Starbucks Porters Five Forces Analysis - Research Methodology

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Starbucks Porters Five Forces Analysis

Posted on July 25, 2012 by John Dudovskiy Porters Five Forces represent theoretical framework that is used for industry analysis and strategy development. Specifically, the five forces shaping competition within the industry consist of the intensity of rivalry among the competitors, the risk of entry of new competitors, the bargaining power of buyers, bargaining power of suppliers and the threat of substitute products and services (Sinkovics and Ghauri, 2009). The nature of the relationships among these forces is best presented in the following figure.

Source: Downturn Strategist (online) Rivalry among existing competitors is high within the industry Starbucks operates in with major competitors like Costa, McDonalds, Caribou Coffee, and Dunkin Donuts and thousands of small local coffee shops and cafes. Starbucks customers possess large amount of bargaining power because there is no and minimal switching cost for customers, and there is an abundance of offers available for them. The threat of substitute products and services for Starbucks is substantial. Specifically, substitutes for Starbucks Coffee include tea, juices, soft drinks, water and energy drinks, whereas pubs and bars can be highlighted as substitute places for customers to meet someone and spend their times outside of home and work environments. Starbucks suppliers have high bargaining power due to the fact that the demand for coffee is high in global level and coffee beans can be produced only in certain geographical areas. Moreover, the issues associated with African coffee producers

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10/10/2013

Starbucks Porters Five Forces Analysis - Research Methodology

being treated unfairly by multinational companies are being resolved with the efforts of various non-government organisations, and this is contributing to the increasing bargaining power of suppliers. However, the threat of new entrants to the industry to compete with Starbucks is low, because the market is highly saturated and substantial amount of financial resources associated with buildings and properties are required in order to enter into the industry. References Sinkovics, RR & Ghauri, PN, 2009, New Challenges to International Marketing, Emerald Group Publishing
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