Executive Summary Our consulting firm, NG Inc, was asked to research Starbucks and compile a strategic analysis and

balanced scorecard for their career objectives. Starbucks was founded in 1971 in Seattle and continues to be the lead marketer of fine coffee at the retail level. It currently has retail stores in all 50 states, as well as 36 countries outside the U.S. Its products and services include: over 30 blends of coffee, hand crafted beverages, merchandise, fresh food, global consumer products, Starbucks cards (rechargeable gift cards), and its brand portfolio (subsidiaries such as the Tazo Tea Company and Ethos Water). After preparing a balanced scorecard for their 2004 strategies, we compared the actual 2005 data to their goals to measure how successful they were in achieving these goals. In order to prepare a strategic analysis and balanced scorecard, we conducted extensive research on the company. We analyzed their mission statement and additional goals stated in press releases, articles, etc. and compared it to their financial results and actual data for 2004 and 2005. Starbucks main goal is to increase revenue, which increased by $1,075,000,000 in 2005. R&D expenditure increased by $2,200,000, which lead to more efficient equipment and innovative products. 328 new retail stores and 400 new drive-thru stores were opened, which increased convenience and frequency of visits for existing customers, as well as increased new customers. Starbucks also added 11,200 distribution channels, which lead to more efficiency and maximization of accessibility to its products. With competitive compensation and benefits, employee turnover remained low and extensive in-house training for employees resulted in high employee loyalty and skill. Strategic Analysis Starbucks Corporations main and overall goal, as is the nature of any company, is to increase profits. In order to accomplish this, Starbucks focuses on a variety of strategies that allow the company to maintain a competitive edge and constantly reinvent its approaches. The cornerstone of Starbucks success is the opening of new stores. Starbucks wants to enhance its brand name and equity, and accomplishes this by attracting new customers to opening stores in their communities. New store locations can also maximize convenience, therefore increasing the frequency of visits by existing customers. In addition, many of these new stores are being development with drive-thrus. With this, Starbucks is targeting a particular segment of its customer base that is comprised of professionals and on-the-go parents. To measure the effectiveness of these strategies, Starbucks is continuously comparing data between newly opened stores and existing stores, trying to increase the profitability of both units while maintaining a steady growth rate. Another strong point of Starbucks strategy is the value placed on customer satisfaction. By extensively training employees for twenty hours before full employment, Starbucks hopes to maximize employee responsibility and attentiveness, resulting in a decrease in wait time. Furthermore, by closely tracking consumer needs and wants, Starbucks is able to introduce more popular products with a decrease in time between new product introductions. By decreasing wait time and increasing choices for customers, Starbucks hopes to increase loyalty among current customers and hopefully attract new customers.

Starbucks also places great value on its employees which is the reason why Starbucks is consistently known as one of the top companies to work for. Starbucks has great compensation and competitive benefits packages for its employees. Even part-time workers get some type of benefit package (ex: insurance). Starbucks treats its employees well because they believe that the work environment should be family-oriented and that a happy employee makes a happy customer. In addition, the company is placing emphasis on substantially expanding its infrastructure by investing in corporate and regional support facilities and personnel, as we well as establishing more efficient distribution networks (Starbucks). Such investments are believed to be necessary to maintain the current level of growth planned for international expansion, which brings us to our next major point. Starbucks believes that one of the key factors in sustaining long-term development is its introduction to new countries and cultures. Compared to the year before, Starbucks has significantly increased its pace in opening up international retail stores, reaching a little above 3,000 stores in foreign countries. This is obviously an intelligent move, as it already dominates the US market, which constitutes only 300 million people, and makes up the bulk of its earnings, whereas the rest of the world inhabits more than 6.5 billion people, of which, many use caffeine, just not from Starbucks. The focus on foreign development, however, can come at great difficulty as foreign cultures and governments will require more research, understanding, marketing and political relationships. Another concern can be the lack of regulation and governmental control regarding patents and trademarks, where other companies can mimic Starbucks brand and logo, stealing their ideas and methods to use as their own, which is already a concern in China. Furthermore, Starbucks is continually expanding their distribution outlets. In 2004, they had 20,000 outlets that sold their specialty products, including Wal-Mart, Target, a variety of other grocery stores, and pharmacies. In 2005, the number of stores involved in the Starbucks distribution channel increased to 31,000, exhibiting almost a 50% improvement and drastically expanding their ability to reach customers. Overall, the Starbucks Corporation is adept and knowledgeable when it comes to designing approaches to further their profits and market share while maintaining a close relationship with customers and their needs. Every aspect of their strategy has been carefully considered and thoroughly planned out, and the immediate future only seems to hold great success for the company and its associates.

