Starbucks and Value Meals

Starbucks announced more cost reductions and restructuring moves yesterday. Their CEO also referred to the potential introduction of value meals in the future, i.e. a bundled price for a beverage and a food item. The details remain unclear. While this type of move may help Starbucks woo customers during this severe economic downturn, and perhaps help stem the loss of customers to McDonald's, such a move could have highly detrimental effects in the long run. Moving further downscale to compete with chains such as McDonald's could further erode the Starbucks brand and the company's differentiated positioning in the marketplace. This seems like a classic example of a strategic move that, in the short run, may have financial benefits... while in the long run, it could substantially weaken the firm's competitive position.