Porter's Five Forces They represent a theoretical framework that is used for industry analysis and strategy development. Specifically, the five forces (more information on Porter's five forces here) that determine competition within the industry consist of the intensity of rivalry between competitors, the risk of entry of new competitors, the bargaining power of buyers, the bargaining power of suppliers, and the threat of substitute products or services.
Starbucks Coffee Company is a global coffee company and chain of coffee shops based in Washington, USA. and the company generated consolidated revenues of $ 14.9 billion during 2013 with more than 200,000 employees (Starbucks Annual Report, 2013).
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Rivalry Among existing competitors it is high in the Starbucks industry. They operate with major competitors such as Costa, McDonald, Caribou Coffee, and Dunkin Donuts and thousands of small local coffee shops.
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The clients Starbucks possess a great deal of bargaining power because there is not even a minimal exchange cost for customers, and there are a lot of offers available to them.
The threat of substitute products and services for Starbucks it is substantial. Specifically, substitutes for Starbucks Coffee include tea, juices, sodas, water, and energy drinks, while pubs and bars can stand out as substitute places for clients to meet someone and spend their time away from home and the environments of job.
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Starbucks suppliers They have high bargaining power due to the fact that the demand for coffee is high worldwide and coffee beans can be produced only in certain geographical areas. On the other hand, issues related to African coffee producers being treated unfairly by multinational companies are being solving with the efforts of various non-governmental organizations, and this is contributing to increase the bargaining power of the suppliers.
But nevertheless, the threat of new entrants in the industry to compete with Starbucks is low, because the market is very saturated and the huge amount financial resources related to buildings and properties are required in order to enter the industry.
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Do you want to know another example of Porter's five forces?
- Porter's Five Forces at Ikea
