22). The café have first mover advantage to be first in business but Starbucks is technologically advanced and have wholesale coffee business in the market. For example on Starbucks’s website (2009) it states, “in addition to sales through our company-operated retail stores, Starbucks sells whole bean coffees through a specialty sales group and supermarkets”.
In 1952, The Broadway Café opened its doors for business. Located in downtown Saratoga Springs, the café specializes in a wide variety of coffees, teas, homemade sandwiches and soups and also offers a full service bakery. For quite some time the Café was the local hotspot. However for the last five years business has been steadily declining. My grandfather who owned the shop up until now has been running it the same way since its inception. The lack of information technology has been the driving force behind the Café’s decline. In order to bring the Café up to date with the 21st century, a detailed analysis using Michael Porter’s Five Forces Model will be implemented.
There are different types of competition in the market for coffee. There are usually a multitude of coffee shops of different types and ownerships to supply for the highly concentrated demand. The most
Suppliers such as Starbucks and Dunkin Donuts are marquee names in the coffee business. The brands are powerful and offer significant value to the Keurig product line. GMCR must continue to build similar relationships and retain them for the long term. These strong brand names not only offer a new target customer they also reaffirm Keurig positioning as premium product. The bargaining power of these suppliers will vary based on size and brand. GMCR must determine its power when negotiating future deals with such suppliers, in cases like Starbucks, GMCR should be willing to give more (accept lower royalty) to continue building the brand.
In terms of competition and the forces, which could limit the success of Starbucks it is important they stay ahead or even with other companies concerning innovative products. Many more micro companies are coming up with new products with a similar quality and a lower price/cost. It is important that Starbucks continues to search for innovative products to continually satisfy their customers. At the same time “rivalry” amongst Starbucks and smaller providers of coffee will continue to increase as the demand for coffee continues. The buyers bargaining power is significant as they can determine the cost, type of product, quantity and ultimately
There are many sellers in the market heating up pricing competition. Competitors like McDonald’s, Dunkin Donuts, Peet’s Coffee and other specialty coffee companies incentivize price wars. Furthermore, coffee’s demand is elastic which makes it difficult to increase prices without greatly reducing the demand. This makes differentiation and positioning very important. Also, it is easy for customers to switch from coffee vendors. Whichever company is most convenient for the customer will likely win the business. Competition is a top priority in the industry.
Starbucks can follow some strategies to differentiate their product even more that will lead to vary their menu prices. For example, Starbucks might create “saving menu” by selling some products at a lower prices to attract even more customers. Also, Starbucks might take into consideration the strategies of opening “Starbucks carts” that open in smaller express places that don’t fit for a whole store. Those “Starbucks carts” will attract even more customers because it is easier to get access to. “Starbucks carts” may provide the customers with low cost products to draw larger market base. To be a best cost provider in the market will allow Starbucks to be the most attractive company in the coffee market internationally. Thus, Starbucks will have a competitive advantage over its rivals by fulfilling the needs of a huge customer base in the market, by providing a high quality products and provide products with the best costs.
In the food or restaurant industry there are many players within each marketplace. When an individual entity does not have full control over the market, related to price or market share, it is described as a monopolistic perfect competition market. Essentially, that is the type of market that Starbucks finds it in. The basic feature of the food and restaurant market is the large number of players in the market produces similar products but not identical products. In other words, there is a bit of differentiation among the products. It is an open market which allows for freedom of both entry and exit. Competition within the industry is very competitive with a limited amount of market control.
“Thanks for your time and we appreciate you for bringing your concern to our attention. We understand your concern expressed in your post and we truly apologize for any inconvenience caused. However, you need to understand that ours is a family business and we strive to serve our community better and so we encourage our customers to bring their children, grandchildren to our children’s story hour. Regarding the concern, you have raised, we are currently evaluating various options and we may consider introducing a separate lounge area with pleasant ambience while keeping it away from the children play area while children can play and enjoy their story telling hour. We hope you as our valuable customer will understand. Thank you for your cooperation and patience for allowing us to serve our customers better.”
The supply of coffee is affected by weather conditions, and the health of coffee trees. According to the article "Coffee Industry to Adopt New Pricing Plans," the major players in the coffee industry have seen profits decline because of over-crowding of the market. An over-crowded market will give the coffee suppliers bargaining power. As Broadway Cafe demands high quality coffee and there is no availability of substitutes for the coffee beans that Broadway Cafe use. Therefore, the bargaining power of supplier increases.
In Threat of new Entrants, as the market for coffee shops and stores is already stagnant, so the threat of new entrant is very low and significant financial capital is required to open a new shop in UK.
As Starbucks continues to expand, more profits and more risks are in store. The corporation’s brand and reputation may be put at risk as the quality of the products supplied by third parties is outside of the company’s control (―Starbucks Corporation Fiscal 2009 Annual Report‖, 20). Partnering with farmers and suppliers meant letting go of control over the quality of certain products. In order to retain customers and protect their brand, Starbucks must establish and maintain effective working relationships with reputable farmers and suppliers, which could increase costs.
With the development of economic globalization, “fast food” becomes a more and more substantial industry in the business world, which adapts to the pace of people’s life. Each organization spares every effort to stand forward the competition due to the fierce competition. In this article, we focus on the “Starbucks”, a prevailing coffee manufacturer in recent years.