BA Business Management: Starbucks Economic Presentation, FE4053QA

This presentation analyzes Starbucks from an economic perspective, focusing on key factors influencing its business. It begins with a brief introduction to Starbucks, highlighting its global presence and product offerings. The presentation then delves into demand factors like income and price changes, classifying Starbucks' product demand as price elastic. Supply variables such as price, cost of production, and technology are discussed, along with the factors of production. The analysis further explores marginal cost, market structure (monopolistic competition), and associated economic problems related to demand and supply. Proposed economic solutions include strategies for demand creation through product improvement and variety. The presentation concludes by emphasizing the importance of product development and cost reduction for Starbucks, underlining the impact of product quality and price on demand. The references include notable economic publications and studies.

Presentation

Introduction
The chosen firm for this presentation is
Starbucks. This company mainly belongs to
US and sales coffee around the world.
Starbucks is known for its quality baristas
coffee. Company also serves delicious,
handcrafted beverages and great-tasting
food. Starbucks is also known for its
expensive products, the reason is high
operating expenses beared by the company in
the form of rent which grew by 13%.

Demand factors
1. Income of the People
2. Price changes for related products
3. Advertising expenses

Price elastic
The demand for
Starbucks product is
price elastic.
As with the increase in
the price of coffee, the
demand of the product
shifts to cheaper
alternatives; and with
the decrease in price,
demands of other
alternatives shifts
towards Starbuck’s
product.

Supply variables
Price
Cost of production
Technology

Factors of production
Land
Labor
Capital
Entrepreneurship
Fixed and Variable
factors
In the give cost of
production factors,
labor lies into variable
factors, while land,
capital and
entrepreneurship lies
under fixed factors.

Marginal cost
Marginal cost is equal to marginal revenue;
this means that Starbucks is earning normal
profit from the business in long run.
While in the short run, especially during
season, the MC is lower than MR, this
indicates that Starbucks is earning
supernormal profit.

Market structure
Starbucks is operated under monopolistic
competition, where large number of firms
sales variety products and have full control
over the price of their product.
As all coffee businesses sales different
flavored coffees and the price of each
restaurant are varies from each other.

Economic problems
Demand problem
Price decreases with the decrease in demand.
Supply Problem
At lower price supply of the product also
reduces.

Economic solutions
One of the best solutions to above economic
problem is creation of demand. As with the
increase in demand price also increases and
company can earn higher marginal profit.
The solution is long term, as to create
demand company requires to either improve
its product quality or make different variety
in its product to gain advantage of monopoly
competition.

Conclusion
At the end it can be concluded that Starbucks
requires investing in product development
and costing reduction.
The major factor affecting demand of the
Starbucks include product quality and price.
Thus company needs to control these two
factors to dominate the product demand.

References
Shiller, R.J., 2020. Narrative economics. Princeton
University Press.
Baldwin, R. and Di Mauro, B.W., 2020. Economics in
the time of COVID-19: A new eBook. VOX CEPR Policy
Portal.
Norris, K. and Vaizey, J., 2018. The economics of
research and technology (Vol. 33). Routledge.
DellaVigna, S., 2018. Structural behavioral economics.
In Handbook of Behavioral Economics: Applications
and Foundations 1 (Vol. 1, pp. 613-723). North-Holland.
Zamir, E. and Teichman, D., 2018. Behavioral law and
economics. Oxford University Press.