Originally when Starbucks began they targeted the young college students, with slightly higher than average income levels. After this initial target market Starbucks has since realized that they could target specific neighborhoods and social classes. Different customers are more willing to pay for luxury good now more than ever. With that in mind, through Starbucks aggressive expansion techniques they have begun targeting almost every demographic.
"McDonald's is planning to capitalize on the public's willingness to pay $4 for a cup of coffee by hiring baristas and dropping espresso machines in 14,000 of their fast-food outlets. Meanwhile, Starbucks, with business lagging, is fighting back with an "if you can't beat 'em, join 'em" strategy, by offering heated breakfast sandwiches and adding drive-thru windows to some of their locations." (Tancer, 2008)
As McDonalds and other chains realize the money in luxury coffee more companies will begin to enter the marketplace. One the other side of the spectrum you have the small local coffee bars that were around before Starbucks took over the marketplace. These smaller coffee shops have their core customers who will not give their business to anyone else. These smaller coffee shops can offer specialized products and services or serving to the local markets needs. However Starbucks has a much larger buying power then the local smaller coffee shops giving them a competitive advantage. Coming back to our original quote, we believe that McDonalds has a customer base that is extremely large that now has the option to get their coffee where they get their breakfast already. McDonalds also has an extremely large bargaining power and runs each franchise with impeccable automation. McDonalds cup of coffee costs a lot less money than Starbucks and tastes the same in a lot of cases. One of Starbucks biggest competitors is the economy; Starbucks provides a luxury good that will be a good that people cut out when they want to save money. This has been witnessed with the recent closing of over a hundred Starbucks stores.
Tancer, B. (2008, January 10). Brewing Battle:Starbucks vs. McDonalds.