Trouble Brews at Starbucks Case Study Example | Topics and Well Written Essays - 1250 words

Trouble Brews at Starbucks - Case Study Example However, in 2007, trouble began when the company performance began to decline. It reported a reduction in the number of customer visits in the United States leading to a 50 percent drop in share price (Pride, Hughes and Kapoor 45). In two quarters growth remained flat and declined in the fourth quarter. This led to rehiring of Howard Schultz, who was viewed as a visionary leader. This was done on the purpose of restoring Starbuck’s premier brand. To this end, this paper analyzes this company to understand how it can regain its earlier status. In the industry, the level of competition is very high. Some of the major competitors for this company include the Tully’s coffee, Caribou Coffee and Gloria Jean’s. Although, there are a high number of competitors, the industry is dominated by the mentioned competitors. In Starbucks case, there are new entries and other firms in the market. The company’s new competitor is McDonalds’ â€Å"McCafe†. Competitors are likely to enter this industry because the startup cost is low. McDonald has the ability to create its distinct product that will help it tap in the coffee market. A store that can successfully enter the market has the potential to make profits. Fortunately, the company’s location limits new entrants. Also, the existence of differentiated brands enables the company to increase the switching costs for customers. For Starbuck, the sheer scale has helped reduce the buyers bargaining power (Romney n.pag.). There is no single group that influences the purchase of the company’s products in large quantities. Also, there are different options as a result of a high number of competitors. In addition, the products that can substitute coffee are in of a variety. This threat is high for the company. The purchase of bottled coffee is seen as inexpensive rather than opting for the company’s mug coffee. There are also products that can be used instead of coffee. They