Starbucks Case Study

1. What is Starbucks’ product?

Starbucks offers a wide range of tangible, extended, and generic products that create a physical, psychological and sociological satisfaction. Most of their products fall under the tangible category except for customer service, knowledgeable baristas, licensing, trademarks, brand exclusivity, and alliances with other companies. However products made through these channels would also fall under mixed categories.

When talking about the physical, psychological, and sociological aspects, these come from the experience that Starbucks sells of being in the café, enjoying the smells, the sounds, the tastes, talking with people, or just relaxing.

2. What advantages does McDonald’s have in competing with Starbucks for coffee sales?

McDonald’s has the advantages of being in business longer, having prime locations, a loyal customer base, cheaper prices, more food choices, as well as being kid friendly. Some McDonald’s even have play areas for the children. For example, you can purchase a large hot or iced coffee for $1.00 at McDonald’s, whereas at Starbucks you will pay around $4.00. If you buy a coffee every work day for a month, from McDonald’s you would pay (21 days X $1.00) = $21.00 without taxes; however if you did the same thing at Starbucks you would pay (21 days X $4.00) = $84.00. By going to McDonald’s you would save ($84.00 - $21.00) = $ 64.00 a month. Also, McDonald’s has been emphasizing the quality of their McCafe Coffee. Starbucks is also a slower service café, where McDonald’s is established as a “fast food” restaurant.

3. What changes in society helped Starbucks become successful?

There are a few changes in society that helped Starbucks become successful, one is that more people are drinking coffee. In the United States alone there are 166 million coffee drinkers and that number is increasing daily. Secondly, more people are drinking coffee outside of the home. Statistics show increases in people age 25 to 60+ years old.

Increased coffee consumption by age groups

Age Group Percentage of Increase

25 – 29 42 – 66%

30 – 59 33 – 46%

60 + 14 – 20%

However, the largest increase was among those who drank coffee at work and are now purchasing it from outside of their office.

Also, Starbucks made coffee drinking a real experience with a comfortable atmosphere, premium beverages, and a location to socialize with friends, to read, to relax, or even to work on your laptop. By creating