Comments on: Starbucks instant coffee: a sign of the times? http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/ for students and teachers of Economics Wed, 23 May 2012 04:39:58 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Lloyd Kluegel http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/comment-page-1/#comment-7576 Lloyd Kluegel Thu, 12 Mar 2009 17:57:27 +0000 http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/#comment-7576 in the past years starbucks has been overexpanding and over-charging customers. another mistake they made was not monopolizing the market for their coffee, meaning that other companies, such as McDonald's in switzerland has the same coffee machines as starbucks, thereby selling similar coffee at way lower prices. in addition, in the economic crisis, people start saving more on unnecessary expenses such as coffee. starbucks strategy was to serve good quality coffee. by selling their own brand of instant coffee, thereby comprising the companies image. instead of selling instant coffee, starbucks should finally drop the prices of their normal coffee. in the past years starbucks has been overexpanding and over-charging customers. another mistake they made was not monopolizing the market for their coffee, meaning that other companies, such as McDonald's in switzerland has the same coffee machines as starbucks, thereby selling similar coffee at way lower prices. in addition, in the economic crisis, people start saving more on unnecessary expenses such as coffee.

starbucks strategy was to serve good quality coffee. by selling their own brand of instant coffee, thereby comprising the companies image.

instead of selling instant coffee, starbucks should finally drop the prices of their normal coffee.

Like or Dislike: Thumb up 0 Thumb down 0

]]> By: Markus von der Marwi http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/comment-page-1/#comment-7570 Markus von der Marwi Thu, 12 Mar 2009 01:24:36 +0000 http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/#comment-7570 Starbucks has made a huge name for itself and has millions of loyal customers. Starbucks was forced to shut down many of its stores, it just had way too many. Seperate starbucks shops were competing with each other. Introducing starbucks instant coffee seems to be a good move, with there being so many loyal customers. Especially during this economic downturn, with starbucks being relatively expensive. Instant coffee is an inferior good, which should do well in a recession. Starbucks has made a huge name for itself and has millions of loyal customers. Starbucks was forced to shut down many of its stores, it just had way too many. Seperate starbucks shops were competing with each other. Introducing starbucks instant coffee seems to be a good move, with there being so many loyal customers. Especially during this economic downturn, with starbucks being relatively expensive. Instant coffee is an inferior good, which should do well in a recession.

Like or Dislike: Thumb up 0 Thumb down 0

]]> By: Laura Nanette G http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/comment-page-1/#comment-7561 Laura Nanette G Tue, 10 Mar 2009 03:49:59 +0000 http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/#comment-7561 This topic has been well discussed by students above, though there are some facts I would like to add on to. As discussed before it is true that starbucks is actually only "coffee", although they do make sure it is fair trade, the beans might not be very different from the beans in other coffee shops. Starbucks has been able to globalize its product so well through perfect advertising. Famous actors and singers with starbucks drinks are photopgraphed and put in all pictures. Starbucks themselves have made their product seem as though they are the only good product; similar to what apple has done with the ipod (another topic to be discussed). This perfect advertisment has cut out most competition on the market; and has let starbucks rise to the top. However, as mentioned above already, Starbucks is setting up more and more stores. It is found on every continent and even kicked out cultural competition. The prices however of drinks and food from Starbucks are high. Starbucks' expansion started off balanced out in the countries; with several stores in a large city. Nowdays there are thousands of starbucks all over the world, in D.C. alone there are over 71 Starbucks. With such a large number, one can be found every few streets away. This cuts out other competition, but the over expansion has risen large amounts of costs that the consumer is not willing or able to pay in such a short amount of time. Starbucks has closed several hundred shops already and is planning to shut down several more )(including ones that are opposite a Starbucks itself), and this way will be cutting costs down. If Starbucks can be compared to a Monopoly would not be right idea, however they are acting similar. Starbucks is selling drinks at a high price with lower quantity. But because customers are not willing to pay such amounts, costs have gone up with the quanity increase of shops (not coffee necessarly). If this is a market failure, could be discussed. This topic has been well discussed by students above, though there are some facts I would like to add on to. As discussed before it is true that starbucks is actually only "coffee", although they do make sure it is fair trade, the beans might not be very different from the beans in other coffee shops. Starbucks has been able to globalize its product so well through perfect advertising. Famous actors and singers with starbucks drinks are photopgraphed and put in all pictures. Starbucks themselves have made their product seem as though they are the only good product; similar to what apple has done with the ipod (another topic to be discussed). This perfect advertisment has cut out most competition on the market; and has let starbucks rise to the top. However, as mentioned above already, Starbucks is setting up more and more stores. It is found on every continent and even kicked out cultural competition. The prices however of drinks and food from Starbucks are high. Starbucks' expansion started off balanced out in the countries; with several stores in a large city. Nowdays there are thousands of starbucks all over the world, in D.C. alone there are over 71 Starbucks. With such a large number, one can be found every few streets away. This cuts out other competition, but the over expansion has risen large amounts of costs that the consumer is not willing or able to pay in such a short amount of time. Starbucks has closed several hundred shops already and is planning to shut down several more )(including ones that are opposite a Starbucks itself), and this way will be cutting costs down.

