Starbucks corporation

a. Discuss the firm's profitability with an explanation of the difference between accounting profit and economic profit.

Start by explaining the difference between accounting and economic profit. Then refer to the actual data. Be explicit. From the annual report you will be able to see if the company's profits are high or low and whether they have been steady, rising, falling, or fluctuating during the last five years. Present this information and comment on the company's profitability discussing whether the company is performing well or not in terms of profits.

You may even with to compare the company's profitability with the profitability of other firms in the industry. For example, if I am writing about Ford, I could compare Ford's profits to those of General Motors. If I am writing about McDonald's, I could compare its profits to Burger King or some other competitor

B. Examine the costs the company incurs and discuss whether the majority of costs are fixed or variable in nature.

For the company you have chosen, try to identify the various costs that it faces. These may be labor costs (e.g. the wages and benefits of workers); the price of raw materials; cost of licenses; costs associated with following regulations, etc. Distinguish between fixed costs (those that don't change when output changes) and variable costs (those that do change, e.g. increase when output increases.

Look at the annual report to see if the company's costs are high or low, rising, or steady

C. Analyze how the market structure affects the profitability and pricing power of the firm.

Identify and describe the market structure, you must analyze how this market structure affects the company's profitability and pricing power. That is, do the characteristics of the market structure allow the company to have power in setting its prices or must it basically charge a price similar to what the other firms are charging? Can the firm increase its price without worrying about losing too many customers and seeing its sales fall too much? Can this firm charge relatively high prices and earn high 0profits? The material in chapters 23 and 24 should help you with instruction 9.