Analysis results Strategy Net Revenue 2004 2005 Difference Explanation $5,294,247 $6,369,300 +$1,075,000 The combination of new retail stores, higher revenues from existing stores, and the introduction of new products resulted in increased revenue. $8,300 $10,500 +$2,200 Recent development efforts have resulted in new brewing and espresso-making equipment, successful flavor line extensions (product development), and new items for morning pastry and lunch menus. 700 1100 +400 To accommodate the early morning traffic driven by time-conscious individuals, Starbucks began including drive-thru stores as a means of attracting this customer segment. 1,344 1,672 +328 Starbucks is domestically and internationally expanding their enterprises to a variety of markets, some of which, are currently untapped. This enables the company to develop in new communities and increase customer service in extremely high traffic areas. Great compensation and benefits packages lowered employee turnover. Furthermore, profit sharing plans add to employee loyalty and productivity. This helps to avoid additional training costs. (Data could not be found) 20,000 31,200 +11,200 Increasing the number of stores involved in the Starbucks distribution channel allows the company to maximize accessibility to its products. Starbucks requires employees to undergo 20 hours of in-store and online training.

R&D Expenditure

Number of Drive-Thru Stores

New Stores Opened

Employee Turnover

Distribution Channels

Employee Training Hours

(Amounts in Thousands, Store Numbers Are Actual)

SWOT Analysis: Strengths

Weaknesses

Well-known brand identity and image Majority market share Recognized for Quality and Service Low Employee Turnover Employee Satisfaction due to competitive compensation and benefit packages Global presence Focus On Customer Satisfaction High Visibility Locations Innovative extensive R&D for Equipment/Technology Convenient Drive-Thru Stores Comfortable Ambiance Internet Access (Wireless) Non-smoking Areas

Over-saturation of the market Expensive Products Lack of diverse music selections Reliance on beverage innovation Financial Problems in some international stores Government regulations and relations Seasonal fluctuations in sales Over-Reliance On Domestic Stores Negative corporate image in Ecuador due to relations with coffee growers Lack of expansion Lack of customer acceptance of new products in existing and new markets Non-smoking Areas

Opportunities

Threats

New Market Opportunities Internationally Franchise Opportunities Health drinks Organic drinks Energy drinks Product Delivery To Home or Office (Catering) Boba (Tapioca drinks) Specialize more in international markets with local flavors More bottled drinks such as bottled Frappuccinos sold in supermarkets More selection for kids drinks Offer mini-meals with drinks at a set price, such as coffee with a pastry or sandwich Market extension for Starbucks merchandise, such as aprons, hats, etc.

