Starbucks is considered to be part of the perfect competition market because of the basic structural characteristics of perfect competition. The infinite consumers buying the product, buyers and sellers easily able to enter and exit, and information known to all public.
I think that Starbucks does indeed have many competitors out there and there are indeed many challenges that one must take in a perfect competitive environment. It is well possible to make some profit in the short-run, but in the long-run economic profit will begin to slow down.
Starbucks had to realign their business practices due to a number of stores closing. Starbucks had earlier begun implementing new devices inside the stores to improve on efficiency and services to the customers. This in turn proved to be a negative effected due to the store straying away from it's traditions, history and the passion that use to be there before. As the title from Starbucks Gossip describes: Starbucks chairman warns of "the commoditization of the Starbucks experience".
Due the restructuring of some stores, the short-run and the long-run costs must have projected some negative numbers for Starbucks. The automated equipment was indeed a short-run cost.
I do think Starbucks coffee is expensive, but there is a reason behind this. Starbucks serves quality coffee and not the usual coffee you find elsewhere. Starbucks charge these prices in connection with the quality coffee beans they get. If Starbucks were to lower their prices, Starbucks will indeed see some profit in the short-run but not in the long-run.
Sources:
· The Seattle Times
(http://seattletimes.nwsource.com/html/businesstechnology/2008028854_starbucks02.html)
(http://seattletimes.nwsource.com/html/businesstechnology/2008028854_starbucks02.html)
No comments:
Post a Comment