Role Of Bargaining Power Of Starbucks

Within the coffee industry Starbucks Corporations has grown from a small shop to a leading coffee distributor, proving to have financial strength and determination to continue growth. With the weakening economy the continued success of Starbucks

One of the main consumers for Starbucks is the ‘serious coffee drinker’ upscale market, It displays the dedication of providing the best coffee.

There are 15,756 Starbucks stores in 44 countries. To have that many stores, serve that many people, and ensure they still maintain the best and highest quality of beans, really sets some doubts. Starbucks has truly become the McDonald’s of the coffee industry because of the supply and demand. In the Starbucks business, quantity is greater than quality because quantity equals to money, where as quality costs more money. There is no win/win situation with this equation when your business is serving practically the world.

Starbucks has developed a brand image that has revolutionized coffee drinking experience. It has created an ambiance that is designed to attract customers and keep them coming back to Starbucks stores. It offers wide varieties of services such as comfortable seating areas with unique music and free wireless Internet for their customers while sipping their favorite coffee. This distinctiveness sets Starbucks apart from most of its competitors and has allowed the company to successfully grow and profit while charging premium prices for their products.

Having a low supplier power to begin with brings a high threat of new entrants to the café in that it is easy for the new entrants to come across what they will need to launch a business in this industry. However, it is tough to come into the restaurant industry and at the same time hard to establish a distinct brand name (McDonald, 2010). Large, well established coffee/tea businesses such as Starbucks have well-built brand identities. This being it does make it a lot harder for competitors like the Broadway café to enter and succeed within the industry. Also, “new entrants find that they are faced with price competition from existing chain restaurants (McDonald, 2010)”. But, the Broadway Café will keep its prices “artificially low as a strategy to prevent potential entrants from entering the market,

Next, Starbucks is in a direct supply channel. Direct supply channel is in which a producer supplies its goods or services directly to consumer, without a middleman (business dictionary). This practice helps Starbucks to keep a good relationship with the customer. In Malaysia, especially in Kuala Lumpur Starbucks can be found in any place where there is high intense flow of people, you can found it in a mall, gas station, airport, university, bus stop and etc. Starbucks primary goal is to locate its store in a highly visible location, to be the ideal place for the individuals who wants to enjoy music or looking for a break in a busy lifestyle. Getting more

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.

“We are not in the coffee business, serving people. We are in the people business, serving coffee”, Howard Schultz’s philosophy has shaped and continues shape Starbucks, the world’s number one specialty coffee retailer with over 21,000 outlets in more than 65 countries nowadays (Starbucks, 2011). Starbucks was founded in 1971 and Howard Schultz joined Starbucks in 1982. In 1987, Howard acquired Starbucks and changed the name to Starbucks Corporation.

Starbucks needs to find another strategy, one that continues to encourage conservation and farmer education, but also a strategy that would affect the industry as a whole. With this in mind Starbucks and CI decided to create coffee sourcing guidelines that would affect the suppliers of coffee. “Under Starbucks new system, introduced as a two year pilot program, suppliers of any size or location could earn up to 100 points for performance in three sustainability categories…if the suppliers me all the criteria, that is ,scored 100 points, it would become a preferred supplier and its coffee would receive priority in Starbucks’

Quality of Coffee – Starbucks history has shown that they place a huge emphasis on product quality. Their coffee is notorious for satisfying customers with its rich, delicious taste and aroma. They strive to offer the best coffee to its customers even going to the producers themselves to ensure quality.

Starbucks prides itself on the best coffee by setting high standards on their products. This is done by traveling the world for the best beans. But the beans aren’t the only high standards that they set; they also want to sustain the farming market by doing “responsible purchasing practices as well as forest conversation programs.” (Starbucks Company Profile, August 2012). By supporting high quality farmers in return means better beans for the future. Along with hot and cold beverages they also sell, equipment for coffee and tea, breakfast items and sandwiches and salads.

centralized system allows Starbucks to run a very effective supply chain and have direct input on their

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.

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

In 1981, Howard Schultz, the chairman, president and chief executive officer of Starbucks, walked into a Starbucks store for the first time. Highly impressed of the great coffee and the company’s concept, he joined Starbucks a year later. In 1983 he traveled to Italy, where he became fascinated with the coffee culture in