Starbucks Corp. purchases and roasts high-quality whole bean coffees and sells them along with fresh brewed, Italian style espresso beverages, a variety of pastries and confections, and coffee related accessories and equipment – primarily through its company-operated retail stores. Starbucks does not franchise, but enters into licensing arrangements with companies that provide access to real estate which would otherwise be unavailable such as airport locations, national grocery chains, major food services corporations, college and university campuses and hospitals. Starbucks has a reputation for new product development and creativity.
However, they remain vulnerable due to the fact that their coffee is expensive in comparison to their competition. Starbucks sells premium coffee at an expensive price. Many of Starbucks business comes from loyal customers who don’t mind to pay high prices for coffee. This fails to benefit Starbucks because they are eliminating potential customers due to their high price. By turning away potential customers Starbucks is giving business to their competition. Coffee is an inexpensive industry to gain entry into, therefore this leaves an easy entry for increased amounts of competitors.
Now not only is the competition opening up shops in locations around already established Starbucks shops, the competition is now selling the product for less money. Another weakness that Starbucks imposes upon their self is that they are at risk of self cannibalization. This is due to individual shops becoming closer together as more shops open. Starbucks is notorious for opening shops within minutes from one another. By opening up shops within short distances of one another Starbucks is taking business away from their other locations.