Starbucks is an international coffeehouse that provides the customers with a unique “Starbucks experience” by offering them high quality coffee because of which the brand is being recognized worldwide. Since its popularity is growing immensely, the number of stores is increasing and this has played a major role in accelerating its revenues. Starbucks was the one that revolutionized the coffeehouse industry and it did this by marketing high-quality, expensive coffee and also by providing a warm and clean environment where the customers could go and enjoy and could escape from the chaos in their daily routines.
Besides this, the customers also have access to Wi-fi Internet at all the outlets of Starbucks and this enables them to work as well and to develop customer loyalty. Moreover, Starbucks also comes up with books and music events to make it more like a community center for the customers. Although Starbucks has been doing very well in its industry, there are many other competitors that have entered the industry and this is serving as a threat for Starbucks.
The closest competitor of Starbucks is Caribou Coffee that has 415 stores in the United States. However, since Starbucks has more than 11,000 stores, this makes it only 5% of that of Starbucks. Besides, Caribou Coffee, McDonald’s is also in line and Starbucks has to face fierce competition with McDonald’s. It was in 2006 when McDonald’s upgraded coffee and this was the time when it began to compete with Starbucks. It has 14,000 stores in the United States and this figure tells us that McDonald’s has more stores than Starbucks.
Moreover, since McDonald’s has a target market that is more diverse than that of Starbucks, more people visit McDonald’s than the number of people who go to Starbucks. McCafe was introduced by McDonald’s in 2008 from where the customers could buy espressos and cappuccinos and these drinks were priced between $2-4. This high-margin was chosen by McDonald’s to raid the caffeinated beverages market that was dominated by Starbucks. According to the analysts, McCafe will negatively affect the sales of Starbucks and this is the reason why it is a major threat for it.
Despite of the fact that the two are having coffee wars with one another, it is said by the analysts that both Starbucks and McDonald’s fall in separate niches with Starbucks offering a quality experience while McDonald’s provides a better value proposition to the customers. In order to cope up with the challenge being thrown by McDonald’s, Starbucks plans to team up with Burger King and it has been announced that by September 2010, Starbucks’ Seattle’s Best Coffee would be sold in around 7250 outlets.
The new drinks that fall in the price range of $1-2. 79 are supposed to replace BK Joe brew of Burger King that was introduced in 2005. Another major competitor of Starbucks besides Caribou Coffee and McDonald’s is Dunkin Donuts that is private company and has 5000 stores in the United States. Although Dunkin Donuts is a competitor of Starbucks but the two portrays two different concepts of having coffee.
At Starbucks, the place to work and relax theme is portrayed while Dunkin Donuts opposes this by relating a customer experience of having coffee on the go. Besides these major competitors, the competition is divided between several other small and large coffeehouses and coffee chains in the US and worldwide and nowadays because of the growing popularity, even the restaurants are offering specialty coffees and other drinks such as espresso, cappuccino, latte to the customers.