How can Starbucks react to the threat of McDonalds selling low cost Essay

How can Starbucks react to the threat of McDonalds selling low cost coffee - Essay Example I would be failing in my duty if I don’t thank all those employees of Starbucks and McDonalds who responded to the phone calls and e-mails sent to these organizations. Last but not the least, I would like to thank all my friends who have been supporting and helping me with this assignment. Table of Contents Contents Pages Executive Summary 4-5 Introduction 5 McDonald’s Vs Starbucks 5-6 Problem for Starbucks 6 Sources of Information 6-7 SWOT Analysis 7-8 Financial Analysis 8-9 Findings 10 Recommendations 10-11 Appendices 12-25 Works Cited 26 How Can Starbucks React to the Threat of McDonalds Selling Low Cost Coffee? Executive Summary Starbucks and McDonald's are big multinational companies that have made their presence felt in the businesses they operate in. Seattle based Starbucks was founded with the objective of providing Italian espresso bar experience in the United States. As a business strategy Starbucks operates by forming a personal relationship with its consumer s. On the other hand McDonalds is a family restaurant and attracts people from all age groups. Strictly speaking, both these behemoths have distinct target markets. Starbucks attracts the affluent while customers who are price sensitive are McDonald’s target market. McDonald’s has rolled out its low-priced coffee brand and in the process has started eating into the share of Starbucks. McDonald's appears well placed to become Starbucks’ biggest competitor in the specialty coffee segment in the coming years. Starbucks now has to devise strategies to counter McDonald’s move and not let its market share dip. The present paper is a commentary on ‘How can Starbucks react to the threat of McDonalds selling low cost coffee? To answer this question relevant information on both these companies has been collected from various primary and secondary sources. A comparison has been made on the business operations of both Starbucks and McDonald’s, SWOT analy sis has been carried out and finally a financial comparison has been made. Some alternatives that can be adopted by Starbucks to react to McDonald’s move have been suggested based on aforesaid analysis. I personally feel that Starbucks should not respond to McDonald’s move with a price cut, rather it should elevate the quality perception in the minds of the customer and build a set of loyal customers who are willing to pay a premium price in exchange of getting the ‘coffee experience’ that Starbucks has to offer. Introduction I have decided to write a commentary on ‘How can Starbucks react to the threat of McDonalds selling low cost coffee? I have chosen this topic since it involves two big U.S. based companies who have worldwide operations, have a huge set of loyal customer base and are well known for their quality products. Starbucks Vs McDonald’s Starbucks is Italian-style coffeehouse chain based in Seattle, Washington. The company was foun ded in 1971 and has more than 17, 000 retail stores in 60 countries. Since inception Starbucks has believed in serving the best coffee to its customers. In fact, the company delivers much more than a simple cup of high quality coffee; it ensures a wonderful experience for the customer. A look at the product portfolio of Starbucks clearly indicates that the company has a huge variety of coffee