Starbucks

1830 WordsMay 22, 20128 Pages
Rivalry Among Existing Firms The coffee industry is a highly competitive industry in that coffee is served at almost every restaurant, diner, and convenient store in the nation. Most homes brew their own coffee as a more convenient and less expensive way of getting their daily coffee fix. Thirty years ago people who wanted a premium cup of coffee would head to their local coffee houses or their corner cafes in order to obtain the highest quality of coffee. Today with the onslaught of corporate chains these local establishments have become an archaic symbol of the past. Starbucks has differentiated itself from its competitors by offering higher quality of coffee which it charges a premium price for. While its prices are much 7…show more content…
Consumers also have a considerable bargaining power over coffee producers. Since a cup of coffee is available just about everywhere if the consumer does not want a particular brand it can find an alternative with relative ease and with little to no switching cost. Starbucks is unique in that it charges a premium price for its coffee and the consumers have little to know bargaining power. It accomplishes this by diversifying itself from other coffee products through a higher quality and its unique coffee flavors that are only offered by Starbucks. In this case people are left with little to no price sensitivity or bargaining power. This has been key to the long run success of the industry. 10 Bargaining Power of Suppliers While most buyers in the coffee industry focus on finding the cheapest suppliers possible, Starbucks is willing to pay more for the highest quality good on the market. They only choose the finest ingredients for their products and demand the best. They are willing to pay a premium to their suppliers and they have a considerable amount of bargaining power. Starbucks stays true to its mission statement and spares no expense in purchasing the highest quality ingredients for its products. Starbucks is such a major player in the world wide market that suppliers compete against themselves to get their business. Last year alone Starbucks purchased 312 million pounds of coffee (2% of the worlds coffee production) from 27

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