Swot Analysis Of Specialty Coffee
Appendix A: Dominant Economic Characteristics
Industry Definition: Erna Knutsen first used “Specialty Coffee” in 1974 in an issue of Tea & Coffee Trade Journal. According to the Specialty Coffee Association of America (SCAA), coffee that scores 80 points or above on a 100-point scale is graded “specialty”. The specialty segment is the most rapidly growing portion of the coffee industry. In the U.S. alone, specialty coffee has increased its market share from 1% to 20% in the last 25 years.
Industry Characteristics:
− Continual Growth Despite the Increasing Costs for Coffee
− Nearly 200% Increase in the Price of Coffee Beans Over the Last Two Years (Hindered Profits for Everyone)
− Price Continues to Rise (Supply Chain and Current Economic Situation
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High to Moderate Competitive Force -Several Firms in Industry (McDonald’s, Dunkin’ Donuts, Local Coffee Shops, Etc.)
-Comparable Products can be Found at Many Different Locations (Supermarkets, Grocery Stores, Etc.)
-Low Switching Costs
-Somewhat Saturated Market Share
-Product Differentiation (Brand)
Threat of New Entrants
Moderate Competitive Force -Moderate Barriers to Entry (Not Substantial)
-Stocking the Volume of Product Needed (Coffee Beans, Tea, Etc.)
-Brewing Equipment
-Branding/Image of Large, Mature Firms that Already Exist in Market like McDonald’s
-Relative Cost for Marketing/Advertising to Become Competitive
Threat of Substitutes
High Competitive Force -Costs Must be Kept Low to be Competitive
-Brewing Coffee at Home
-Attending Bar/Pub (Mingle, Hangout, Socialize, Etc.)
-Attending Other Pleasant “Third Places” (Besides Home and Work)
-Visiting a Friend’s House to Spend Quality Time/Relax
-Cheaper Alternatives (Local Coffee Shops)
Bargaining Power of Suppliers
Low to Moderate Competitive Force -Suppliers Pose Low Threat of Competing Against Starbucks (Forward Integration, Lowers Supplier Power)
-Starbucks Forms a Highly Important Part of Suppliers Business (Due to its size and scope), Which Makes Supplier Power
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Unless, for some reason, consumer preferences/tastes were to change drastically, it seems that Starbucks has successfully created a winning strategy that is both profitable and sustainable –based on this analysis. Starbucks can continue to fight against the threat of substitutes by establishing a welcoming atmosphere at each location, selling products at grocery stores/supermarkets to appease home brewers, and providing a drive thru (when possible) at locations to accommodate the “in-a-hurry/on-the-go”
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