Starbucks

Industry and Strategy Analysis

a. Apply Porter's five forces framework to the specialty coffee retail industry.

1. Rivalry Among existing firms = Strong

- Starbucks faces a strong force of competition.

*There's a large number of rivalries in the coffee beverage industry from different sizes/specialities/strategies. (strong)

*There's low switching costs. It's easy for consumers to change to other retailers/brand. (strong)

*There's a variety of firms. There's a few retailers with different sizes/specialities/strategies. (moderate)

In 2016 Starbucks has a market share of 42.4% of market share in the U.S. Starbucks is the leading players with Dunkin' Brands Inc. Coming in second with 25.5%. Therefore,competition should be amongst Starbucks top priority challenges.

2. Threats of New Entrants = Moderate

- Starbucks faces a moderate force of the threat of new entrants.

*There's a moderate cost of doing business (moderate)

*A moderate cost supply chain (moderate)

*High cost of brand development (weak)

New entrants can compete with Starbucks because the cost of doing business/supply chain development is fairly moderate. It's the high cost of developing a strong brand that make it difficult to compete with established brand, Starbucks. Threats of new entrants should be a secondary priority to Starbucks strategies.

3. Threat of Substitutes = Strong

- Starbucks experiences a strong force of the threat of substitutes.

*Availability of substitutes. Consumers can shift to substitutes because there are many of them. For example restaurant beverages/bottled beverages/other goods from grocery store/tea/hot chocolate (strong)

*Low switching costs because consumers do not need to spend for the shifting process. (strong)

*Low cost of substitutes. Many of the substitutes cost less than Starbucks goods. (strong)

Thus Starbucks must make threat of substitutes among it's top priority concerns.

4. Buyer Power = Strong

-Starbucks experiences strong