Question

3. Perform Porter’s Five Forces Analysis for one of the industries given below. Justify your answers. Industry: Starbucks – coffee beverage industry, Samsung smartphone – smartphone industry, Automobile industry, Cable TV industry, Dental office, Clothing store

Answer 1

Competitive Rivalry or Competition with Starbucks Coffee Company

In the food service and coffeehouse sectors, Starbucks faces the powerful power of economic rivalry or competition. This force pertains to the influence of competitors on each other and the industry environment in the Five Forces analysis model The large number of firms is an external factor that intensifies competitive rivalry. Starbucks Corporation has a multitude of competitors of various sizes. The population of competitors in relation to this is moderately varied in terms of specialty and strategy. Such moderate variety further strengthens the level of competition within the industry in this Starbucks Five Forces analysis. Furthermore, competition is reinforced due to the low switching costs which are the disadvantages for consumers when they move from one provider to another. This case, for example , involves minimal disadvantages for consumers who are moving from the company to other coffee houses. Based on this component of the Five Forces analysis, competition is among the top-priority challenges facing the company. The generic strategy and intensive growth strategies of Starbucks Corporation reflect strategic reactions to the competition.

Bargaining Power of Starbucks’s Customers/Buyers

Starbucks Coffee Company is experiencing buyers or customers with strong force or bargaining power. In Porter's Five Forces model of analysis, this force is based on the influence on the international business environment of individual customers and groups of customers. The bargaining power of customers is among the most significant forces affecting the business in this aspect of the company's Five Forces analysis model. Customers can easily switch from Starbucks to other brands, based on the low switching costs. Additionally, the high availability of substitutes means customers can stay away from Starbucks if they want to, as there are many substitutes from vending machines such as instant beverages. These strong factors overshadow the fact that individual purchases are small compared to the company’s total revenues. The small size of individual purchases reflects the poor impact individual purchasers have on the company.

Bargaining Power of Starbucks Coffee’s Suppliers

Starbucks Coffee faces the supplier's weak strength or bargaining power. Porter's Five Forces model of analysis recognizes this force as the impact suppliers have on the business and its role in the industry. An external factor that imposes a moderate force on Starbucks is the moderate size of individual suppliers. The high variety of suppliers however weakens their negotiating power. Suppliers, for example, have different tactics and competencies that they use to compete against each other, with the goal of generating more money by providing Starbucks Corporation with more products, such as coffee beans. The bargaining power of suppliers is further weakened because of the large overall supply. There are many coffee and tea suppliers around the world for example. That external factor limits the individual suppliers' influence. In this portion of the Five Forces analysis, the cumulative impact of external factors is the poor force or bargaining power of suppliers on the business.

Threat of Substitution or Substitutes to Starbucks Products

Starbucks Corporation experiences the powerful force or threat of replacement. This force relates to the impact of substitute goods or services on the enterprise and its external environment in the Five Forces analysis model. This component of the Five Forces analysis indicates that the potential of substitutes is strong to negatively impact the business of Starbucks Coffee. The high availability of substitutes facilitates consumers' purchase of these substitutes instead of Starbucks products

Threat of New Entrants or New Entry

Starbucks Corporation is confronted with moderate force or threat of new entry. This force in Porter's Five Forces model of analysis refers to the effect of new players or new industry entrants. The moderate cost of doing business is related to the variability of the actual cost of establishing and maintaining coffeehouse industry operations. The cost of running a small coffeehouse, for example, is lower compared with the cost of running a coffeehouse chain. Smaller cafés have lower production demands in relation to this and related supply chain costs.

These external factors allow smaller companies to do business and to compete with Starbucks Corporation. On the other hand, the production of brands is onerous. This condition reduces the threat of substitution in the framework of the Five Forces model of analysis. For example, small coffeehouses do not have enough resources to develop their brands. In addition , brand growth usually takes years to achieve Starbucks brand strength