McDonald’s when entered the business it started as a fast food restaurant. Today, McDonald’s have diversified its business by offering premium coffee, breakfast options and many other products ranging from different market segments to affect sales of Starbucks (Alkema, Koster, & Williams, 2010). The other issue related to Starbucks was that it was rationalizing its global portfolio by growing its store too fast. This is resulting in the cannibalizing of its products as the stores are closely located. Due to this reason the company had closed down 1,000 company operated stores.
8000 stores have been closed down in United States, and remaining stores in other international markets. Starbucks was affected by the financial crisis around the world due to which its stock price declined to $10 in 2009 from $35 in 2007. However, the company managed to overcome this change and recently in 2011, the stock price went to $30. But then, its net revenues were not maintained and did not rise along with the stock price which is a greater concern for the company (Alkema, Koster, & Williams, 2010). Four most important facts: The first most important factor that contributes to the decline in sales is the economic downturn around the world which has led to financial crisis for Starbucks.
Starbucks is considered to be a high quality coffee but with a high price tag. This becomes an important factor in the contribution of worldwide shutting down of the Starbuck’s café. The other most important factor is the pressure from various competitors that are trying suppressing the existence of Starbucks in the market. Competitors such as McDonalds are trying to put pressure on the company to step down as the world market leader.
Various companies are offering lower priced coffee in the expectation that it would drive Starbucks out of the business (Koehn, Besharov, & Miller, 2008). The third most important factor is the growth of the company and the expansion of its number of stores around the world. This had made the company to focus on its operation in expanding the business to many parts of the world and achieving their vision which was to open 40,000 café’s around the world.
The company has diverted its focus from customers to international operations which has created disruption in its sales. The company can only survive in the market if they have care for their customers and always willing to satisfy their needs. The last important factor is to depend more on the coffee product instead of offering more varieties and diversification in its product portfolio.
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