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Starbucks - Porter's Five Forces: Past / Present

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Cedric Ingemey

on 30 November 2016

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Transcript of Starbucks - Porter's Five Forces: Past / Present

Industry Rivalries

Mostly basic coffee companies
Adding specialty coffee to product range hard for big companies
Consumption of tea/juice etc. ▼
Economies of scale not important
BUT: purchasing in bulk = discount
superior infrastructure
► small advantages
Products highly differentiated
High switching costs
High capital investments
Distribution through retail outlets of specialty coffee producers
New Entrants

▼ Single customers, few groups, don't buy in volume

▼ Low price, less price-based, emphasis on quality

▼ No full information

▲ No switching costs
Bargaining Power of Customers
Mainly: caffeinated soft drinks
(Pepsi, Coca-Cola)
Difference in taste/demographics

Basic coffee, lower quality

Substitute Products
Two options: Raise bean prices / Lower quality

▼ Independent farms in SA, Pac
▼ No union
▼ Many other farmers
▼ Need to sell

▲ Quality difference from supplier to supplier
Bargaining Power of Suppliers
Starbucks - Porter's Five Forces: Past / Present
Industry Rivalries
Competing small shops
Dunkin Donuts, McDonalds
Concept: McCafe coffeeshop
Growth coffee industry

Explosive growth industry
New entrants less likely
Economies of scale
Small shop competitors
New Entrants
Buyers Starbucks =individual customers
Risk: customers switch brand
Bargaining Power of Customers
Soft drinks
Pepsi and Coca-Cola
Health reasons
Substitute Products
Suppliers' coffee = Fair Trade Certified
Coffee brand buy, advertising fair trade
Bargaining Power Suppliers
Hardly any competition
Few and weak substitutes
Weak customers and suppliers
Easy entry, not yet established
Summary Past
A lot of competition, but only in large brands.
Extensive growth ► small specialty shops
Introduction Fair Trade
Expansion of shop network SB

Summary Present
Past: Easy entry, young industry, unique
Present: Many competitors, large brands

SB non-flavoured, add syrup
► New idea/innovation
25% of specialty coffee flavoured
No Price wars
Young industry
Growing industry
Interesting Position
NEW strategies
Free wifi
Meeting rooms for rent
Speedy service
Free refills
Not effective
Popularity coffee still high
Low chance of small shops being a large threat
Suppliers less dependent by specialty coffee and specific demand. Results bargaining power.
Large network of Starbucks ► many customers, low bargaining power
►Strong position
Structured and steady network of customers and profits
► Neither high nor low

BUT: First mover advantage
► Limited access for new entrants
► Little threat of substitution
► Low, not substantial
► Low, depend on SB
►Easy to establish, strong position
► Find new ways to attract customers

► More than specialty coffee:
For the masses
To go
Interesting combinations
Extras (i.e. Wi-Fi)
Fair Trade
Full transcript