Anti-Starbucks Groups Competition from restaurants, doughnut shops, and other specialty coffee shops Competition from supermarket sales concerning whole bean coffees Seasonal coffee prices Imitations of Starbucks image and logo in China could potentially confuse market and lessen opportunities in foreign countries Medical research concerning the effects of caffeine Health conscious groups

Recommendations Organic Foods and Health Drinks Starbucks should provide organic foods and health drinks. Modern people are more health conscious, particularly as new trends begin to focus on health-conscious marketability. Starbucks can improve their image by paying more attention to their customers concerns. For example, using more organic ingredients or diversifying their menu would provide fresh healthy coffee substitutes, thus potentially attracting new customers as well as increasing the frequency of visits from current customers who may not need caffeine during that particular time in the day. Catering Starbucks can expand their service to office or home delivery when the purchase size reaches a reasonable minimum. Because the drive-thru retail store is increasingly being marketed towards professionals on the go, Starbucks could attract potential clients, such as large firms or companies, by delivering coffee directly to their business location. This would also allow for the possibility of long-term contracts. Increase International Locations Starbucks should continue to open new locations worldwide. Starbucks is extremely dependent on its domestic success, and yet has a variety of countries it has not explored opportunities in. However, it is recommended that Starbucks tread lightly and with caution, insuring proper social and cultural analysis before plunging into a country. This is apparent in the fact that Starbucks was forced to close three retail stores in Singapore last year. Community Outreach Starbucks could refresh their corporate image by showing more concern for the communities they are located in. Although a huge portion of the population is well aware of the fact that Starbucks is successful in its endeavors, an extremely small percentage is knowledgeable or exposed to its community or charity outreach programs. By increasing awareness of its socially responsible characteristics, Starbucks might lull or appease antagonistic groups, thus enhancing their public image and brand equity. Product Extension and Specialization Lastly, Starbucks could try to extend its menu selection to include drinks related to particular cultures. For example, the Chinese culture focuses more on tea than coffee, and although Starbucks has a selection of different types of tea, it could further entice this consumer segment by introducing boba, a drink that incorporates little balls of jelly called tapioca. It could present similar drinks that are popular in other cultures as well. Another example is in Japan, Starbucks introduced a Matcha (green tea) latte and Frappuccino. This caters more to local tastes and preferences, which increases customer satisfaction. Starbucks should research local cultures more so that it can adapt its menu to meet the needs of its international customers.

Increase Bottled Drinks Starbucks currently sells bottled Frappuccinos in supermarkets and specialty stores, which remain extremely popular among consumers. Starbucks should increase its product line of bottled drinks to include other favorites, such as the Iced Chai Tea Latte or even seasonal drinks, such as the Gingerbread Latte. This would increase sales and customer awareness of the products it sells in its retail stores. Increase Selection for Childrens Drinks Since Starbucks aims to be a family environment and cater the needs of all family members, it should increase its menu items for children. It currently offers hot chocolate and apple cider for children, but it could offer a wider range of products, such as milk shakes or juice, as well as more bakery items that satisfy childrens taste preferences. This would entice parents to bring their children in, especially working parents who want to go to Starbucks but feel that that they cant take their children with them because they will be to antsy, which would generate more sales. Offer Set Mini-meals Offering value meals similar to fast food restaurants would increase sales because it increases the average sale per customer. Working men and women come into Starbucks for something quick and convenient, they dont always have time to calculate how much separate menu items will cost or they dont really think about getting a snack, so if you market minimeals that include a latte and a pastry or sandwich together at a set price, it encourages them to purchase additional items. This also increases awareness of Starbucks additional menu items, such as the fresh food and pastries. Market Extension of Starbucks Merchandise Increasing the Starbucks merchandise line to include more branded items, such as baseball hats, canvas tote bags, umbrellas, aprons (and other kitchen accessories), not only increases sales but helps Starbucks achieve its ultimate goal of becoming the most recognizable brand in the world. More people will be wearing the Starbucks logo to show their loyalty and support of the brand, which increases awareness and helps establish Starbucks as a mega-brand.