If Starbucks can be compared to a Monopoly would not be right idea, however they are acting similar. Starbucks is selling drinks at a high price with lower quantity. But because customers are not willing to pay such amounts, costs have gone up with the quanity increase of shops (not coffee necessarly). If this is a market failure, could be discussed.

Like or Dislike: Thumb up 0 Thumb down 0

]]> By: Matt Coucher http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/comment-page-1/#comment-7531 Matt Coucher Thu, 05 Mar 2009 18:06:09 +0000 http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/#comment-7531 Starbucks has become part of the economies of scale. With the economic downturn, and Starbucks' overpopulation of every street corner across the globe, they are having to shutdown some of the cafes because they have expanded too quickly and cannot cover the costs of such rapid expansion. Instant Coffee would be a brilliant strategy for Starbucks to take as it gives people a cheaper alternative during this recession while still maintaining brand loyalty. Starbucks has become part of the economies of scale. With the economic downturn, and Starbucks' overpopulation of every street corner across the globe, they are having to shutdown some of the cafes because they have expanded too quickly and cannot cover the costs of such rapid expansion. Instant Coffee would be a brilliant strategy for Starbucks to take as it gives people a cheaper alternative during this recession while still maintaining brand loyalty.

Like or Dislike: Thumb up 0 Thumb down 0

]]> By: Jonny http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/comment-page-1/#comment-7526 Jonny Thu, 05 Mar 2009 17:24:19 +0000 http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/#comment-7526 Like many have said money is tight so people are more aware where they are spending their money and how much. For few Starbucks coffee is irreplaceble, but others think it as an expensive normal good. So they dont mind taking a step down to cheaper alternatives like McDonalds ect. Starbucks is smart as they know some people are willing to pay the same amount no matter what and they are taking advantage of those. But many arnt willing as it costs so much so they are giving them an alternative. Some can be brand loyal but cant afford the current prices, so are forced to move. But as they have new alternatives at a cheaper rate these loyal people can stay Like many have said money is tight so people are more aware where they are spending their money and how much. For few Starbucks coffee is irreplaceble, but others think it as an expensive normal good. So they dont mind taking a step down to cheaper alternatives like McDonalds ect. Starbucks is smart as they know some people are willing to pay the same amount no matter what and they are taking advantage of those. But many arnt willing as it costs so much so they are giving them an alternative. Some can be brand loyal but cant afford the current prices, so are forced to move. But as they have new alternatives at a cheaper rate these loyal people can stay

Like or Dislike: Thumb up 0 Thumb down 0

]]> By: Yael Burla http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/comment-page-1/#comment-7518 Yael Burla Thu, 05 Mar 2009 05:04:01 +0000 http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/#comment-7518 When I go to america, I can usually find a Starbucks within a 5 minute walking distance.. Then again, I can probably find 3 Starbucks stores within this radius. Starbucks has opened up so many stores that it is now having trouble balancing their costs. As a result, when AVC and ATC are higher than price, some stores find themselves in a position where they HAVE to shut down since they are only harming themselves by staying in the market. Because most of the products sold at Starbucks are considered normal goods, people with lower incomes do not generally buy coffee from there. However, because many Starbucks are shutting down, they are selling inferior goods as a way to manage their costs and still increase demand for those with low incomes. When I go to america, I can usually find a Starbucks within a 5 minute walking distance.. Then again, I can probably find 3 Starbucks stores within this radius. Starbucks has opened up so many stores that it is now having trouble balancing their costs. As a result, when AVC and ATC are higher than price, some stores find themselves in a position where they HAVE to shut down since they are only harming themselves by staying in the market. Because most of the products sold at Starbucks are considered normal goods, people with lower incomes do not generally buy coffee from there. However, because many Starbucks are shutting down, they are selling inferior goods as a way to manage their costs and still increase demand for those with low incomes.

