Economics Essay Example | Topics and Well Written Essays - 750 words - 10

Economics - Essay ExampleFor this giant, drinking chocolate is not the of import product but only a component of it. Starbucks is not just all about coffee but being able to relax and interact at its warm and comfy ambiance. However as the article emphasizes, the performance of the specialty coffee shop in the market is adversely affected by the economic slowdown in the United States. As consumers try to squeeze their disposable income to cover all their expenditures, they also turn to industry players which offer coffee for a fraction of a cost of what Starbucks charge. Thus, McDonalds and Dunkin Donuts are eating up into the companys shares with their cheaper alternatives. In response to this, Starbucks is test marketing $1 deep coffee in order to curb competition. Analysts have commented that Starbucks will lose big time with this strategy beca theatrical role it lowers revenue. Yet this paper argue that economically speaking, this impudent strategy will not erode profitabili ty in consideration of the companys market.The specialty coffee sector can be referred to as a monopolistic competitive market. This type of competitive environment is a middle ground between two maxims namely perfect competition and monopoly and shares characteristics of both. In monopolistic competition, the market has many buyers and sellers just like in a perfectly competitive one (Samuelson & Nordhaus 116). In the specialty coffee sector, buyers are assorted ranging from ordinary students to corporate executives while sellers like Starbucks and Gloria Jeans compete for market share. As opposed to monopolistic and perfectly competitive markets, sellers differentiate their products to appeal to customers. As discussed above, Starbucks use marketing techniques like advertising and brand name in order to set itself apart from other competitors like McDonalds and Dunkin Donuts. This is very important to all companies lacking(p) to