Group Report Your groups briefing paper should follow the following format: I. II. III. IV. V. VI. A detailed profile of the organisation: its activities, size, structure, history, etc A customer analysis A competitor analysis A resource audit An environmental scan A SWOT/TOWS summary

Use should be made of appendices as appropriate. No word limit is set but groups are expected to use judgement in the context of the scenario. Variety of sources company websites, media coverage, official statistics, case study articles etc. Individual report I. II. III. In practice, how appropriate/useful do you think these analytical/modelling tools are for the strategic decision maker? In practice, what difficulties would you anticipate in applying these analytical/modelling tools and realistically how could these be overcome? Examples of organisations that have successfully used/applied these analytical/modelling tools introduced so far on the module.

Indicative word length: 1500-2000 words Actions The detail of how we intend to achieve the objectives Objectives The specific achievements were hoping to deliver (SMART) Strategies The broad approaches we intend to take Goals/Aims The ultimate outcomes we want to achieve to deliver the mission Vision/Mission Defines where the organization is going and why the organization exists For your case study organisation decide: I. Who your key customers are/will be II. The key things you think they want III. What you have to get right to deliver IV. How you would propose to measure customer satisfaction cost-effectively

Starbucks competition heats up

NEW YORK (AP) - As Starbucks Corp. investors met in Seattle for the chain's highly anticipated annual shareholders meeting, coffee drinkers around the country lined up Wednesday for a cup of joe from one of the coffee giant's competitors. In a promotion the company said was timed to celebrate the first day of Spring, Dunkin' Donuts gave away free 16 ounce cups of iced coffee all day -- a coincidence that only seemed to highlight Starbucks' latest woes. The Seattle chain, which virtually pioneered the now exploding specialty coffee market, has been faced with concerns from investors and its own management that if it continues to grow at its current rapid pace, the brand will be diluted enough to allow competitors to gain a stronger foothold. At the same time, competitors like Dunkin' Donuts and McDonald's have been expanding their offerings to compete. 'There's no question in my mind that the competitive juices in the coffee area have grown exponentially,' said Dunkin' Donuts brand president Robert Rodriguez. The free coffee day -- which follows a hot coffee giveaway at Starbucks last week -- is one way Rodriguez is trying to focus more attention on Dunkin' beverages. For years, consumers associated the name Dunkin' Donuts with its doughnut counters rather than its coffee. To change that, Dunkin' has been aggressively promoting its new line of espresso drinks and menu offerings by TV chef Rachael Ray and launching a national advertising campaign in May with the tag line 'America Runs on Dunkin'. Soon, the privately held chain will also undergo a makeover at its stores reminiscent of a certain competitor, complete with earthy walls, waiting areas for espresso drinks, and coffee beans on display. Rodriguez said the new look is designed to make the stores 'warmer to customers' while also highlighting beverages. 'Consumers want to see a much deeper lineup of beverages' at the stores, he said. Dunkin' first introduced a line of espresso drinks in 2003, directly competing with a Starbucks staple. The line now makes up more than 5 percent of sales. In total, the chain had worldwide sales of $4.7 billion in 2006, meaning their espresso drinks came in at about $235 million. In comparison, Starbucks company-owned stores had $6.58 billion in revenue during its 2006 fiscal year. About 77 percent of those sales -- around $5 billion-were drinks. The rest of store sales came from food, whole coffee beans, coffee-

