 Cup
of coffee
emotional atmosphere
Competitive Edge

High quality coffee and products

Reachable locations

Community to share the coffee drinking experience
Starbucks Model

1. Great attention to detail in stores

Employees well trained and qualified

Wide range & types of coffee, drinks, food

2. Attract coffee and non-coffee consumers

3. Transcended traditional coffee houses into a pleasant
experience

Employees are pleasant and consistent in service

Coffee into a social platform

Starbucks has been able to attract the non-customers
through their business model of focusing on people

Starbucks did not take away from its competitors or make
coffee go away. It simply made it more popular!
Porter’s Five Forces

Michael Porter of Harvard Business School

A helpful, widely used framework for classifying and analyzing the factors
that determine the intensity of competition and levels of competition in
different industries

Profitability of an industry

3 sources of horizontal competition


Competition from substitutes, entrants, and rivals
2 sources of vertical competition

Power of suppliers and buyers
Threat of Substitutes

Price depends on availability of substitute products

Elastic demand


Travel agencies
Inelastic demand

Gas

Starbucks Coffee
Threat of Entry

Barrier to Entry

Capital requirements

Absolute cost advantages

Product differentiation

Retaliation
Industry Rivalry

Concentration

Product differentiation

Excess capacity and exit barriers
Bargaining Power of Buyers


Price sensitivity

Greater the importance, greater the sensitivity

Less differentiated, more willing to switch

Intense competition creates eagerness for price reductions
Relative bargaining power

Size and concentration

Buyer’s information

Integrate vertically
Bargaining Power of Suppliers

A firms ease to switch between different input suppliers and the bargaining
power of each party

Supplier usually lack bargaining power due to size

Suppliers of complex, technically sophisticated components may have greater
bargaining power
Starbucks Porter’s Five Forces Analysis


Threat of substitutes

Tea

Juice

Soft Drinks

Water

Energy Drinks

Smoothies
Threat of Entry

Low- the market is highly saturated and substantial amount of financial
resources associated with buildings and properties are required in order
to enter into the industry
Starbucks Porter’s Five Forces Analysis


Industry Rivalry

Costa Coffee

McDonalds

Caribou Coffee

Dunkin Donuts
Bargaining Power of Buyers

Large- there is no and minimal switching cost for customers, and there is
an abundance of offers available for them
Starbucks Porter’s Five Forces Analysis

Bargaining Power of Suppliers

High- demand for coffee is high and coffee beans can only be produced in certain
geographical areas
Starbucks – Resources

Tangible

Over 20,000 stores


Human Resources

Worldwide market
Drink variety

Customization

Drive-thru locations

High Income



$1.38 B in 2012
Intangible

Starbucks experience

Brand equity

Store locations

Near premium stores

Employees

Expertise

Skills

Knowledge
Organizational culture

– organizations values, traditions and
social norms
Starbucks - Internal Capabilities



Stay the #1 coffee shop worldwide

Starbucks experience

20,000 locations

Brand equity
Continued expansion

Brand equity

High income

location
More convenient experience

Drive-thru windows

Organizational culture
External Capabilities

External capabilities

Acquisitions

Mergers

Strategic alliances

Coffee bean farms

100% ethically sourced by 2015

Apple

Kraft - Mondelez
Resource & Capability Analysis


Identify key resources/capabilities

Brand equity

Location

Drink variety

Human resources
Create/sustain competitive advantage

Starbucks experience

Premium coffee shop
Resource & Capability Analysis


Identify key resources/capabilities

Brand equity

Location

Drink variety

Human resources
Create/sustain competitive advantage

Starbucks experience

Premium coffee shop
Six Paths Framework
1: Look Across Alternative Industries
2: Look Across Strategic Groups Within
Industries
3: Look Across the Chain of Buyers
4: Look Across Complementary Product and
Service Offerings
5: Look Across Functional or Emotional
Appeal to Buyers
6: Look Across Time
Six Paths Framework
Path 1: Alternative Industries
•Substitutes
•Alternatives
Six Paths Framework
Path 2: Strategic Groups within Industries
•Out
competing by Price and Performance
•Break
out of Tunnel Vision
•Trade
up or Trade down
Six Paths Framework
Path 3: Chain of Buyers
•Purchasers
•Typically
•What
can differ from actual users
focus on one single buyer group
are the Chain of buyers for Starbucks?
Six Paths Framework
Path 4: Complementary Product and Service
Offerings
•Untapped
•Other
Value
services affect demand
•Before,
During, After
Six Paths Framework
Path 5: Functional or
Emotional Appeal to Buyers
•Functional
vs. Emotional
•Industries
have trained
customers in what to expect
•Starbucks
created emotional
atmosphere in which customers
enjoy their coffee
Six Paths Framework
Path 6: Time
•Trends
affect business over time
•Protecting
•Grounds
•Market
the environment
for your Garden
today to what it might
deliver tomorrow
•Difficult

jeopardylabs.com/play/jeopardy26360