Starbucks Porter’s Five Forces Analysis

Porter’s Five Forces analytical framework developed by Michael Porter (1979)[1] represents five individual forces that shape the overall extent of competition in the industry. These forces are represented in figure below:

Starbucks Porter's Five Forces Starbucks Porter's Five Forces Analysis

Starbucks Porter’s Five Forces

Bargaining power of Starbucks suppliers is insubstantial. Starbucks works with many suppliers around the globe and the importance of business with Starbucks for any individual supplier is paramount because of the volume order. Supplier switching costs for the world’s largest coffee retailer are not huge, Starbucks is able to substitute suppliers and these factors further decrease supplier bargaining power. At the same time, it is important to note that although most coffee trades in the commodity market, high-altitude arabica coffee of the quality sought by Starbucks tends to trade on a negotiated basis at a premium above the “C” coffee commodity price

Rivalry among existing firms is fierce. Starbucks competes with specialty coffee shops and quick-service restaurants. Starbucks faces competition in the global marketplace from Costa, Caribou Coffee, McDonald’s, Dunkin Donuts, Pret-a-Manger and thousands of small local coffee shops and cafes. As it is illustrated in figure below, despite fierce competition in the coffee chain industry, Starbucks is a clear market leader in the US with market share of almost 40% followed by Dunkin Brands Inc., which has about one fifth of the market share.

Starbucks Porter's Five Forces Analysis

 Market share of the leading coffee chains in the United States in 2016[1]

Bargaining power of Starbucks buyers is significant. Starbucks buyers derive their bargaining power from the abundance of competition and choice. High levels of customer price sensitivity in coffee chain industry is an indication to the significance of buyer bargaining power. Moreover, there are no switching costs for customers in coffee chain sector and buyers have abundant and detailed information about products and services offered in this sector…

Starbucks Corporation Report contains a full analysis of Starbucks Porter’s Five Forces Analysis. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Value Chain analysis and McKinsey 7S Model on Starbucks. Moreover, the report contains analyses of Starbucks leadership, business strategy, organizational structure and organizational culture. The report also comprises discussions of Starbucks marketing strategy and addresses issues of corporate social responsibility.

Starbucks Corporation Report

 

[1] Porter, M. (1979) “How Competitive Forces Shape Strategy” Harvard Business Review

[2] Statista (2017) Available at: https://www.statista.com/statistics/250166/market-share-of-major-us-coffee-shops/