making equipment and other merchandise, according to the company's most recent annual report. But from its much smaller base, Dunkin' recently unseated its rival as No. 1 in a 2007 customer loyalty index produced by Brand Keys, a market research firm. They are not the only ones winning awards that seemed like a shoo-in for Starbucks. McDonald's Corp. introduced a line of premium coffee that earned first place in this month's Consumer Reports issue for best in coffee. The brand beat out Starbucks, Dunkin' Donuts and Burger King for both taste and value. Now McDonald's is branching out into espresso drinks. The fast food chain, based in Oak Brook, Illinois, has begun introducing McCafe concept restaurants in select locations in the U.S. with comfy couches, cappuccinos and pastries that look more like the neighborhood Starbucks than your typical Mickey Ds. To those naysayers who question whether a burger joint can serve a good cup of coffee, spokesman Bill Whitman said 'for those who haven't been in a McDonald's lately, it's time to come back and take another look.' With more premium coffee options brewing, the battle for the hearts of coffeelovers will come down to a fight for location, said Darren Tristano, executive vice president at Technomic, a restaurant and retail consulting firm. Dunkin' Donuts, for example, has had great success on the East Coast challenging Starbucks, but it's still trying to become more of a presence nationally, he said. There are now about 5,300 Dunkin' Donuts stores in the U.S. Starbucks, on the other hand, has 6,010 stores in the country and plans to open 1,700 more in its next fiscal year. JMP Securities analyst Kristine M. Koerber said the chains can have the most impact by differentiating their products. 'That's something Starbucks has always had an edge on,' Koerber said. But how long will that edge last? In a memo leaked to the media in February, Chairman and Starbucks visionary Howard Schultz said the company's rapid expansion has watered down the Starbucks experience. Since the memo was released, Starbucks shares have fallen 6 percent. But Tristano said it may be some time before the Starbucks brand is severely diluted and the competition has a real shot at being pronounced the winner in the coffee wars. 'Starbucks is like Google,' he said. 'It's still one of the most recognizable brands in the world.' But Rodriguez of Dunkin' Donuts -- who characterized the coffee competition as 'formidable' -- said the expanding marketplace may be a boon to all of its players.

'Any time any of our major competitors bring attention to a category, the category grows,' he said. Besides, he added, 'we feel confident we have the best product in the marketplace.'

In UK, Starbucks ranks tops, though still not great, in CSR

The UK coffeeshop industry is failing to communicate a basic standard of corporate responsibility reporting, scoring badly on the CleanAnalysis Navigator Maturity Model. Analyst and consultancy group CleanAnalysiss Bitter or Sweet report places Starbucks ahead of Caff Nero and Costa, in both the consumer perception and the environmental reporting leagues. Some 49 per cent of sustainability professionals polled via Greenbang believe Starbucks to be the greenest of the three brands. Caff Nero came second (27.5 per cent) with Costa in third place (23.5 per cent). Interestingly, Caff Nero, a private company, has no CSR report. CleanAnalysis, part of Greenbang.com, provides independent reporting, research and seniorlevel consulting programmes for executives, corporate responsibility officers, investment houses, the media, public sector organisations, lowcarbonindustry professionals and environmental services firms. From coffee bean to mug, it takes 53 gallons of water to make a cafe latte. The CleanAnalysis report, Bitter or Sweet: How the UKs coffee shops communicate sustainability, analyses the high street coffee shop industrys efforts at communicating sustainability and measures them on an industry performance benchmark the CleanAnalysis Navigator Maturity Model. Starbucks was found to be the strongest of the three in all three areas: consumer perception, emphasis on sustainability in online marketing, and in environmental reporting. However it provided no UK breakdown of its carbon footprint. Caff Nero published no CSR report, nor did it make strong mention of sustainability its website, yet the survey showed people think it is more sustainable than Costa. It did not respond to email and phone requests for data. Costa fared someway better in operational reporting, although it failed to reply to requests for information. Its sustainability data was nontransparent as it was published in the CSR report of holding company Whitbread. Its brand was regarded as the least sustainable of its UK competitors (23.5 per cent).

Most industry emphasis in online marketing of sustainability came from Starbucks, which frequently mentioned ethics and responsibility. Over the entire industry, there were few mentions of waste, carbon and recycling. Dan Ilett, senior analyst for CleanAnalysis said, Were already seeing growing environmental awareness among consumers, and in time they will demand more transparency from the people they buy from. These companies are all battling for a differentiator in the market. Stronger sustainability credentials could do that as theres a clear gap for a company to take that position. Most of these stores products have a useful lifecycle of less than one hour and if they are making progress in their sustainability efforts, they need to communicate this in an appropriate and gradual way. To suddenly splash green branding across their stores will look suspicious so communicating green credentials needs to be done with care and with the approval of customers.

