Q.

A: Starbucks Strategy using Porter’s Five Force Analysis:

 Rivalry amongst exisiting competitors: Competition to Starbucks at coffee business is

high with contenders like Diedrich's espresso, Green Mountain Coffee Inc. Caribou
Coffee, Coffee Beanery and in excess of 3,480 rivals in the market.
 High Bargaining power of suppliers: Bargaining intensity of providers is high due to
natural resources required to make them is high, and Starbucks puts stock in reasonable
exchanging with different nations.
 Threat of new entrants: For Starbucks, the danger of new participants in the market is
low. With decent measure of substitutes available in the market, the danger of a new
participant with new technique model will be low.
 Threat of substitutes: The danger of substitutes is low in light of the fact that Starbucks
is a commonly recognized name and interest for coffee will never go down, and will
consistently be an ideal beverage for the customers.
 High bargaining power of buyers: Starbucks customers possess high bargaining power
because of abundance of offers available in the market.

Starbucks Value Chain Creation:

For any company Value chain consists of Primary and support activities. Starbucks build its
value chain operations in order to remove the redundancy and to achieve efficiency
maximization. Supply chain operations consists of

1) Retail store units

2) Specialty sales
3) Mail Order
4) Grocery Channel
 Starbucks included primary activities like transportation, production, marketing, services.
For Starbucks, its retail sales depend on its employees, nerchandising, its image,
innovation and its ownership. It is a place where you will get the finest coffee, great
people, ambiance is great and the music is top notch.
 Specialty Sales is an agrrement with service providers, wholesalers, retailers to carry
forward the company. Starbucks collaborated with various companies that were leaders in
their respective fields like United Airlines (Starbucks was served in all International and
domestic flights), Pepsico (to develop Frappuccino), Nordstorm, Barnes & Noble
Bookstores and various others.
 Mail Order allowed the starbucks to meet the customer needs that are not located near
company’s outlet store. They made a group called ‘Encore’, which is used to increase the
sales by increasing transaction size.
 Penetration into the Grocery channel. Starbucks got great success when it started test-
marketing in Chicago and Portland area. In order to remain main player in coffee,
Starbucks needed to be available in the supermarkets. Other area where the company can
penetrate is day-part chains. For ex: Juice bars, Bagel shops.