PROFIT MAXIMIZATION BY USING PRICING STRATEGYClass: BUS 574 Strategic Management Researcher: Natthawan Saethea (Mina) Date: 3/15/2016

LERANING OBJECTIVE Translate the overall goals of long-term profit maximization into meaningful performance targets that can be measured and monitored.

CURRENT ARTICLE How Starbucks Uses Pricing Strategy for Profit Maximization?(Dawson, 2013)

“PROFIT MAXIMIZATION”

Profit = Total Revenue – Total

Cost Reducing

costs Increasing

selling pricesMore

profits

Increase 1% of average prices

Increase Profit 11 %

(Jones, 2015)

RESEARCH QUESTIONDid Starbucks make the right decision to increase its price in order to maximize profit ?

BUSINESS SITUATION In 2013, Starbucks raised their beverage prices by an average of 1% across the U.S

Starbucks claims the price increase is due to rising labor and non-coffee commodity costs,

As the result, 1% increase in price to rise profits by an average of 11%

(Dawson, 2013)

PRO Pricing strategy affects customer demand by shifting demand to the larger size

CON Losing the customer base from low income

customers swift to another brand ( such as Dunkin Donuts)

PRO Improving its premium brand image

CON Paying more for advertising expense.

PROBoosting profit overall margin of the company

EVALUATIONMaking a right decision in order to achieve profit maximizationUsing effective pricing strategy Strong marketing plan Developing its premium position

RECOMMENDATIONSStarbucks may try to reduce unnecessary costs Bothering pricing: New promotion in storePersuade customers to join sustainability program such as recycle cup

REFERENCES Dawson, T. (2013, June 27). How Starbucks Uses Pricing Strategy

for Profit Maximization. Retrieved March 15, 2016, from http://www.priceintelligently.com/blog/bid/184451/How-Starbucks-Uses-Pricing-Strategy-for-Profit-Maximization

Jnr, T. P. (2013, April 16). Profit Maximization: Strategies To Make Your Business More Profitable - naijapreneur. Retrieved March 15, 2016, from http://www.naijapreneur.com/profit-maximization-strategies/

Jones, A. (2015, April 21). Welcome to Market Realist. Retrieved March 15, 2016, from http://marketrealist.com/2015/04/expect-starbucks-upcoming-earnings/

Thank You