Starbucks losses in UK rise to 10m

Starbucks loses ground to Costa Coffee in recession

Starbucks thrived on froth but is now suffering from austerity. Photograph: Christopher Furlong/Getty Images

Starbucks losses in Britain have grown to almost 10m, suggesting the business has been losing ground to strongly performing Costa Coffee, the rival chain owned by British leisure group Whitbread. The lacklustre figures from Starbucks Coffee Holdings (UK) show a pre-tax loss of 9.9m for the 12 months to last September compared with a loss of 1.9m the previous year. The American firm's performance contrasts with figures from Costa which showed comparable sales growth of 3.9% for the 39 weeks to the end of November last year. Since then the pace of Costa growth has accelerated to 8.5%. Starbucks' performance underlines concerns raised by chief executive Howard Schultz a year ago when he delivered a damning, off-the-cuff assessment of the UK economy. "The place that concerns us most is western Europe and, specifically, the UK," he said. "The UK is in a spiral."

Asked about his biggest concerns, Schultz said: "Unemployment, the sub-prime mortgage crisis, particularly in the UK, and I think consumer confidence, particularly in the UK, is very, very poor." These remarks immediately sparked an angry response from then business secretary Lord Mandelson. "Why should I have this guy running down the country?" he said. "Who the fuck is he? How the hell are they [Starbucks] doing?" A Starbucks spokesperson said: "These figures from last year reflect an undeniably tough period at the height of the recession and the substantial investment we made to alter the course of the business at that time. That's paying off with a record number of customers and a return to solid sales growth in the last year." The British coffee shop market has become increasingly dominated by Starbucks, Costa and to a lesser extent Caff Nero. Intense competition spilled over into a bitter row this year when Starbucks complained to the Advertising Standards Authority. It objected to a Costa campaign which boasted "Starbucks drinkers prefer Costa" and "Seven out of 10 coffee lovers prefer Costa". The ASA last month upheld Costa's claims, ruling they were based on independent blind-tasting tests. In the last year Starbucks has refurbished some UK stores, and has earmarked 24m for this process in the current year. The group is also focusing on services such as free Wi-Fi access and reputation-enhancing initiatives such as sourcing Fairtrade coffee for espresso-based drinks. "We looked at every aspect of the business and we have a clear path to profitability in the UK," the spokesperson said. Starbucks has also been experimenting with an instant coffee brand, VIA Ready Brew, as other high street outlets among them pub chain JD Wetherspoon and McDonalds aggressively target cost-conscious coffee drinkers. The brand is expanding into motorway services and expects to have some 30 outlets selling Starbucks coffee at Welcome Break services by the end of the summer. Questions to answer 1)
convenience stores gas stations quick service and fast food restaurants gourmet food shops donut shops independent coffee shops

Identify the major competitors (across different services/products) What are their major strengths? (i.e. what are they good at?) What are their key success factors? (what makes them successful?) What are their major weaknesses? How could we counter-act their strengths or exploit their weaknesses?

For example: Coffee costa, Cafe nero, Coffee Republic, McDonalds etc

2) Low cost of production, brand, exceptionally high quality, good customer services, better deals, stores are in prime locations, some competitors have drive thrus for quick service. A reputation for value of money, convenience and a wide variety of products 3) low price to sell, strategy to sell products like introducing deals and promotions .

