Starbucks Competitive Advantage

Competitive advantage is an advantage in which a company outperforms others in terms of productivity, quality, price of products, superior service, better technology, and higher profit. An example of a company with competitive advantage is Starbucks.

Starbucks Corporation has been around since 1971.  What makes Starbucks unique from other coffee-bar shops is not only their wide selection of products, but the environment they provide to all customers. Starbucks sustains competitive advantage by constantly looking for new ideas, new products, as well as new experiences for guests. Starbucks also offers a selection of music, and unique designed coffee mugs. The company even hires designers to come up with artwork for commuter mugs.  Starbucks’ forte is incorporating differentiated features such as their different flavored coffees that no other company offers. They constantly come up with new features such as the “VIA coffee blend,” and recently, Starbucks has created the flavoured VIA coffee blends. It comes in cinnamon, vanilla, and caramel. They have been selling very fast. Market trends are constantly being monitored by Starbucks as well.  They study every city’s personality and how their products can best fit into the community. Every season, Starbucks comes out with promotional drinks and flavours, which attracts more customers to try their drinks before they are gone.

I work at a Starbucks in Aurora. My manager makes sure that we give each customer a “Starbucks experience” by greeting them nicely, chatting with the customers and giving them attention, and making their drink consistent, accurate, and quick every time. Although Starbucks prices range very high, it is because customers are paying for service, and quality as well. Customers love what they are drinking, and are willing to pay the price, and it is making Starbucks a lot of profit, giving them great competitive advantage.

Currency WAR!

A recent article by the Economist Magazine, Oct 14, 2010, discusses tensions in world trade because some governments are interfering with free markets by intervening with the exchange rate of their money.
The basic problem is that a country can make their products that they produce appear to be cheaper then they actually are if they intervene with their currency exchange rate instead of letting the market decide.

My example: if a hamburger costs 10 Yuan in China and the exchange rate is 10:1 to the Canadian or US Dollar, then that would be the same as $1 in Canada. In that case, the burger would be very cheap because it costs 1/5 of what it costs in Canada! Now, if the Chinese worker makes a minimum wage of 20 Yuan per hour instead of $10 an hour like in Canada, then you could say it takes the Chinese worker and the Canadian worker both one half hour to buy a burger. Does that make it fair? If the same Chinese and Canadian workers made the same TV set, car, laptop, or T.V, then the Chinese product would have 1/10 cost and would be much cheaper. Therefore, we would only want those electronics built in China. Is that fair?

A country with an exchange rate that does not reflect the true value of its currency can have an unfair advantage in trade. People will want to buy their product because they are cheaper then anywhere else. This is what is happening with China. The Chinese Government is making lots of money because they sell their products to the rest of the world at high exchange and they don't buy the same amount back. China just keeps all the money. The Chinese government has a lot of money to keep because they export more products than they import (trade surplus). The U.S economy is the other way around, they buy alot more from countries like China than they export (trade deficit).

The arguments between China and the USA are about the exchange rates. If the Yuan was valued higher, Chinese products would cost more and US products would cost less, and maybe the trade deficit would change.

Another problem is what the Chinese should do with all the money that they have! They will want to invest it! But the Chinese have so much money that the only place they can invest their money is to buy bonds with the US treasury department. And they don't want the American dollar to be worth less, and they also want to make sure that they have a good interest rate.

 A government is allowed to print money. But when the government starts printing lots of money, the money becomes worst less. This is called inflation. The Chinese don't want the Americans to just print more money to buy their bonds, they want the money to be worth a lot.

I think it is very important for global trade that we have fair exchange rates.