Porter's Five Forces Analysis: Starbucks
Porters Five Forces
Porter’s Five Forces model is used to analyze and identify the level of five competitive forces and market’s attractiveness. It also determine the strengths and weaknesses of an industry.
Threat of New Entrants
Starbucks confronts a moderate force of the threat of new entrants. It shows that the new entrants exert important impact but not strong enough to influence Starbucks’ business or in other words, the barriers for new entrants are not enough strong to prevent new competitors from entering into the market. Due to the moderate cost of managing business as well as supply chain management, the new competitors can definitely compete with Starbucks. For instance, they can choose to lease equipment or stores and therefore the initial investment cost is relatively low for them. Since there is no switching cost for the consumer, the small coffee shop can actually compete with Starbucks at certain level. In this competitive industry, the new competitors has a moderate possibility to be successful. However, new entrants will find it difficult to compete against with Starbucks as they find costly to develop such a strong brand like Starbucks. In United States, Starbucks held substantial real estate for their major site in almost main market areas. It ultimately rises a severe market share threat as the “homegrown” rival arising based in another country, and Starbucks does not have a strongly established market presence. A moderate barrier to entry is created
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