Like or Dislike: Thumb up 0 Thumb down 0

]]> By: Dimitri Da Ponte http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/comment-page-1/#comment-7517 Dimitri Da Ponte Thu, 05 Mar 2009 05:03:33 +0000 http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/#comment-7517 I must say Amit has a very good argument. Starbucks is a brand many have a loyalty to. I find it interesting that firms such as Starbucks have to start producing inferior goods in the face of recession. A smart move on their part, for as incomes are falling the demand for a ‘normal good’ coffee will decrease, while their demand for ‘inferior good’ instant coffee will increase. This also gives the chance for the people who have a brand loyalty to Starbucks to return as loyal customers if they had been unable to afford their coffee anymore. I must say Amit has a very good argument. Starbucks is a brand many have a loyalty to. I find it interesting that firms such as Starbucks have to start producing inferior goods in the face of recession. A smart move on their part, for as incomes are falling the demand for a ‘normal good’ coffee will decrease, while their demand for ‘inferior good’ instant coffee will increase. This also gives the chance for the people who have a brand loyalty to Starbucks to return as loyal customers if they had been unable to afford their coffee anymore.

Like or Dislike: Thumb up 0 Thumb down 0

]]> By: Daniel D'Amco http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/comment-page-1/#comment-7511 Daniel D'Amco Thu, 05 Mar 2009 03:45:32 +0000 http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/#comment-7511 Starbucks has created too many stores making it extremely hard for them to cover the costs. By opening up multiple shops in one area it forced the smaller coffee companies to go out of business. However, because Starbucks can not cover the costs they are finding themselves having to shut down many stores and this is resulting in smaller coffee shops opening back up again. Now Starbucks is selling inferior goods to differentiate themselves from the other coffee shops. This method of sales is extremely effective especially right now while we are experiencing a recession. Instead of making more expensive products and trying to compete with other coffee shops that way they are lowering their standards and costs by creating simple products and making them more attractive to consumers. Starbucks has created too many stores making it extremely hard for them to cover the costs. By opening up multiple shops in one area it forced the smaller coffee companies to go out of business. However, because Starbucks can not cover the costs they are finding themselves having to shut down many stores and this is resulting in smaller coffee shops opening back up again. Now Starbucks is selling inferior goods to differentiate themselves from the other coffee shops. This method of sales is extremely effective especially right now while we are experiencing a recession. Instead of making more expensive products and trying to compete with other coffee shops that way they are lowering their standards and costs by creating simple products and making them more attractive to consumers.

Like or Dislike: Thumb up 0 Thumb down 0

]]> By: Stefan B. http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/comment-page-1/#comment-7504 Stefan B. Wed, 04 Mar 2009 23:19:00 +0000 http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/#comment-7504 Personally, i agree with Bjorn. There are too many shops, focusing more on quandity than quality. With quality i see the main problem lies with the employees at Starbucks. Starbucks has the problem of deciding who they want to take or not. I am often times angry at the way the Baristas approach their clients. They are sometimes unfriendly, or dont know what they are doing. This seems very unprofessional to the clients, and obviously gives Starbucks a bad reputation. Like Basti said, Starbucks has too rapidly expanded, due to this they focused more on expansion, not caring about quality. Even though i like a drink at Starbucks once in a while, i prefer mixing my own drinks with milk, sirups, sugars etc, since im spending less money and i can do whatever i like most. And just like Mr. Welker, i take it in a thermo, since Starbucks is only set for more and more profit, not respecting the needs of the customers such as a good customer service and fair prices. Personally, i agree with Bjorn. There are too many shops, focusing more on quandity than quality. With quality i see the main problem lies with the employees at Starbucks. Starbucks has the problem of deciding who they want to take or not. I am often times angry at the way the Baristas approach their clients. They are sometimes unfriendly, or dont know what they are doing. This seems very unprofessional to the clients, and obviously gives Starbucks a bad reputation. Like Basti said, Starbucks has too rapidly expanded, due to this they focused more on expansion, not caring about quality. Even though i like a drink at Starbucks once in a while, i prefer mixing my own drinks with milk, sirups, sugars etc, since im spending less money and i can do whatever i like most. And just like Mr. Welker, i take it in a thermo, since Starbucks is only set for more and more profit, not respecting the needs of the customers such as a good customer service and fair prices.

