Starbucks - Case Study

1. What do you think would be the impact of current economic slowdown to the sales of Starbucks? (Ch3 p.2)

The economic slowdown has brought many changes in consumer spending behavior. However, drastic spending cuts have been seen in “discretionary purchases” or purchases that are optional (i.e. apparel, electronics, home furnishings, toys, etc.), and luxury purchases. Affordable and “simple” purchases have are thriving. Based on this analysis, I would conclude that Starbucks’ sales will either remain stable or see an increase in sales during the current economic slowdown. Coffee is a commodity that would not be classified as a luxury purchase.

2. Specifically which of the “environmental forces” is involved in this article? (Ch3 p.9)

The environmental force involved in this article is the “economic” environment for Starbucks. The article discusses raising prices as a result of not only increasing coffee prices but also balancing the cost of doing business in a competitive market. Starbucks targets a moderately high income customer, and the recent economic downturn has had an impact on the company’s purchasing power, thus impacting its’ consumers.

3. Describe the difference between the “potential market” and the “target market” tall. (ch3 p.17)

The “potential market” is a market in which consumers portray an adequate level of interest in a product; however they might not have adequate income and access to the product, therefore their interest in not enough to define the market. “Target markets” are markets that the company decides to pursue. This decision is based on a market that is more defined in the sense that the target market is a part of the “qualified available market” with consumers who have all the requirements: interest, income, access, and qualifications for the product being offered. The “target market” for Starbucks is moderately high income consumers, thus portraying no “apparent pushback” to recently raised prices by Starbucks.

4. Suppose you were a Starbucks manager in charge of determining whether to raise prices, and if so, by how much? What are questions you would want to have answered in a marketing research project? (Ch4 p.11)

Before even conducting a marketing research project, I would need to identify why there is a need to increase prices. Once that has been determined, some questions I would want to have answered in a marketing research project are:

a. Are there other ways we can keep our expenses in check without the customers taking notice or there being changes in the final product being delivered?

b. How would the consumers react to prices remaining