External Environment

As Starbucks continues to grow, so do the number of rivals or competitors the company must face. Resturants like McDonald's and Sonic have recently began creeping in on Starbucks' market share by offering flavored and iced coffees at a lower price. While McDonald's and Sonic can be considered competitiors of Starbucks, the opposite is not true. Starbucks focuses on gourmet coffees while the other two restuarants are primarily in the fast food industry. The problem with fast food companies entering into Starbucks' market is that fast food chains typically provide a similar product at lower cost to the customer, and are more readily available than Starbucks' stores. With a downward sloping economy, households are focusing on "more bang for the buck" so a one-stop shop at McDonald's or Sonic for breakfast and coffee off of a value menu is better suited for the middle class budget. However, there are some customers that will remain devoted to the Starbucks brand regardless of economic conditions or convenience.

Another external factor working against Starbucks' success is the depressed economy. The economy was cited as the reason for several store closings in recent months, and also the blame for post poning the expansion of new stores across the globe. It seems even a good cup of coffee can't pull one out of an economic slump. All is not lost for Starbucks, however. The company has taken advantage of some of their external factors by implementing product differentiation, expanding product lines by offering more food options and music collections, and offering free wi-fi to customers that drink in the lobby. Product differentiation has derived in many forms including new coffee drinks and holiday drinks that a customer cannot find on a competitor's menu; further distinguishing the Starbucks brand from competitors.

SBUX - $25.07 ( as of close of business 09/03/10)