Starbucks Corporation is an American Coffee Company. It has well known position in the beverage and coffee industry. In the comparison of its competitors the revenue of the Starbucks has increased by 2% in 2017 (CSI market, 2017). Porter’s five forces model is aided an organization to evaluate the position of the company. The position of the company in terms of substitute products and services are defined below.
Threat of substitute takes place when companies are forced to compete within same industry produced substitute products and services. The range of substitute product is high for the Starbucks brand coffee. The characteristics of Starbucks are availability of substitutes, low switching cost and low cost of substitute. This element of five forces model depicts that substitute have firm potential to negatively influence of Starbucks. There is possible chance that the customer of Starbucks can easily switch from one place to another due to availability of substitute of coffee in the market ( Magretta, 2011). The shifting cost of substitute is low because the customers of Starbucks are not required to spend for the purpose of shifting. Another threat source for Starbucks is homemade products which can provide the facility many customers to make at home. Apart from that the efficient customer service, excellent ambience and premium quality in coffee, Starbucks provides premium packaged coffee and coffee makers to its customers. The brand loyalty and efficient quality of products and services are able to extent the threat of substitutes.
The bargaining power of customer or buyers of Starbucks is moderate to low. Although the customers of the Starbucks are getting premium quality in coffee but there is a possibility that many of them can move to another brand if they get premium quality in low cost (Cheng 2013). There are so many substitutes available of the products of Starbucks which can force customer to have other brand’s beverages and switch from it to another. The power of buyer is affected by number of availability of products in the market. It has been analyzed that the product mix of Starbucks is diverse. Customers are attractive towards the brand of coffee which is provided by Starbucks. Thus, the aspect of force model of porter’s defines that the customers are precious for Starbucks but there is a possible chance that the other brand might get attract of its customers by providing low cost beverages.
The business model of Starbucks contains 9 models which aids it to do something innovative with its products and services. The description of business model of Starbucks is mentioned below.
Starbucks is possessing approximately 20,000 stores worldwide inclusive of Starbucks Coffee, Teavana, Seattle’s Coffee &development of renewed retail locations (Geereddy, 2013). The target customer of Starbucks is men and women aged 25 to 40. The size of the organization is wider and Starbucks is establishing itself in present as well as future market as well by opning its store in all over the world. It secures reliable customers trust and preserve market share as well. The first Starbucks was opened in Washington in 1971 by three partners. Gordon Bowker, Jerry Baldwin and Zev Siegl were founder of Starbucks Company (Mason, Cole & Goza, 2017). The competitors of the Starbucks are McDonalds, Costa Coffee and Dunkin’s Donuts. In the context of marketing and sales, Starbucks focuses on the premium high quality items and upper level of client administration (Garthwaite, et. al., 2017). The technology development of Starbucks is remarkable because it provides the premium quality and maintains the consistency in the flavour and menu to connect with the customers for a long time (Tu, Wang and Chang, 2012).
It has been recommended that the Starbucks are popular brand for the coffee. Apart from the positive aspects there are some major challenges such as low cost products by competitive brands, higher prices of coffee beans and variety in the food provided by the competitors who may impact the Starbucks adversely. It has been recommended that it should operate its business as per analysing and evaluating the demand of customers.
Cheng, D.S. (2013). Analyze the hotel industry in porter five competitive forces. Journal of Global Business Management, 9(3), p.52.
CSI market. (2017). SBUX Sales vs. its Competitors Q2 2017, Retrieved from https://csimarket.com/stocks/compet_glance.php?code=SBUX.
DaSilva, C. M., & Trkman, P. (2014). Business model: what it is and what it is not. Long range planning, 47(6), 379-389.
Garthwaite, C., Garthwaite, C., Busse, M., Busse, M., Brown, J., Brown, J., & Merkley, G. (2017). Starbucks: A Story of Growth. Kellogg School of Management Cases, 1-20.
Magretta, J., (2011). Understanding Michael Porter: The essential guide to competition and strategy. Harvard business press.
Mason, A., Cole, T., & Goza, N. (2017). Starbucks: a case study of effective management in the coffee industry. Journal of International Management Studies, 17(1).
Tu, Y.T., Wang, C.M. and Chang, H.C. (2012). Corporate brand image and customer satisfaction on loyalty: An empirical study of Starbucks coffee in Taiwan. Journal of Social and Development Sciences, 3(1), pp.24-32.
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