Starbucks Porter’s Five Forces Analysis 2014

Starbucks Porter’s Five Forces Analysis 2014Porter’s Five Forces is a strategic tool that is used to analyse the level of competition within an industry. The following figure presents the application of Porter’s Five Forces framework to Starbucks for the UK market, and the level of strength of each threat has been specified on the scale of 1 to 10, 1 being the weakest, and 10 the strongest .

 

Starbucks Porter’s Five Forces Analysis 2014

Threat of New Entrants (4/10)

The threat of new entrants is low due to the following reasons:

  • Coffee chain market is saturated in the UK
  • Significant capital requirements are needed (mainly for renting and leasing buildings

Threat of Substitute Products (8/10)

The threat of substitute products is significant due to:

  • Increasing ranges of energy drinks
  • Increasing focus on negative affects of caffeine on the media and among consumers

 

Bargaining Power of Buyers (9/10)

The bargaining power of buyers is high due to the following reasons:

  • The numbers and variety of offers in the industry exceeds the demand
  • No or minimum switching costs to other companies

 

Bargaining Power of Suppliers (8/10)

Suppliers have strong bargaining power as:

  • Raw material (coffee beans) is available only from limited geographical areas such as Afric, Latin America, and some parts of Asia
  • The level of competition amongst coffee chains is fierce

 

Rivalry among Existing Competitors (10/10)

The extent of rivalry among existing competitors is very high, and the numbers of branded coffee shops have been increasing in the UK in the following manner:

2007 2008 2009 2010 2011 2012 2013
Food focused coffee chains (e.g. EAT) 1,167 1,373 1,419 1,472 1,583 1,964 1,803
Coffee focused coffee chains (e.g. Starbucks) 2,325 2,283 2,958 3,173 3,415 3,665 3,916
Total numbers of coffee chains in  UK 3,492 4,056 4,377 4,645 4,998 5,359 5,719

Source: The Telegraph

 

Market share amongst competitors in the UK is distributed in the following way:

Operator

Market share by number of stores

Market share by turnover

Costa Coffee

39.7%

40.4%

Starbucks

22.0%

30.7%

Caffe Nero

14.5%

14.0%

AMT Coffe

1.9%

1.7%

Caffe Ritazza

1.6%

1.4%

Café Thorntons

1.1%

0.9%

Esquires

1.0%

0.8%

Coffee Republic

0.9%

0.6%

Puccino’s

0.8%

0.4%

Soho Coffee Co.

0.6%

1.3%

Love Coffee

0.5%

0.4%

Coffee #1

0.4%

0.4%

Caffe Fratelli

0.4%

0.3%

Boston Tea Party

0.3%

0.5%

Total

100%

100%

Source: Roberts (2012)

 References 

Roberts, J., 2012. Quality quest keeps coffee sector full of beans, Marketing Week February 8, 2012 Issue