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Saturation of Market

According to published reports, Starbucks controls 73% of the specialty coffeehouse market, they have over 17, 000 stores in 55 countries , with six stores opening every day. They recently announced their goal of having 40, 000 stores worldwide, but still feel that the company is “vastly underestimating the worldwide demand for its items” . The global giant has faced countless allegations of oversaturation of the market, and anti-competitive practices, but the company insists that its countless stores arise as “one main complaint they hear from customers is that Starbucks isn’t convenient enough ” and state that “going across the street can be a barrier” . Independent coffee shops are struggling with Starbucks monopolistic reign; the company is renowned for exploiting its considerable market share and has been constantly accused of using predatory practices to stifle competition. Penny Stafford has illustrated how Starbucks locks out competition through a series of exclusive lease agreements, cluster bombing of stores and competitor buy outs at below market-price, which if not accepted the company threatens to open nearby stores . There have been numerous reports of Starbucks employees loaded with free samples sanding in front of independent stores to draw customers away . This anti-competitive behaviour is in direct violation of the Trade Practices Act, by using its market share to reduce fair competition Starbucks is creating negative ramifications for customers. Competition relying on the interaction between demand and supply, increases the quality of good, decreases the price, and encourages innovation, by rejecting fair competition Starbucks is rejecting these principles. Furthermore exclusive lease agreements are an example of collusion, a crime which distorts market principles and is considered illegal. In the search of higher profit margins, Starbucks has compromised the needs of its consumers. However Starbucks still maintains “that it sees very little cannibalization of existing business when a new store opens” .

Furthermore from an economic standpoint, the saturation of Starbucks stores evident in major cities, coined by Starbucks as ‘infill’ can be seen as wasteful duplication. The positioning of two stores across the street from each other is an absurd waste of economic resources, and is unnecessary. The equity analyst John Owens maintains that at this stage there are no signs that there is anywhere near the limits to their expansion.  Starbucks will continue to expand its stores in the search for profit, regardless of the economic impact and destruction of small businesses.

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