Cost Leadership: Starbucks and The Threat of Substitutes

Substitutes, according to the textbook, "become a threat to a firm when their cost and performance, relative to the firm's current products or services, become more attractive to customers." I recently got tired of waiting int he drive thru line at Starbucks because it added about 12 minutes (on average) to my morning commute. I started to research alternative coffee options. I originally chose Starbucks because of accessibility, ease, and experience. Recently, however, I have valued my time more and realized that 12 minutes a day is hours a year. I was at Kroger browsing the cold brew selection when I noticed that Starbucks makes an iced coffee (same recipe) and bottles and sells it in the drink section. Not only did Starbucks make it easier for me to get my coffee, but they also ruled out the threat of substitutes. This kind of product variation across the board is something that ruled out cost because the quality was the same as it is in the store.


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