What’s the point?
What’s the point?
A monopolistic competition has lower barriers of entry hence it is important for the firm to bring in new products to differentiate themselves for their dominant existence in the industry.
Source:
Starbucks Unveils New Coffee Makers, The Wall Street Journal, and March 8, 2012.
Discussion:
Starbucks is moving into single serve coffee market in a big way by introducing its own brewing machines. It entered into single serve market in 2009 with it’s via instant coffee. Starbucks is continuing to seek new ways to expand into the single-serve market. The move is part of Starbucks's strategy of becoming a broader consumer-products company rather than relying so heavily on its retail stores. Starbucks jointly with Germany-based Krueger GmbH & Co developed a single-serve system, Verismo. Verismo machines will complement its partnership with Green Mountain.
Starbucks is facing a monopolistic competition; many sellers, low barriers to entry, slight product differentiation. In this industry, you can differentiate by style or type, by location, and by quality. Starbucks retails stores are more like a Coffee-bar, where you grab a drink, listen to music and work for some time and its typical customers are prime ones, who care more about standard, brand; and less about the price. Starbucks has a competitive advantage of quality, brand name and a well established customer base and hence has pricing power over the others in the market. The