STARBUCKS Starbucks Coffee is the world's leading coffee retail company as well as a US-based coffee shop chain. This business started in 1971 when at that time there were three academics, namely Jerry Baldwin an English teacher, Zev Siegel a history teacher, and a writer Gordon Bowker. They opened a shop, which was named Starbucks Coffee, Tea, and Spice at Pikes Place Market, Seattle. Before Starbucks, there were other coffee places in the US, but this place differentiates itself from other places based on quality, taste, and customer experience. Starbucks also popularized dark roasted coffee. Some coffee shops use handcrafted coffee, while Starbucks uses automatic espresso machines for safety and efficiency reasons. Starbucks serves a variety of coffee, hot and cold drinks, fresh juices, snacks, and variants of tea. Today, Starbucks has more than 23,768 outlets worldwide. The first branch of Starbucks outside the United States was in Tokyo, then Starbuck's branches outside the US continued to expand in other countries. Porter’s Five Forces Analysis The five forces analysis was first put forward by a lecturer at Harvard University Business School. His name is Michael Eugene Porters. Michael E. Porter was born on May 23, 1947, in Michigan, United States. He has core expertise in strategic management and the company's competitive advantage. Apart from that, he has produced several books and various articles on management. In 1979 he first proposed an analytical method for an industry or company. This method is known as Porter's five forces analysis. Porter's five strengths analysis serves as a method used to analyze an industry that aims to determine the state of the company, be it a company that is already established or that is to be established. This method is very effective both in the internal and external environment of the company. This analysis method can be used in companies that offer products or services. The results of this analysis can be used to maintain and improve the quality of the company, be it in the competition for quality, price or speed, and ease of service. MEDIU M Here’s porter’s five forces analysis for Starbucks : HIG H HIG H LO W HIG H LO HIGH HIG Competive rivalry Power of buyers Power of suppliers Power of substitute products Threat of new entrants - Costa - McDonald (McCafe) - Dunkin Donuts - Switching cost - An abundance of offers to them - Food material - Warehouse - Tea - Milk & Chocolate - Juices - Food (Snacks) - much of small coffee shops and cafes Competive Rivalry The intensity of competitive competition in the industry is high. This is due to monopolistic competition in the industry and the number of companies competing for high market share. The main factor that moderates competition for Starbucks is its market share. It has the highest market share followed by Costa, Dunkin Donuts, and McCafe. Which is where the company is priced relatively cheaper. But Starbucks has been able to moderate the threat of competition against it based on the premium quality of its products and the quality of customer service. And also , global coffee brands have managed their supply chains very well thus lowering their bargaining position as well as building strong brands that give them a competitive edge in the industry and moderate these strengths. Even so, overall there is always a gap in the industry for new players, which adds to the intensity of the competition in it. Power of Buyers Starbucks experiences the strength of the bargaining power of buyers or customers, which means a lot of choices for customers. This strength is based on the influence of individual customers and customer groups in the international business environment. Today's buyers are well aware of their choices. Customers can easily switch from Starbucks to other brands. And also, the high availability of substitutes allows consumers to stay away from Starbucks if they want, because there are many substitutes such as instant drinks from vending machines. If Starbucks tries to raise prices, buyers will simply walk away because of the low switching costs for buyers. However, the store environment that Starbucks provides and its unique taste has earned its brand loyalty. Certain customers are less price-sensitive and will continue to buy Starbucks even if they increase the price slightly. Power of Suppliers Starbucks faces weak supplier power or bargaining power. The commodities and other raw materials used by Starbucks are supplied by many suppliers. Starbucks collaborates with many suppliers around the world, but a large number of suppliers weaken their bargaining power. For example, suppliers have a variety of strategies and competencies they use to compete with each other, with the aim of intending to earn more income by supplying Starbucks with more ingredients such as coffee beans, tea, and cocoa. The bargaining power of suppliers is further weakened due to the large overall supply. Therefore, suppliers are not in a position to bargain with Starbucks or attempt to influence its prices. These external factors limit the influence of individual suppliers. Power of Subtitute Products Starbucks is under a strong threat of substitution. All products served by Starbucks have substitutes such as coffee, tea, and food. But it cannot be denied that there are also many Starbucks replacement products out there. That substitute has a strong potential to negatively impact the Starbucks business. The high availability of substitute products makes it easier for consumers to choose these substitute products over Starbucks products. Whether it's a different brand of coffee or a different type of drink. There are also many drink providers, from bars to restaurants. In addition, low switching costs further reinforce the threat of substitute products because it is easy for consumers to choose substitute products that are relatively cheaper. However, there are several factors that moderate this threat to some extent. Namely premium quality coffee, excellent customer service, and a great atmosphere. Premium quality and good branding have been Starbucks strategies for many years, and are recognized worldwide. Threat of New Entrants The threat of newcomers to Starbucks is sufficient, the resistance is not very high. Newcomers can compete with brands like Starbucks at the local level. However, their chances of success remain low to moderate. Starbucks has acquired a large market share based on its infrastructure, efficiency, and product quality. But with low switching costs, new brands can attract customers using relatively low prices. So, the threat of newcomers remains. This can be largely mitigated by brand image, market share, and other factors such as brand loyalty. An important factor that gives the Starbucks brand a competitive advantage is its access to raw materials and suppliers. Starbucks has access to better quality coffee and more suppliers globally. All of these factors act to moderate the level of threat posed by new players. Source : - COMPETITIVE STRATEGY Techniques for Analyzing Industries and Competitors. Michael E. Porter, ISBN 0-684-84148-7 - Porter, M. (1979) “How Competitive Forces Shape Strategy” Harvard Business Review - https://www.porteranalysis.com/porter-five-forces-analysis-of-starbucks/ - http://panmore.com/starbucks-coffee-five-forces-analysis-portersmodel#:~:text=In%20summary%2C%20the%20following%20are,power%20of%20suppl iers%20%E2%80%93%20Weak%20Force
