Starbucks move to increase the prices at Starbucks stores originates from the need to cover the rising cost of input. Starbucks has noted an upward adjustment on dairy products as well as rents. These are the leading input that the company requires so as to run the business. Starbuck is America global coffee company that not only deals with making coffee, but also tea, pastries and snacks. The ability of Starbuck to provide customers with excellent products lies in the ability to access quality raw materials.
Dairy products are essential for the production of Starbucks drinks and pastries. A rise in these commodities means that Starbucks will realize additional costs hence the need to raise the prices of its commodities. Similarly, Starbucks has a worldwide customer base meaning it has branches all over the world. Currently, Starbucks has over 20000 locations in over 60 countries. An increase in rent in these locations will subsequently lead to an increased in fixed costs for Starbucks. An increase the two input costs, justifies the need for Starbucks to increase the prices of its products (Larson, 2008).
When forecasting revenues and profits for Starbucks for the following year, focus shall be on sales of Starbucks products and customers purchasing behavior. For instance, an increase in prices on all Starbucks commodities may result to a dip in sales as customers seek alternative options that are selling at a lower cost. Managers must thus determine the targets that the company has to accomplish in terms of sales. It is by setting realistic targets that the company will manage to achieve them thus achieving the projected revenues and profits (Larson, 2008). Determining the purchasing trend is also vital in determining Starbucks revenues. Brand loyalty may see the sales of Starbucks products continue to soar regardless of increase in prices.
Larson, R. (2008). Starbucks a strategic analysis. Retrieved from http://coe.brown.edu/documents/StarbucksaStrategicAnalysis_R.Larson_honors_2008.pdf