Sample Essay on Starbucks Coffeehouse Key Issues

Cutthroat competition is among the major challenges facing Starbucks. There are now highly specialized coffeehouse chains and increased growth of local cafes and quick-service restaurants that pose serious threat to this giant company in the coffee industry. Customers are showing their preferences to the competitors’ products considering factors such as convenience, product service, and pricing. For instance, the local cafes are strategically located in the market; thus give easy service at relatively lower prices to the customers and their strategic locations and pricing makes them more convenient. Among the well-established U.S companies posing stiff rivalry with Starbucks are McDonalds and Dunkin Donuts. The latter is getting famous each day due to their quality donuts and coffee, and it looks to come up with more products. McDonald’s, on the other hand, specializes in fast food through its large number of stores, and it is fast upgrading its coffee beverages. The contention in the market will continue to increase as the competitors will try to adjust themselves to grow and survive in the turbulent coffee beverage industry (“Starbucks Faces Growing Rivals As Coffee Wars Reach Boiling Point | Life and Style | The Guardian”). In efforts to obtain new customers, there may be reduction prices, the introduction of new products, and increased marketing efforts that will lead to serious consequences. Therefore, the Starbucks management ought to counter the issue because they stand the danger of being kicked out of the market.

Pricing is a major marketing strategy that may lead to the growth of a company or its failure, as well. Starbucks for a while now has been known for charging relatively higher prices than its competitors in the industry. This is a key issue because the moment the customers learn that the coffee product can be found at a cheaper price with another seller, they will definitely switch. What Starbucks is doing then is stabbing itself on the back with the skyrocketing prices that lead other coffee products providers to reap highly. Unfortunately for the company, its competitors such as McDonalds have larger customer demographic hence a possible fast loss of customers to them (“Starbucks SWOT Analysis 2015 | Strategic Management Insight”). The aftermath of poor pricing is a decreased market share and then poor profitability; hence, the management needs to step in and review its pricing strategies for the better.

Starbucks currently faces a huge challenge regarding its branding whereby it has hit a brand wall. This means that the company brands do not appeal to the customer anymore and are basically out of vision. Quality branding should involve much innovation in differentiation to contain customers; otherwise, the customers will flow away. Starbucks also seems to face a potential brand trap linked to the activities in the stock markets. Since the stock markets require high profitability and growth, Starbucks has found itself diverting*g from riskier customer-focused innovations to embracing increased operating efficiencies to maximize profits. Unknowingly, the company has just blindfolded itself not to observe what the customer wants since it will rather increase its profitability and boost its stock activity on the Wall Street (“Starbucks Hits a Brand Wall”). Giving customers a blind eye drives them away to the competitors who are focused on producing products that appeal to them and contain them. The management risks on this hence should prioritize customer satisfaction that will eventually increase the desired profitability levels. Thus, there is the need for a strategy from the management that will come up with better branding strategies to contain the loyalty of customers.

Works Cited

“Starbucks Faces Growing Rivals As Coffee Wars Reach Boiling Point | Life and Style | The Guardian.” The Guardian. N.p., n.d. Web. 25 July 2015.

“Starbucks Hits a Brand Wall.” Brands Create Customers. N.p., n.d. Web. 25 July 2015.

“Starbucks SWOT Analysis 2015 | Strategic Management Insight.” Homepage | Strategic Management Insight. N.p., n.d. Web. 25 July 2015.