Keurig Case Study

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Keurig Case Study

I. Overview
Meaning excellence in Dutch, Keurig, was founded in 1990 by Peter Dragone and John Sylvan. The founders were on a highly caffeinated mission to completely alter the coffee industry with the underlying belief that coffee should be served fresh by the cup. They wanted to bring the gourmet coffeehouse experience to both the home and the office. Dragone and Sylvan wished to not only make this possible, but to do so in a satisfying, convenient and efficient way.
In 1998, Keurig released their first single-serve brewing coffee machine. The machine could also serve a cup of hot tea or hot cocoa. In 2006, Keurig merged with Green Mountain Coffee Roasters (GMCR), which would later lead Keurig to becoming a
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Porter’s Five Forces

a) Threat of New Entrants

As competition in the single-cup brewing market continues to increase, the barrier to entry remains relatively low. This encourages competitors to enter the market. The competitors are aware that creating a lower-cost brewing machine that can brew coffee in the pod style (non-patented) would give them a competitive advantage over Keurig, whose products are considered quite expensive. Three main competitors include Nestle, Starbucks, Kraft and Mars. All three companies have greater financial, marketing and operating resources.

b) Bargaining Power of Suppliers
Keurig has a low concentration of suppliers, which therefore limits the bargaining power of these suppliers.

c) Bargaining Power of Buyers
Buyers ultimately have more bargaining power than the suppliers. This is because Keurig will be more interested in keeping consumers happy so that they can maintain relationships and brand loyalty. For example, consumers can demand new flavors of coffee that fit their personal preference.

d) Threats of Substitute
The threat of substitutes is relatively low solely because of the fact that there is a limited number of substitutes. Keurig is the top Single-brewer coffee machine.

e) Intensity of Rivalry
Companies are more apt to work with Keurig in hopes of making K-cups in their own coffee to be used by the Keurig single cup brewer. This is more of an
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