The firm appeals to the mass market, selling a non-essential product. Sales of non-essential products suffer most during economic downturns. Furthermore, when there is a recovery, firms that sell items of a relativity low cost that are still perceived as 'luxuries' may benefit from even small increases in the level of disposable income (Kotler and Keller, 2011). A key indicator of the economy in the U.S. is the unemployment level; this has dropped to 7.5% in 2013 with a recent Wall Street Journal survey of economists indicating they expect a further 180,000 jobs will be created each month for the next 12 months in the U.S. (Casselman and Izzo, 2013). As increase employment emerges wages are also likely to increase; raising the level of disposable income where the increases are above the rate of inflation. There is a general agreement that there is a recovery taking place, it may be slow, but it is also believed that another recession is unlikely (Casselman and Izzo, 2013).
Increased jobs will increase the aggregate level of disposable income in an economy, and increase aggregate demands; Starbucks may benefit from that demand and have more consumers who may have the utility to purchase the coffee, and associated products. Increases sales of core items will also increase the potential to sell complementary items. Where there is consumer confidence in the economy, this will also encourage spending, as consumer will not feel the need to remain cautious (Baye, 2007).
Starbucks...
However, there are many positive influences emerging, short-term lower coffee costs and the long-term potential for increased demand may see some of the benefits offset by increases in other costs. However, there is a greater potential for gains compared to losses; so Starbucks is likely to benefit from the changing economic influences, seeing both sales and profits levels increase.
References
Baye Michael, (2007), Managerial Economics and Business Strategy, McGraw-Hill/Irwin
Casselman, B; Izzo, P, (2013), Economic Road Clearing, but the Going Is Slow, Wall Street Journal, [online] http://online.wsj.com/article/SB10001424127887324059704578473383938968700.html accessed 5th June 2013
Economagic, (2013), PPI: Dairy Products, [online] http://www.economagic.com/em-cgi/charter.exe/blswp/wpu023 accessed 5th June 2013
Forecasts.org, (2013), Crude Oil Forecast, [online] http://forecasts.org/oil.htm accessed 5th June 2013
Josephs, L, (2013, March 17), Coffee-Bean Prices Sag as Stockpiles Build, Wall Street Journal, [online] http://online.wsj.com/article/SB10001424127887324077704578362770217867326.html accessed 5th June 2013
Kotler Philip; Keller Kevin, (2011), Marketing Management, Prentice Hall
Starbucks, (2012), 10-k, for the Fiscal Year Ended September 30, 2012, Starbucks
From the students own notes
