Industry and Strategy Analysis
Porters five forces are an effective tool to assess the attractiveness of an industry, thus an indicator of future profits. Here is an analysis of the coffee shop industry.
Power of buyers There is no, or very limited switching cost for customers, and there is an abundance of other substituting products that the ones offered by Starbucks. Even though this is a threatening fact for Starbucks business, this is what makes them unique buy offering the "Starbucks experience". This have shaped their success. However coffees addictive nature can also result in less rational decision which can overrule the need for a "Starbucks experience". Taking the arguments above into consideration, the buyers power is considered high.
The threat of substitute products and services for Starbucks is substantial. Specifically, substitutes for Starbucks Coffee might include drinks like tea, juices, soft drinks, water and energy drinks, whereas pubs and bars can be highlighted as substitute places for customers to meet someone and spend their times outside home and work environments. However, Coffee is an important part of many people's lives and habits why coffee might be considered to be hard to substitute. Also Starbucks has shown their strengths in innovating related products why they are able to cover most related products in their product portfolio. Consequently, the threat of substitutes are considered moderately low.
Suppliers power are considered relatively low. This is due to the fact that Starbucks might be a very important costumer to each of them. At the same time, Starbucks has a large numbers of suppliers around the world why cutting in suppliers probably would be an easy task. The price on commodities are usually almost fixed and changes manly because of supply issues like "bad or good seasons". This also makes the suppliers less