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Certain customers are less sensitive to prices and will continue to purchase from Starbucks even if it raises its prices slightly. However, the store environment provided by Starbucks and its unique taste has earned it brand loyalty. If Starbucks or any other brand attempts to increase the prices, buyers will simply walk away as switching cost is low for the buyers. The buyers today are well-informed and know their choices. Starbucks is facing intense competition which means an abundance of choices for the consumers. This makes the bargaining power of the suppliers against Starbucks low. The suppliers are, therefore, in no position to bargain with Starbucks or attempt to influence its prices. Except for the high altitude arabica coffee which is traded at a premium, rests of the coffee beans required by Starbucks are easily available. The switching cost for Starbucks is not high (Tan, 2016).
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Starbucks works a large number of suppliers worldwide and the massive supply requirements by Starbucks make it paramount for the suppliers. The commodities and other raw materials used by Starbucks are being supplied by a number of suppliers. Therefore, the threat of new entrants is moderate for Starbucks. There are many coffee shops on the local level that have been successful in developing a customer base in their areas. However, a single outlet can be started with a moderate level of investment. Customers have developed a liking to the taste of the products of Starbucks making it difficult for new entrants to attract them. Developing a brand and earning brand loyalty takes time. Developing economies of scales takes time. Establishing such a huge chain of stores requires intense investment. There a number of entry barriers to this industry. Thus, the competitive rivalry is high for Starbucks. There are a few products that are unique to Starbucks that have helped it build a brand loyalty amongst customers. Many of the coffees and beverages being served by Starbucks are also being served by the competitors. The switching cost is very low for the customers making the competition even intense. The competitors are working continuously to innovate, specialize, and come up with strategies to attract more customers (Dudovskiy, 2017). Starbucks is the market leader with a 40% share of the US market. The competitors of Starbucks include McDonald, Dunkin Donuts, and many small local coffeehouses. The quick-service restaurant and specialty coffee industry is intense. The annual revenue in 2015 was more than $19 billion and there are 238,000 employees working at Starbucks.įollowing is a detailed Porter Five Forces Model Analysis of Starbucks: Later on, it grew massively with an average of two new locations in the world daily. The first branch of Starbucks outside the American region was in Tokyo. Currently, Starbucks has more than 23,768 outlets across the globe. Starbucks serves a variety of coffees, hot and cold drinks, fresh juices, snacks, and variants of tea. A number of coffeehouses are using hand-made coffee, while Starbucks makes use of automated espresso machines for both safety as well as efficiency reasons. Starbucks also popularized the darkly roasted coffee.
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Before Starbucks, there were other coffee places in the US, but it distinguished itself from others by quality, taste, and customer experience. It was found in 1971 by Jerry Baldwin and two others in Seattle, Washington. Starbucks Corporation is a coffee company as well as a coffeehouse chain based in the USA.