Five Forces of Starbucks

Starbucks suppliers have high bargaining power due to the fact that the demand for coffee is high in global level and coffee beans can be produced only in certain geographical areas.

Starbucks is dominant coffee brand in North America, which also is well-known worldwide. Established in 1971 as coffee shop oriented to a niche of coffee purists, in late 1980’s it turned to be a constantly growing chain of stores that sold whole-beans and premium-priced coffee to mostly affluent, well-educated customers. In years 1992-2002 company was showing at least 5% annual growth. And by 2002 Starbucks was serving already 20M customers in 5886 stores (both operated and licensed) around the globe, had $3.3 billion net revenues and was opening 3 new stores a day in average.

Starbucks was originally a small waterfront coffee shop located in Seattle that opened in 1971 (starbucks.com- Our Heritage). It is extremely convenient and now has over 24,000 stores in the 70 countries it is located in, which is one of the reasons that it is so well known today (starbucks.com- Starbucks Coffee International). There is a large variety of coffees you could get, however, they do not focus solely on coffee. They also sell teas, smoothies, pastries, and more. Their mission is to “inspire and nurture the human spirit- one person, one cup and one neighborhood at a time,” (starbucks.com- Our Heritage). It is a place that people can work on computers, study, or hang out at, so it is constantly in business.

This Module 1 SLP will be the first part of an in-depth market analysis. The company I have chosen is Starbucks Coffee Company. The first Starbucks opened in 1971 at Pike Place market in Seattle, WA. Eleven years later, Howard Schultz was hired by the company to be the director of retail operations and marketing. The first Starbucks with the current coffee house look and feel was opened in 1984 in downtown Seattle. The Starbucks headquarters is still located in Seattle, WA. Currently, Starbucks is relying on retail expansion, product innovation, and service innovation to achieve this long-term goal once set by current chairman Howard Schultz: “The idea was to create a chain of coffeehouses

This could be considered the lowest of Porter’s Forces that affect Starbucks. Starbucks main input is coffee beans, followed by slightly less common Arabica coffee beans, and being coffee a commodity product, there are many coffee suppliers that can offer the product cheaper than others. The lack of complexity that surrounds the production of coffee beans enables Starbucks to find viable alternatives should any of their suppliers attempt to improve its standing. As an

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Starbucks—This $21 billion Seattle-based company sells has over 9,000 outlets world-wide. Selling everything from coffee to CDs, Starbucks is in the business of the “coffee experience,” and they’re always looking to partner with those companies that will best complement their customers’ desires for a high quality coffee drinking

Starbucks is a major coffee company that we have in America as well as being expanded around the world. By using the SWOT analysis we noticed how Starbucks is falling apart and what can be used to make the company the way that it is set up. They wanted to continue to grow stores and by the companies wanting to continue to branch out globally by having continuous competition across the world. Another strength that this company has to offer is Starbucks is the leader of the coffee market. It is a strong brand to compete with. It is hard to go against them because they are always thinking outside of the box which is stated on page 211. Another strength that this business has to offer is on page 211 where Starbucks has always strived to be a good neighbor by providing a place for people to come together and by committing to supporting financially in where stores are located.

Starbucks is a very successful company but, there are several weakness in its aspect. First of all Starbucks cannot estimate the price of its coffee and company’s profitability. This is because Starbucks have large dependency on supplies of coffee beans from out of country plantations. This is a commodity and factor that cannot be controlled by the

Threats to Starbucks include the entry of new competing gourmet coffee providers, the increasing overhead costs, and the ongoing sluggish economy. The success of Starbucks has garnered many admirers and competitors. Because the barrier to entry is relatively low, many coffee companies are copying and competing with Starbucks, such as Coffee Bean and Tea Leaf, Seattle’s Best Coffee, and even McDonald’s Cafe. In addition, the increasing overhead costs and the sluggish economy further negatively impact Starbucks’

Enthusiast coffee drinker or not, people of all generations have heard of the popular franchise Starbucks Coffee Company. Opened in 1971, Starbucks started off as a single store located in Seattle. Today the well-known coffee chain has spread their name almost all over the globe. With over 21,000 locations in 64 countries, Starbucks is by far the largest leading coffee company in the world. Starbucks Coffee has different values compared to other coffee corporations that do not see the importance in giving back to communities around them and treating their employees as equals, all while striving to provide their customers with high quality products that are ethically sourced.

In general the coffeehouse industry in the United States was experiencing an increase in coffee consumption per capita due to the “Starbucks effect”. At this time Starbucks was operating approximately 20,000 stores in the United States and was living a fast expansion strategy worldwide.

The bargaining power of Starbucks Coffee’s Suppliers is not a very high factors as compare to the others as there are thousands of coffee plantations across several continents producing the same quality of coffee bean.

Starbucks is undoubtedly dominating the coffee industry, however that does not exclude the entry of new rivals. For example, McDonald’s, Burger

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