4) What are their major weaknesses? a) a weak control of its empire, despite its IT advantages. b) operates globally, but its presence is located in only relatively few countries worldwide. c) lack of flexibility d)

Analysis of Starbucks Competitors

While Starbucks is still considered the dominating coffee chain corporation, in recent years, its hold on the coffee has loosened considerably. The recent competition facing Starbucks has not been from newcomers, but rather from older coffee chains that have increasing consumer loyalty and from established fast food corporations that have altered their focus to incorporate the rising trend of coffee. Starbucks has also been

unsuccessful in unseating many independent mom and pop coffee houses, which have both hometown familiarity and loyalty. One of Starbucks biggest competitors is considered to be Dunkin Donuts. While Dunkin Donuts has always been moderately successful in selling coffee, especially because of the complimentary pairing of donuts and coffee, in the past few years the corporation has begun to aggressively promote its coffee. Dunkin Donuts recently hired celebrity Rachael Ray to be the face of their new advertising campaign, which has the slogan, America Runs on Dunkin9. Moreover, Dunkin Donuts has started to emulate several Starbucks strategies, including holding a free coffee day a week after Starbucks held its free coffee giveaway. While Starbucks is still the largest retail chain, a 2007 survey conducted by research firm Brand Keys has found that Dunkin Donuts is No.1 in terms of customer loyalty (Starbucks came in at No. 2) . While Dunkin Donuts has found its greatest success in the Northeast, Starbucks main West Coast rival has always been Peets Coffee & Tea. Starbucks stocks have fallen significantly below the market in the past year, while other coffee chain competitors such as Peets Coffee & Tea have had their stocks remain at market level or above. Peets Coffee & Tea, which was founded only 5 years before Starbucks, has stayed in the coffee industry due to its focus on quality coffee. It has not tried to beat Starbucks moneymaking strategies of selling music and appearing edgy, but instead it has remained true to its core as a coffee shop that sells quality coffee. Peets concentration on quality coffee comes across with stances such as never resteaming milk, roasting beans in small batches, and maintaining a large variety of coffees for customers to choose from10. Peets strategy of opening across the street or nearby to Starbucks locations has allowed it to take advantage of Starbucks popularity for its own gain, giving consumers an alternative coffee shop to go to. Additionally, Peets has never concentrated on store expansion, choosing to maintain its current stronghold in California. Because of this, on the West Coast, Starbucks does not command the same customer loyalty that Peets does. The Coffee Bean & Tea Leaf has similarly done well by making sure to appear different than Starbucks with its large tea selection and its successfully innovative nature. Coffee Bean& Tea Leaf was the first corporation to popularize Chai Lattes and Ice Blended Coffee Drinks, both of which have been massively successful and emulated by Starbucks. The Coffee Bean & Tea Leaf was also able to find success in Israel, a place where Starbucks was unable to conquer, because Coffee Bean & Tea Leaf boasts kosher drinks and allows smoking. Starbucks has strong competition from other coffee shops, but surprisingly, the other main competitors rising in the coffee market are prominent fast food chains. Corporations such as McDonalds and Burger King have been around much longer and have a much bigger establishment than Starbucks does. They already have the infrastructure in place to sell coffee, and these fast food chains have recently been promoting what they assert is coffee thats of similar quality to Starbucks for a cheaper price. For the same sized cup of coffee, McDonalds charged $1.35, Burger King charged $1.40, and Starbucks charged $1.5511. McDonalds has recently confirmed an increase in its breakfast business, which is cited as due to their Newmans Organic Coffee line.
9

Burger Kings coffee is also praised as highquality fastfood coffee, especially with its choices of decaf, regular, and turbo. While Starbucks has strategically opened its stores nearby small, privatelyowned coffee shops in attempts to drive them out of business, in many cases the effort to drive away the smaller mom and pop shops has backfired. Starbucks marketing for their newly opened stores only drew more customers for the independent coffee places in the vicinity. Independent coffee shops have even gone so far as to open up more coffee shops next to Starbucks, similar to Peets strategy of chasing Starbucks locations. And the smaller independent shops have the upper hand in terms of customizing their coffee shop to appeal to small towns, such as endorsing hometown football teams. Starbucks faces stiff competition from all sides. Its mass marketing leaves it unable to gain the consumer loyalty that smaller coffee shops have, and fast food conglomerates are far more established than Starbucks is.