THE FALL OF STARBUCKS?

Recently, Starbucks just announced that they are eliminating 6,700 employees worldwide. This is after following a series of closures of their shops. I just read the article from msn.com that Starbucks had a 97% fall in profit in the forth quarter of the year 2008 and their shares prices have dipped from mid-$30s to mid-$20s in the previous year n even down further to a little over $10 per share. This was an unprecedented phenomenon. With the on-coming of several rivals such as Dunkin' Donuts and McCafe, just in the U.S only, they have managed to squash Starbucks market share from 58% to 42%. Starbucks, in U.S, has been a massive conglomerate and was even worshipped by the Americans who depended on Starbucks for their caffeine fixes.

Just a few weeks ago, i actually read STARBUCKED by Taylor Clark and found out the interesting history of how Mr Howard Schultz founded Starbucks. It seems that coffee werent ever popular with people until he capitalised on the idea of brewing good coffee. In the past, coffee was sold but it was diluted or lack the quality, nobody ever appreciated and some would even get disgusted at the sight of those bland coffee. But, there's another guy name Peet who actually imported Arabica beans of good quality and perfected the recipe of brewing coffee(the temperature of water, etc...) Peet, sold bags of Arabica beans to people and even taught them how to make the perfect cuppa. But they have to be really strict and adhere to his method or else, he would refuse to sell them the beans. He was known for his temper but it was for the good of those who really appreciate good coffee. And Howard Schultz, together with 2 other good friends started off this cafe business. It's a really interesting book but i din't manage to finish reading it coz i had other books to read as well. Those who r fans fo Starbucks should read it.

And did you know that Starbucks was first opened in Seattle? The first year it opened, it was failing and recurring loss but they had this really crazy idea and went ahead with opening another on the opposite road of the shop itself. It soon created a buzz(a huge one, actually) and actually, generating free publicity for themselves inadvertently. But they aren't exactly mad. The two shops, thou holds the same brand name. They had different interior designs..the first shop catered to more of the general public and on the other hand, the second shop catered to the busy business people who are on their way to offices on out for a quick caffeine fix from their offices tht are nearby. Thus, VIOLA, Starbucks was on it's way to success and creating a new wave of madness. It has created a culture by itself, just like Macdonalds. It's freaking awesome to read their road to success. It's all about hits and misses. You may fail in the things you do, but that does not mean that it will not succeed either. I thought that was quite true, provided you have given a careful thought about the problem. So yup, i shan't tell everything here on the blog. The author's gonna kill me.

But back to the point, now that Starbucks seems to be on the down-slide due to the serious recession that the world is facing right now. I seriously think that they were way too impatient with the expansion plans. Yes, they did replace COKES with COFFEES but still...there are alot of people who could live w/o both and on WATER only. I could only hope for the best for Starbucks. I like it's concept and drinking coffee from Dunkin' Donuts just doesn't taste the same as that of Starbucks.

So if you ask me if Starbucks is gonna fail, i would bet a NO. It's afterall, a trend that was started by they, themselves. It's just like they are the creation of good coffee..Creators do not die. They thrive on customer loyalty and because they are the ones who knows coffee best. They knew to target the psychological aspect of consumers and people all over the world are hooked to their coffee. Yes, recession is here but for these coffee-addicts, it's a neccessity to them already. From an amateur economist point of view, coffee is an price inelastic good since it's 1) habitually consumed good 2) the proportion of income spent on good is small and to coffee addicts, starbucks aint a luxury good to them anymore. It's a neccessity. What's spending ~4 bucks to get their quick caffeine fix than drinking 5 cups of XX 3-in-1 brand of coffee powder?

So yea, Starbucks, in my opinion is here to stay but i hope they pull through this tough period of recession.

Starbucks is LOVED!!!!