Amended February 10, 2009 at 1:01 pm.
The economy is hurting and so is the economy. The Dayton Business Journal reports, "Starbucks launches discount breakfast 'pairings," in an attempt to woo customers leaving the chain for cheaper coffee elsewhere.
The pairings run through March 3 at Starbucks U.S. stores. They include a tall latte with oatmeal or coffee cake, and tall brewed coffee with various breakfast sandwiches.
Starbucks is under growing financial pressure and faces competition from fast-food chain McDonald’s, which now offers espresso-based coffee drinks.
The Seattle Times informs that "Starbucks loses third top exec since Schultz took the helm."
One of Starbucks' top executives, Gerry Lopez, gave notice last week that he will resign Feb. 20, according to a securities filing today.
He is the third top executive to leave Starbucks since Howard Schultz reclaimed the CEO spot last year. At that time, former CEO Jim Donald was pushed out, and last fall Chief Financial Officer Pete Bocian departed after a year to become Hewlett-Packard's chief administrative officer.
The Los Angeles Times reports that "Starbucks to cut 6,700 jobs."
Starbucks Corp., the Seattle-based company that turned coffee into a high-priced daily indulgence, announced today that it will eliminate about 6,700 jobs because of the difficult economy.
In a prepared statement, the company said its profit dropped 69% in its fiscal first quarter. Starbucks said it will close 300 underperforming stores in addition to the 600 it already planned to close in the United States. The company had planned to open 200 stores in the United States but said it will scale back to 140.
Starbucks mirrors the national economy.
Posts
Some Links
9 months ago
~Joe Garza~
ReplyDeleteThe competition of McDonald's and other low priced competitors significantly hurt the previous years of fame and gain from the high priced and luxury coffee maker Starbucks. The poor economy we face today has called for a demand of cheaper products of lesser value, which is where the lead competitor McDonalds has taken the lead, due to the supply and demand decrease of richer more luxury goods. The inferior goods are gaining much profit due to our economy and Starbucks will continue to suffer.
It's sad to see Starbucks suffering as much as it is because the economy is so poor. Starbucks coffee is a normal good, when the economy is prosperous so is Starbucks. And when the economy isn't doing so great, well then McDonald's is prospering. Inferior goods are what people are looking for, the same good but a cheaper price. Of course, being a bit of a coffee freak myself, I can't side with McDonald's. Sure, Starbucks gets expensive, and it's not in my budget to spend $5 on coffee everyday like I have in the past. But, I always look at quality, and Starbucks is of higher quality, in my opinion. So, I'll be one of those few who save a few dollars here and there, and continue to purchase the luxury good that is coffee from Starbucks.
ReplyDelete-Double Dare
Because Starbucks coffee is a normal good, it is only natural that the fall in the economy should be mirrored in a fall in Starbucks' profits. I doubt that Starbucks can try to compete with McDonalds. Starbucks has built its image as being "luxury coffee." No one will picture a trip to Starbucks as saving money regardless of what new ploys Starbucks tries to use. (Would McDonald's ever offer coffee cake? Coffee cake sounds like a "luxurious food" that one would eat when drinking "luxurious coffee")
ReplyDeleteStarbucks has always been a normal good. Now that the economy is hurting people are starting to switch to McDonalds coffee(inferior good) because it is cheaper. This is causing a lot of starbucks locations to close down. Most people that buy coffe are people who have an 8 to 5 job and who are making minimum wage. They can't afford to spend 5 dollars every morning on a cup of coffee, so they are going to go down the street to Mcdonalds(inferior good) and buy it from there for a lot less money.
ReplyDeleteZach Young
Coffee is one of the most traded goods in the world, yet is hurting bad from the declining economic state. McDonalds is stepping up their game and competing with high end coffee suppliers, such as Starbucks, by selling similar drinks at lower prices. However, can McDonalds, a cheaper good, really compete with the high-quality goods served at Starbucks? There really is no competition at all if you care about quality and not price.
ReplyDeleteIt does not really matter if you skip out on the Starbucks coffee because you will pay for it when you go to the grocery store to purchase your everyday items (eggs, milk), which have increased as well. If the economy stays in the shape it is in now, then Starbucks and other companies will continue to slowly deteriorate.
Raven J. Lewis
Connally High School
I pulled through starbucks last wednesday only to order my white moca drink, but instead was playing 21 questions with the girl who was taking my order. I stayed there in line for about 5 minutes just telling her , no i don't want a cookie, or a sandwich, I just want my drink. She was really nice but I just wanted my drink so that i could be on my way. I don't like the fact that they are closing their stores, because their are already so many people that have been laid off of their jobs. I believe by Starbucks laying off all these people that we are just sinking deeper and deeper into this depression.
