during major
festival. They provides innovative products such as newly implemented food and beverage
with different theme according to the country’s festive seasons. So, they has a strong non-
price competition strategy (Market Structure, 2013).
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Question 6
6.1 Profit Situation in Long Run
In long run, monopolistic competitors market in the long run where new firms can
enter the market, which is likely if firms are earning positive economic profits in the short
run. With these new firms will be enticed to these profit opportunities and will be chosen to
invade the market in the long run. In the monopolistic market has no barriers to entry in the
market so, it is easy for the firm to enter the market in the long run. (CliffsNotes, 2016)
As the entry into the market increases, and cause the firm’s demand curve continue shifting to
the left until it is just tangent to the average total cost curve at the profit-maximizing level of
outputs, as shown in Figure 1. The firm’s economic profit is zero, and there will no longer
have any inducement for new firms to enter the market when it reached the point. In the long
run, the competition brought about by the entry of new firms that can cause each firm in
monopolistically competitive market to earn normal profits.
6.2 Factor Change the Profit Situation in The Long Run
Long run is a period of time which is all factors of production and costs are variable. The
firms can change production levels by expecting economic levels. For instance, a firm can try
applying the change by increasing the scale of production in response to profits, which can
involve building a new plant or adding a production line. (Kenton, 2019)
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Question 7
7.1 Conclusion
From this assignment, we can conclude that the main success factor of Starbucks is
the top management of the company. Mr. Howard Schultz as Chairman, President and Chief
Executive Officer who has developed Starbucks Corporation into the world’s most
recognized company by formulating unique management approaches which leads to the
greatest success of the company. In addition, the utilization of the inputs by the corporation
leads them to compete well with its competitors. Starbucks Corporation has always focused
on high quality and premium- priced coffee roasts and up to date they have been up to their
standards. By utilising their non-priced strategy at their top most level, the corporation also
attracts more and more people over their products. Today Starbucks still maintains its global
status recognized among the most promising globalized business which has now developed a
powerful brand and global knowledge. (Starbucks: Reasons for Success, 2019).
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8.0 References
Essays, UK. (November 2018). Company analysis of Starbucks Coffee Malaysia.
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CliffsNotes. (2016). Monopolistic Competition in the Long-run.
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Costa Coffee VS Starbucks. Sakura Mixed Coffee. (2011, March 22)
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Comparing Costa and Starbucks. (n.d.). Retrieved from
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Kenton, M. G. (2019, May 14). Long Run.
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Market Structure. (2013, October 24).
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[Link]?m=1
Market Structure and Supply and Demand of Starbucks. (n.d.).
Retrieved from StudyHippo: StudyHippo: [Link]
supply-demand-starbucks/
London coffee shop prices 2017, Starbucks, Costa, Caffe Nero. (n.d.). Retrieved from
[Link]
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Starbucks: Reasons for Success. (2019, February 13).
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starbucks-reasons-for-success/
Starbucks VS Costa Coffee. S. Francesca. (n.d.).
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Top 11 Starbucks Competitors - Competitor Analysis Of Starbucks. (2018, September 02).
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