There is a variety of market circumstances influencing the situation of one or another enterprise and their competition as a whole. However, popular goods and services are likely to remain intact in the case if their manufacturers implement the appropriate policies. For this research, the selected product of everyday use is Starbucks’ coffee, and its consideration is conditional upon the recent changes related to the COVID-19 crisis, which affected the company (“Navigating through COVID-19,” n.d.). The business is going through difficult times stemming from the recent global economic recession, which will inevitably modify its position. Therefore, this paper aims to analyze the factors influencing the demand and the supply for Starbucks, their effects on the equilibrium price, and the potential shifts in this regard in the future.
Factors Influencing the Demand and the Supply
The elements affecting the perceptions of Starbucks’ coffee by customers can be divided into external and internal circumstances, which should be analyzed, varying by their sphere of influence. Thus, for example, the demand for the drinks realized by the company depends on the current policy, which is the expansion of the business worldwide, signifying the increase in it (UK Essays, 2017). Meanwhile, the market environment’s conditions in this respect reflect the interrelation between this indicator and the income of buyers, allowing to view it as elastic and changeable (UK Essays, 2017).
This aspect is complemented by the shift in their preferences towards healthier options (UK Essays, 2017). Therefore, considering the above, the positive impact of the expansion is balanced by the financial issues resulting from the current crisis, and the demand for coffee remains relatively stable.
In turn, the supply correlates with such factors as the number of sellers in the market and the professionalism of Starbucks’ employees. The former is continuously growing regardless of difficulties the enterprise faces due to its operation in many different countries and thereby contributes to the increase in this field (UK Essays, 2017). The latter presents one of the principal benefits of Starbucks compared to such competitors as MacDonalds or Coffee Bean and ensures the advantageous position in the market (UK Essays, 2017). Hence, the supply for the company is affected by the specified components, which demonstrate the extended coverage of the rising number of customers.
Equilibrium Price of the Product
One of the essential areas of influence of the mentioned factors alongside their role in forming the demand and supply for Starbucks’ coffee is the establishment of the equilibrium market price of the product. According to the statistics, the changes described above, especially the crisis conditions, led to the need to readjust this indicator (UK Essays, 2017). This necessity is explained by the decrease in purchasing power and the following incapability of the company to meet people’s expectations while providing the goods of an appropriate quality (S&P Global, 2019).
As a result, Starbucks tried to reduce the salaries of its employees around the world and renegotiate the accompanying costs, such as the services of third-party workers and landlords (UK Essays, 2017). Hence, it can be concluded that the shifts in demand and supply resulted in the decrease of the equilibrium price of Starbucks’ drinks.
Prospective Changes in Demand and Supply
As can be seen from the analysis above, the conditions of the external environment play a dominant role in Starbucks’ policy. From this point of view, the new events stemming from the COVID-19 crisis and the economic recession will inevitably reform the business in an unexpected way. They will also negatively affect the demand and supply of the products. The former depends on the willingness of customers to pay for coffee, which is a good they can refuse from purchasing for a while. As for the latter, it is directly connected to the opportunities of dealing with foreign partners, which will not be as optimistic as it is required for further progress (S&P Global, 2019). Nevertheless, as any other company in the present-day world, Starbucks implements a number of new decisions to mitigate the risks.
These methods aimed at eliminating the chance of a negative outcome include the efforts for addressing the needs of partners, employees, and buyers. They are advantageously complemented by the initiatives intended to equip the store partners with the necessary tools and resources (“Navigating through COVID-19,” n.d.). Therefore, the anticipated turn in the principal operations will have a significant impact on the demand and supply, but it will be balanced by the adopted measures.
To summarize, the current policy of Starbucks with regard to emerging challenges seems efficient in overcoming barriers to successful participation in the market. It is significantly influenced by external and internal factors, including the ongoing crisis, the declining demand, and the complicated supply. However, the company is capable of remaining competitive due to its actions for mitigating the specified risks. It also efficiently readjusts its activity in all the aspects depending on the emerging situations, which should be addressed in a timely manner, such as the efforts on correcting the equilibrium price of coffee drinks by cutting the expenses on other services. Thus, the current economic recession will affect the business, but it will be likely to recover shortly after its completion.
Navigating through COVID-19. (n.d.). Starbucks Stories & News. Web.
S&P Global. (2019). Starbucks seasonality shifts as coffee market stability concerns rise. Web.
UK Essays. (2017). Effects of the expansion of Starbucks. Web.