ReplyDelete-Bernice Vessells
from Chilton
I was once told that people do not buy from Starbucks because their coffee is spectacular, but rather because the company itself is a cultural movement. Coffee shops have been popular throughout Europe for quite some years. More recently, however, Starbucks has discovered how to take this European custom and effectively apply it as a revolutionary movement here in our nation. It is the right combination of instant coffee and a relaxing setting. As soon as this revolution took over, the population came in droves to support it. Everyone wants to be the person carrying the "hip" starbucks cup. Honestly, I admit I don't even really like coffee, but i've done my fair part in contributing to the company. I believe the latest slump is a direct result to the recession. People are now willing to sacrifice looking hip and drinking the popular drink in order to save a little cash.
ReplyDeleteAnd, starbucks has to get rid of some employees in order to stay in business. I'm not sure they really had a choice...find a company that isn't laying off at this moment...
-Don Juan
Starbucks suffers from an elastic demand curve. Being a high-end coffee retailer, they exist in a narrowly defined market for a luxury good. It doesn't help matters now that McDonald's offers close substitutes to their coffee.
ReplyDeleteI believe that Starbucks is having trouble because of the cost of their coffee. It is more expense than most other comparable coffees. Therefore to try to compete with the other companies that are selling coffee, they introduce the "paring" deals to try to get people back inside their stores and buying. The economy has definitely hurt Starbucks because people aren't willing to spend $3-$4 for just one cup of coffee anymore when they are having trouble just paying the bills or that money can be spent on something more constructive.
ReplyDeleteSara Mac Aulay
It is sad to see how only a few years ago Starbucks was "the" coffee place, but because of the economic struggles the sale of less quality coffee is increasing. The normal good of Starbucks coffee is being replaced by the inferior good of McDonald's coffee. People can not go and pay the $5 for a good quality cup of coffee when they must save for gas or other necessities.
ReplyDelete-Cara H.
Starbucks is suffering right now because people are spending their money on necessities not luxury's which is a elastic demand curve. Since their are always going to be substitutes for coffee, their situation will probably not change until the economy picks back up or they cut prices to compete with their competitors.
ReplyDeleteCasie Petty
MCC
Its evident that the only reason Starbucks is doing more poorly is because of the economy. And once the economy straightens its self back out then it will go up again. The reason they do well when the economy is well off is because people almost buy Starbucks for the "experience" more than anything else. You get that nice muffin, with coffee bean aroma, catch up on some work or social time, and on top of all that you get the good coffee. But I guess when push comes to shove and the demand for cheaper coffee raises that is when you will see McDonald's and other cheaper fast food places prosper. The people demand the cheap coffee and McDonald's will supply it, its as simple as that.
ReplyDelete-Brady Passon
MCC
As the economy continues to struggle, we will continue to see the place that offer luxury items, such as Starbucks, decrease in sales. The fact that Starbucks has to offer lower priced items shows the elasticity of their product. As people have less money to spend, they are less willing to buy the more expensive coffee. As this continues, we will an increase in demand for the infior products, that places such as McDonalds offers.
ReplyDeleteAs the economy contintues to hurt there is no doubt that strabucks and other luxury itmes will contiue to lose money to cheaper brands of the same goods that is offered at a cheaper price by supliersa such as McDonalds. But even though the economy is not at its best does not mean that luxury items such as coffee is perfered at cheaper price for less quality. Most poeple are willing to pay the full price when it comes to quality rather than taking the second best. So as the economy continues to suffer luxury item suppliers such as starbucks will continue to suffer from our economy before they are able to see a sign of imporvement.
ReplyDeleteWith the economy the way it is, consumers are wise to cut back their spending on amenities such as fine dining, spa treatments, or morning coffee. However, most American citizens aren't comfortable giving up these pleasures, so they look for a more inexpensive product to satisfy their desire and their budget. In this example of coffee, a lower price of related goods such as McDonald's breakfast coffee, causes a decrease in the demand for the original good, Starbucks coffee. Amenities are a low priority for most people during an economic recession, and any companies producing higher quality goods will probably continue losing business to companies producing cheaper, lower quality goods.
ReplyDeleteCatherine L.
The economy, the way it is now, has hurt many companies. Starbucks is one that has taken a pretty hard hit. People are having to conserve their money in ways such as choosing Mcdonalds coffee over the Starbucks coffee. This is hurting the Starbucks company majorly because now cosumers can by the same sort of coffee from McDonalds for half the price. In this case with the economy, Starbucks has the normal good while McDonalds is producing inferior good.
ReplyDeleteStarbucks has always been the "premium" coffee house to me. However, as more and more "deluxe" coffee drinks are produced from various other establishments, the supply of coffee drinks is increased dramatically. While these may not be as "high quality", the balance between price and quality is crucial to consumers. The overall value of McDonalds may not be as high as Starbucks, but its value per dollar is higher to the consumer. Simply put, either Starbucks finds a way to stay atop of the competition and find the equalibrium of quality / price, or allow competitors to continue to steal capital from the coffee market.