Like or Dislike: Thumb up 0 Thumb down 0

]]> By: Helene Gleitz http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/comment-page-1/#comment-7489 Helene Gleitz Wed, 04 Mar 2009 04:12:55 +0000 http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/#comment-7489 As mentioned by almost everyone already, I think that Starbucks has made a good move by entering the instant coffee market. As we know, Starbucks sells the same coffee as everyone else, but has 'the name'. We are therefore willing to pay a few extra bucks to get the nice packaging and show off the brand on the cup. As a Frappucino lover myself, I will still continue to go to Starbucks and order my favorite drink, and won't be influenced by the fact that Starbucks is now selling instant coffee. However, it is evident that the number of Starbucks in the world have become ridiculous. Look at the Bahnhofstrasse for example: there are at least 3 Starbucks shops to which you could go to and order Lattes. It seems a little irrational to me and I think the firm would benefit if some of them closed. During the economic crisis, it seems obvious to have a plan to stay afloat and prepare for the future. It was therefore a good move for Starbucks to enter a new market and broaden their product range. As mentioned by almost everyone already, I think that Starbucks has made a good move by entering the instant coffee market. As we know, Starbucks sells the same coffee as everyone else, but has 'the name'. We are therefore willing to pay a few extra bucks to get the nice packaging and show off the brand on the cup. As a Frappucino lover myself, I will still continue to go to Starbucks and order my favorite drink, and won't be influenced by the fact that Starbucks is now selling instant coffee. However, it is evident that the number of Starbucks in the world have become ridiculous. Look at the Bahnhofstrasse for example: there are at least 3 Starbucks shops to which you could go to and order Lattes. It seems a little irrational to me and I think the firm would benefit if some of them closed.

During the economic crisis, it seems obvious to have a plan to stay afloat and prepare for the future. It was therefore a good move for Starbucks to enter a new market and broaden their product range.

Like or Dislike: Thumb up 0 Thumb down 0

]]> By: Younes Huber http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/comment-page-1/#comment-7487 Younes Huber Wed, 04 Mar 2009 02:56:56 +0000 http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/#comment-7487 As mentioned above by many, Starbucks has reached a diseconomy of scale and therefore has had to close down stores. Yet brand loyalty remains and I believe that the strategic decision to enter the instant coffee market was theoretically intelligent, since they need to eliminate as much competition as possible from companies such as McDonald’s, yet by doing this they may ruin their image as a whole. Nowadays people see Starbucks as a great place to grab a coffee because it is good tasting coffee and is a normal good, unlike instant coffee which is an inferior good. Producing both inferior as well as normal goods of the same product may lead to confusion in many customers; they may as well dismiss Starbucks's good quality coffee for "just another dishwater-tasting coffee". A risky move. As mentioned above by many, Starbucks has reached a diseconomy of scale and therefore has had to close down stores. Yet brand loyalty remains and I believe that the strategic decision to enter the instant coffee market was theoretically intelligent, since they need to eliminate as much competition as possible from companies such as McDonald’s, yet by doing this they may ruin their image as a whole. Nowadays people see Starbucks as a great place to grab a coffee because it is good tasting coffee and is a normal good, unlike instant coffee which is an inferior good. Producing both inferior as well as normal goods of the same product may lead to confusion in many customers; they may as well dismiss Starbucks's good quality coffee for "just another dishwater-tasting coffee". A risky move.

