We have seen this play before, and there are two scenarios as to how it could end. Starbucks Corporation (NASDAQ: SBUX) is being challenged like never before, having saturated the market place in some locations it is now facing the challenges of selling expensive coffee in a slowing economy.

Would you rather pay $4 for a cup of coffee or a gallon of gas? You can find cheaper coffee but you have few options to find cheaper fuel. Amid the already difficult operating environment Starbucks is faced with competition from the largest restaurant chain in the world, McDonald's Corporation (NYSE: MCD). McDonald's is looking to steal its morning thunder with competitive offerings at a far lower pricing structure. The threat is very real no matter what spin Starbucks puts on it.

This brings to mind two similar situations both involving Microsoft Corporation (NASDAQ: MSFT) and past competitors. Early on there were two word processing programs that together probably had 90% market share. Those were Wordperfect and Wordstar. Both of them were fine programs offering strong features, and now they are nowhere. Microsoft displaced both of them with MS-Word integrated with their Office suite of products, and is now king.

Regular BloggingStocks readers know by now that my investment strategies are fairly conservative and relatively coarse. Please don't begrudge me that. Although I don't track my picks in a portfolio, I do mentally track the general performance of the companies I tout, and I believe that overall I've done fairly well.

There are two major differences between my stock-picking efforts and what I perceive to be Warren Buffett's style. First, Mr. Buffett has years of experience that I myself do not have. Second, Mr. Buffett likes to have a greater working understanding of the nature of the businesses he chooses to investment in than I do. I choose my companies of favor with what I call my "big picture" strategy. All that means is that I use a broader view than most of my contemporaries who like to dig right down to the very roots of their picks.

I like to think that my strategy provides solid conservative support, which shall then free an investor to do some aggressive speculating with their profits.

Back on February 21, I began a series of articles on Crocs Inc. (NASDAQ: CROX). I have been recommending the stock to the members of the Insiders Insights club of my website since late 2006, when the stock was trading at $40 -- that's before the 2-for-1 split. Those shares are currently at almost $94. On a split basis the stock is above $46. Basically, my members have more than doubled their money in the past six months. Great investment, good timing. What to do now with this controversial company? Where can it go from here?

I have written that Crocs is not a fad, Crocs is an emerging, global phenomenon, and that Crocs even has the opportunity to become the next Nike Inc. (NYSE: NKE). The controversy surrounding Crocs involves the love-it or hate-it relationship with its shoes. People fall very heavily into one camp or another -- there's very little neutrality on this subject!

What makes Crocs a full-blown phenomenon is its extraordinary distribution model. 11,500 domestic-retail, distribution outlets and 12,500 international distribution outlets. Crocs distributes through third-party vendors, therefore not needing its own bricks-and-mortar set-up. It's brilliant as Crocs generates gross margins in the 60%+ range and its "real estate" is someone else's. With this model, Crocs generates operating profit margins in the 25-27% range. This is what appeals to institutional investors! I cannot emphasize this point enough. Young, start-up companies hope -- hope -- to have operating margins in the mid-20's% upon maturity, but to have these margins during the build-up stage is just remarkable. Besides its great sequential quarterly revenue growth, the operating margins "is the story"!

This post is based on an article written by Alexander Green, Investment Director of The Oxford Club. My thanks to Mr. Green for his straightforward insight.

Let me begin by stating that my only argument against the oil industry has been their "the only game in town" attitude. Never have I complained that oil companies show too much profit. I have never accused the oil industry of gouging or unjust profiteering. With that stated, let us continue:

Oil companies DO NOT set gasoline prices at the pump. Those prices are dictated entirely by supply and demand economics. The single biggest driving force in the economics of crude oil today is the increasing demand by growing industrialized nations, China being the biggest by far. Even the United States Supreme Court declared that they find no evidence that oil companies are manipulating oil prices in any undue manner. This issue will, of course, remain in hot public debate.

Analysis provided by Theflyonthewall.com:

Corporate profits as a percentage of U.S. GDP are at the highest level they have ever been, exceeding 13%. This might lead a stock-market bear to conclude that bad days are ahead since profit margins cannot go much higher from here.

However, high profit margins also mean that there is plenty of room to increase wages and help the tapped-out consumer. The U.S. Federal Reserve may be close to decreasing interest rates. Also, Labor markets are tightening, with the unemployment rate at just 4.6%. This means a stronger negotiating position for employees, which usually leads to higher wages. In addition with the stock market finally taking off, stock options will be worth something, which will further help the consumer.

History tells us that the free-market economy has been a battle between labor and capital. Capital has had a twenty-year great run with profit margins going through the roof. Mostly likely it is time for labor to get its due. However, do not assume that reality is bad for the stock market. The post-World War II bull market which lasted to 1968 was driven by a strong labor movement. A stock market can do very well with a well-paid labor force.

Selling things online appears to be a great idea for a business. In fact, it's a fun model: we are all so excited about the many opportunities for new businesses to thrive online. In the case of some major Internet companies, we have bid up the stocks to very high levels. But history tells us that we have done so at our own peril.

Yesterday I wrote that Amazon.com Inc. (NASDAQ:AMZN) is overspending on growth and is thus overpriced, and concluded that the market has lost its collective sense once more. I raised numerous questions and received some thoughtful support in the comments. Since then, I have asked myself one more inescapable question which I pose today: What choice do they have?

From the inception of Amazon.com, Jeff Bezos has argued that, in this particular business, "first mover status" is critical to its success. The market supported this thesis and we were off to the races. Amazon has been on a spending spree, growing its sales quarter after quarter. But Amazon is trapped. It must continue to grow at all costs. It has reported top line sales growth again in the latest quarter -- but very disappointing profits.

The truth is Amazon is just like a great big supermarket. That is what it wanted to be, the online supermarket to the world. I think Bezos has achieved his goal but there is a HUGE problem here: supermarkets have very low profit margins!