Question

Please explain about the porters 5 forces of Starbucks ?

Answer 1

Porter's 5 forces model is based on the following factors:-

1. Threat of new entrants

2. Bargaining Power of Suppliers

3. Bargaining Power of Buyers

4. Competitive Rivalry

5. Threat of Substitutes

Analysis of the Starbucks chain based on the above model is as follows:

1. Threat of new entrants: Moderate

• Barriers to entry are low due to low initial investment cost.
• New entrants shall mostly be at a local level.
• Low-switching costs
• Higher branding cost
• Product Differentiation

2. Bargaining Power of Suppliers :Low

• Ease of availability of raw material like coffee beans,milk etc. due to its commodity nature.
• Availability of large number of suppliers across the world.

3. Bargaining Power of Buyers: High

• Low switching cost
• Availibility of multiple-choices and brands in the market

4. Competitive Rivalry: High

• Availabilty of many brands in the market like Dunkin,Barista etc
• Competition with local level cafes on pricing front and regional customer base.
• Low switching cost

5. Threat of Substitutes: High

• Availability of other beverages like tea, juices and carbonated drinks in the market.
• Lower cost of substitutes
• Low switching cost