Porter's Five Forces Of Starbucks

HISTORTY

DEVELOPMENT AND GROWTH OF COFFEE: STARBUCKS

By the late 1990s the coffee industry has grown tremendously up to a net worth of $80 billion. The largest consuming nations being European Union (35%), United States (25%) and Japan (9%). Specialty Coffee Industry: Between 1962 and 1974 coffee consumption declined in USA from 3.1 cups a day to 2.2 cups. The declining quality of the coffee blends made in the American roasters was a significant reason behind this. To stay competitive the roasters began to include cheaper beans in their blends, as the only differentiating factor was price. This trend continued in the years 1960-1970, which leads to a decline in coffee consumption.

However in 1975, due to a severe frost in Brazil the

1) Existing rivalry amongst competitors: High

There is a high level of competition amongst the existing firms. The major competitors for Starbucks are Coffee Bean, Costa Coffee, McDonald’s, Dunkin’ Donuts and local coffee shops. The number of branded coffee shops has increased at a rapid pace.

2) Bargaining power of consumers: High

There are many players vying for the same set of customers. With practically zero switching costs and a plenty of options to choose from, we can say that the bargaining power of consumers is high.

3) Threat of substitutes: High

Water, aerated drinks, alcoholic beverages and energy drinks are some of the substitutes for the products of Starbucks. Additionally, the consumers are becoming increasingly health conscious and might prefer fruit juices over coffee. Bars and pubs can substitute Starbucks as a place to hang out and spend time outside the environs of office and home.

4) Bargaining power of suppliers:

Starbucks need to analyze the extent of Organizational Risk faced by the company. Having an impressive philanthropic track record does offer brand equity but the same has side effect as well. They are the first to be targeted for creating an example by firms like Global Exchange. Starbucks need to prepare itself financially and through it labor force for the crisis situation. Cost benefit analysis and worst-case scenario simulation should be used to create appropriate commitment of the resources to the situation.

2. Starbucks need finalizing concrete communication objectives it wants to achieve through its PR campaign. Also it needs deciding the appropriate communication channel to best delivers its message for the constituency it is targeting.

3. Starbucks is recommended to have a team of cross-functional members from various departments and functions in order to deal with any such eventuality. It’s preferred to have open team with representation of Starbucks store managers, which are in direct link with customers and thus are best suited to identify the issues as they develop.

4. Starbucks should leverage on its goodwill developed over the years of delivering quality products in a socially responsible manner. The good image pays well in times of