Like or Dislike: Thumb up 0 Thumb down 0

]]> By: Aleya Thakur-Weigold http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/comment-page-1/#comment-7480 Aleya Thakur-Weigold Wed, 04 Mar 2009 00:58:10 +0000 http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/#comment-7480 I thought this article was very interesting and I agree with many of the comments that have been made. I think that Starbucks has managed to brand itself in such a successful way that many people will stay loyal to their brand of coffee. I think it is very smart of them to provide a less expensive option to customers, with the instant coffee. This way the customer has the freedom to decide whether to buy the cheaper or more expensive coffee, while staying loyal to their brand. On the other hand I also agree with Bjorn, Starbucks has expanded way to fast and as Basti said, there are not enought people to go to Starbucks anymore. I thought this article was very interesting and I agree with many of the comments that have been made. I think that Starbucks has managed to brand itself in such a successful way that many people will stay loyal to their brand of coffee. I think it is very smart of them to provide a less expensive option to customers, with the instant coffee. This way the customer has the freedom to decide whether to buy the cheaper or more expensive coffee, while staying loyal to their brand. On the other hand I also agree with Bjorn, Starbucks has expanded way to fast and as Basti said, there are not enought people to go to Starbucks anymore.

Like or Dislike: Thumb up 0 Thumb down 0

]]> By: Gabriel http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/comment-page-1/#comment-7478 Gabriel Tue, 03 Mar 2009 23:39:14 +0000 http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/#comment-7478 I agree with the method that Starbucks is using, it is obvious that they have to take measures since there was obviously an over allocation of resources since there where too many Starbucks stores. Closing down stores will lead to a decrease in cost but not necessarily a very big loss in demand since most stores were very close together and Starbucks consumers would not mind walking the extra distance. They have decided to make a very simple product with a very low price so that consumers will still buy they products during the financial crisis. I agree with the method that Starbucks is using, it is obvious that they have to take measures since there was obviously an over allocation of resources since there where too many Starbucks stores. Closing down stores will lead to a decrease in cost but not necessarily a very big loss in demand since most stores were very close together and Starbucks consumers would not mind walking the extra distance. They have decided to make a very simple product with a very low price so that consumers will still buy they products during the financial crisis.

Like or Dislike: Thumb up 0 Thumb down 0

]]> By: Basti http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/comment-page-1/#comment-7477 Basti Tue, 03 Mar 2009 18:48:05 +0000 http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/#comment-7477 Starbucks has reached dis economies of scale is multiplying to fast an they cannot cover there costs. I agree with Bjorn that the rapid expansion has left them with two Starbucks on every corner. There aren't enough people to go to Starbucks anymore because there are so many. As Amit said entering the instant coffee market is a smart idea for Starbucks, one because there name is so popular that other people will be attracted to the brand and will buy Starbucks instant coffee. I also agree with Dom, Starbucks is reacting correctly by selling inferior goods which are attractive during this economic crisis. Starbucks has reached dis economies of scale is multiplying to fast an they cannot cover there costs. I agree with Bjorn that the rapid expansion has left them with two Starbucks on every corner. There aren't enough people to go to Starbucks anymore because there are so many. As Amit said entering the instant coffee market is a smart idea for Starbucks, one because there name is so popular that other people will be attracted to the brand and will buy Starbucks instant coffee.

I also agree with Dom, Starbucks is reacting correctly by selling inferior goods which are attractive during this economic crisis.

Like or Dislike: Thumb up 0 Thumb down 0

]]> By: Dominic McNamee http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/comment-page-1/#comment-7470 Dominic McNamee Tue, 03 Mar 2009 16:43:25 +0000 http://welkerswikinomics.com/blog/2009/02/25/starbucks-instant-coffee-a-sign-of-the-times/#comment-7470 Starbucks does seem to be reacting how they should be. By offering inferior goods in a hard economic time would keep customers coming back. Also, this has the potential to make Starbucks even larger once the rescission is over as people may start coming for the budget coffee then move up once their incomes rise again. Starbucks does seem to be reacting how they should be. By offering inferior goods in a hard economic time would keep customers coming back. Also, this has the potential to make Starbucks even larger once the rescission is over as people may start coming for the budget coffee then move up once their incomes rise again.

Like or Dislike: Thumb up 0 Thumb down 0

]]>