ReplyDeleteMcDonald's new slogan about their coffee says it all. "Rich so you don't have to be." Fast food restaurants like McDonald's and Dunkn Donuts are smart to begin to sell cheaper but still decent tasting coffee during this recession. Most people are cutting back on expensive goods like Starbucks coffee and name brand items. People will start to go for cheaper coffee at other places or start making coffee at home before they leave for work. Although Starbucks has had to cut back on employees and stores, I do believe that it will still come out of this recession alive because some people are still not willing to give up their morning Starbucks coffee experience that allows them to feel important by making a million decisions in order to get 1 vente, non fat, decaf, upside down caramel white chocolate mocha latte with 2 1/2 shots of espresso all in a cool cup with a travel sleeve.
ReplyDelete-Bryan E.
Starbucks has always been the top dog of coffee sales, but now McDonalds has entered the market. With the current economic bind nearly everyone is facing, it is easy to see why Starbucks sales are declining. Both the supply and demand curves have shifted in ways detrimental to Starbucks' sales. The demand curve has shifted due to the fact that McDonalds' coffee provides a cheap substitute to Starbucks' "premium" and highly expensive coffee. Also, consequently for Starbucks, the supply curve has shifted due to the increase in suppliers such as McDonalds. Who knows, even though McDonalds' quality may not be as good as Starbucks' but they are doing a good job so far as to beating out the top dog. All I can say is I hope Starbucks has some great ideas to keep up with the competition.
ReplyDeleteLorena Vargas
Although Starbucks has built a tremendous reputation for coaxing Americans, and me also I must admit, to indulge in outrageously high-priced coffee over the past years, the economy is in a major slump and, of course, the economic issues of today are going to effect businesses who prosper from Americans who wish to simply "indulge". There's not much room for indulging in luxury items such as coffee anymore; as much as we may hate to face the fact, we have to realize that Starbucks coffee is not necessarily affordable for most Americans in these tough economic times and, most importantly, it is not a necessity. Just as the price of many other goods is growing, so is the price of coffee which, in turn, decreases the demand. It seems especially outrageous to spend so much money on an item that you can get somewhere else for a much lower price, showing the reason why McDonald's is now a strong competitor against Starbucks. Sure the quality of Starbucks' coffee greatly exceeds that of McDonald's coffee, but seriously it's just coffee and it'll only last you for minutes of your day. It's really not so important! I love Starbucks, but it is obvious why they would have to cut back some costs.
ReplyDeleteDue to the rising gas prices and the economy falling harder then what it has ever before, people are forced to cut back on unnecessary spending. Starbucks is a luxury, and can easily be let go in order to save that extra buck. McDonalds is just satisfying the customers taht decided it would be easier to try something new and cheaper.
ReplyDeleteMike Glatter
Connally High School
I like starbucks. The coffee is amazing service is great and it's just has a nice atmosphere in general. I never really thought coffee would be considered a "luxury" but I guess with Starbucks' prices thats now the case. I really hate McDonalds and the fact that they're trying to "kick'em when they're down" just makes me hate them more (I realize its just an economists way of thinking though). No matter how much cheaper their coffee might be it definatley won't have the same quality. I guess I'll just have to try my best to keep the company afloat :)
ReplyDelete--Mariela Morales
Starbucks can no longer function at its peak point simply because their products are no longer in demand. As the hard times pressure Americans, we are forced to cut back on some things, like coffee, which is simply not necessary or are just not worth the Starbucks' price. What McDonald's has done is a very smart economic move; it's not about "kicking them when they're down", it's about benefiting from the higher demand of cheap coffee. It's quite simple to understand. People still need coffee but can no longer afford expensive places like Starbucks. Instead, they look for other options that won't hurt their wallets. McDonald's is simply providing the supply which many Americans are now demanding.
ReplyDelete-Monica Pantea
The economy is hurting, and it will continue to hurt and spread to all franchises and companies, because of this credit crisis and people in fear of their own well-being in the future. Not to mention, Starbucks is a luxury good, hence quite elastic when hard times come about. I'm afraid that all luxury goods will be touched in the same way that Starbucks is. McDonalds has the cheaper price and that's simply going to pull in more demand. McDonalds is also already doing quite well despite this huge mess. Starbucks shrinking will just help it even more I think.
ReplyDeleteUnfortunately, Starbucks is suffering because of the economy. When other companies began producing coffee of the same quality at lower prices, Starbucks began to lose customers. McDonalds is one of the top competitors. I currently work at a small coffee shop that offers the same kind of things as Starbucks, but the drinks are cheaper and larger. At Starbucks, the quantity supplied is greater than the quantity demanded which makes a surplus.
ReplyDeleteStarbucks is a good example of a new company that first started off with such high hopes. Though now all those high hopes and dreams are going down like the economy. First it was like the average joe or college student could maybe twice or four times a week could go down and get a cup of coffee. Though now it's like once a week maybe twice. Now that McDonalds is in the coffee business it's now getting harder to sell their Product with so many companies competing for the same goal. Which is to out sell your opponent and hopefully put him out of business. So I guess you can say the coffee business has came down to dog eats dog and the bigger dog is the one who can make the better deal. (slade)
ReplyDelete