Research Paper Outline 1

Dommonic Bland

“Starbucks is hiking prices, again”

Economic 210

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 Research Paper Outline 2

Abstract

Throughout this paper, I don’t use first person. plan to examine why Starbucks decided to

raise their prices for the third straight year in a row. We will take a closer look at how and why

Starbucks has a dominate presence in the coffee market. I plan to explain the effects of these

changes in prices through the use of several key microeconomic concepts, such as elasticity,

supply and demand with the use of illustrated graphs. At the end, I will be discussing my

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personal thoughts about these concepts, as well as the future of Starbucks. Throughout this paper

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will ??? be utilizing several references for information to include our textbook, Starbucks

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website and a few articles from various outlets.

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 Research Paper Outline 3

Starbucks is an American based coffee company, a popular franchise corporation. It’s the

largest coffee firm in the industry. There are more than 21,000 stores, as of August 2015, in over

65 countries. (Starbucks 2015) the reference ALWAYS goes inside the period. The company is

in the restaurant industry as well, where they server premium gourmet coffee and delectable

pastries while providing the coffeehouse experience. Starbucks recently announced it will be

raising prices again on some of their hot beverages (REFERENCE). These prices increases will

vary from $0.05-$0.20 on the affected drinks. (Wattles, 2015) Over the past few years the

company has raised prices on a variety of their products, so this didn’t come as shock to the

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public. What products and how much (REF). According to spokeswoman Lisa Passe, “this is the

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first increase in two years for the majority of impacted beverages, such as Tall brewed coffee and

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Grande Latte”.(Wattles, 2015) The move will increase the cost of the average customer’s order
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by 1%, according to the company.
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When one thinks about the name Starbucks, most people would associate the name to
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coffee. Starbucks has built a repetition for providing that premium coffeehouse experience to the

average person and for that reason; they have a very marketable brand. The brand has a strong
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customer relationship with is customers. Since the company’s existence, they have only few
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major competitors in this industry to include such companies as Dunkin Donuts, Krispy Kreme

and McDonalds, making it a free market for competition. There are a few other coffee houses
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that are competing with them on a national level as well. We have seen that it is very easy to get

into this market but it is very hard to make a profit. Starbucks has come up with an ingenious
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way to charge $0.05- $0.20 more on certain hot beverages this go around. Starbucks customers

have experience these small hikes in price in the past, due to the current market prices of coffee

beans what were the past hikes? Buy how much? (REF). But this time, the price increase is part

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 Research Paper Outline 4

of Starbucks strategic marketing campaign (REF). These will have little effect to the companies

on going popularity, even when their competitors are lowering their prices to try and keep up.

The company has established a large control over the coffee restaurant industry, allowing

them the ability to dictate the ongoing cup of coffee (REF). Starbucks customers are very loyal to

the company and they are willing to fork over top dollars for those premium beverages. Sales

remain steady over the past few years, despite the company’s price increases. In 2014, Starbucks

reported a 6% global sales increase vs its competitors less than 1.2% global sales (REF). As the

law of Supply and Demand states the availability of a particular product and the demand for that

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product has on price. If the demand is high, prices will be low incorrect! As prices go down

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quantity demanded goes up… price of rice is low but demand stays the same…. And when

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supply is high, the demand will be low incorrect. quantity supply is high as prices go up. We can
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see this on in today’s market prices per cup of coffee. This is shown on the curve below. When
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supply(S) is high it shifts the curve to the right (S1) and the demand changes. Supply shifts
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increase supply at all levels.. something happens (other than price ) to shift supply… cost of

beans go down… more competition.. prices only change quantity supplied not a shift in supply.
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There is a big difference… And when the Demand (D) increases, it shifts the curve up and to the
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right to (D1); when these changes occur the prices change (As long as all else stays the same).
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 Research Paper Outline 5

(Money, 2015)

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(Figure 2)
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When you do not use second person either think about coffee, could you live
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without it? This is the question economics as every time theywho is they? talk about the
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elasticity of coffee. Well for some people, the answer to that question is No do not capitalize,

How many… give me a resource that proves your point which would make coffee elasticity this
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is not correct usage of this… are you saying coffee is elastic? . What is the elasticity of demand
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for coffee? Look it up and give a source. Then explain if it is elastic, inelastic or unit elastic. And
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for those who could live without or find other alternatives for coffee would say coffee would be

inelastic not correct usage. In my option, I think coffee is like a drug it is a drug caffeine.. here is

where you look up to see if any studies were done on “coffee” addictions… or obsession with

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 Research Paper Outline 6

starbucks.. etc. and some people would go to great lengths for their caffeine fix but why coffee?

Coke has it too. . This is very evident in the current coffee market. We can see why Starbucks

can afford to charge a premium price on their products, while their competitors’ prices are lower.

We can see in the graph below who this works. A product is defined as inelastic, when an

increase in price causes a small change in demand. A product is defined as elastic, when an

increase in price causes a big change in demand. Yes this is correct! Above was not. So when the

price of coffee goes up … What? Real numbers here… show the research on the price increases

for coffee and the actual demand. So, what does all this say? What are you trying to prove?

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Starbucks is a Monopoly? Can they charge whatever they want for coffee?

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(Figure 3)
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In conclusion, I think Starbucks is here for a long time. They have proven to have a very
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successful business model. I see them continuing to raise their prices as the business world

continues to change. The average customer is making more money and Starbucks is capitalizing

on their success. We have seen how these small price increases prove to be very beneficial to

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 Research Paper Outline 7

both the customer and the company. With these changes the company will be able to continue to

provide customers with that gourmet coffeehouse experience without ripping ??? of its

customers. But I do see you don’t see anything… The paper should lead the read to the

conclusion you are just stating it so it matches your argument in the paper. in the near future

where the company will maximize its profits. As a faithful Starbucks patron, I Hence people will

still be in line to get my their Grande size Frappuccino, even though they Starbucks may have

raised their prices by a few cents. Nothing can compare the satisfaction of my caffeine fix. The

real question is at what price does this change?

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The paper needs work. Make sure you do not use 1st person or 2nd person in the paper. You need

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more research.. Make sure you reference ALL numbers and dates and any thoughts not your

own. Go deeper into the mind of a Starbucks’ patron… there are studies out there showing
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loyalty and brand ID seek out the research and it will help develop the paper. Think about what
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you are trying to prove or show… watch the way you phrase thing. The paper is short as well.
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References
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Our text book

Articles from various news outlets (i.e. CNN Money)

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 Research Paper Outline 8

“Starbucks is hiking prices, again”

http://money.cnn.com/2015/07/06/news/companies/starbucks-price-hike/index.html

“Starbucks ups price on drinks, bagged coffee today”

http://www.usatoday.com/story/money/business/2014/06/20/starbucks-raising-

prices/11105425/

Dunkin', Mickey D’s or Starbucks? The Surprising Winner of the Coffee War. (n.d.). Retrieved

August 5, 2015, from http://time.com/money/3028578/dunkin-donuts-mcdonalds-starbucks-

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coffee-wars/

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Demand Elasticity. (n.d.). Retrieved August 5, 2015, from

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http://thismatter.com/economics/demand-elasticity.htm
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