Porter\'s Five Forces Analysis for Starbucks

Starbucks Five Forces

Barriers to Entry - High

There are many barriers that prevent other firms from competing with Starbucks in the U.S. coffee market. One prohibitive force would include the issues related to developing economies of scale. Starbuck has established a global supply chain that can deliver its products to fifty million customers in fifty one countries every week (Cooke, 2010). Starbucks has developed its supply chain so systematically that it serves as the backbone of its organization (Locke, 2011). Furthermore, new entrants would be limited to charging the market rate for premium coffee.

Bargaining Power of Suppliers - Low

There is virtually no bargaining power found in Starbucks supply chain. Coffee producers are highly fragmented and sell their raw materials on an open market which offer little room for product or service differentiation. Given the enormous buyers power that Starbucks has, suppliers are typically forced to accept Starbucks terms.

Bargaining Power of Buyers - High

Starbucks Buyers have a great deal of power. There are many different types of coffee that is available nearly ubiquitously. Therefore, consumers have many alternative brands to choose from. Furthermore, there is also the option for consumers to brew their own coffee at home or work.

Threat of Substitutes -- Low to Medium

There do not exist many alternatives to coffee. Many Americans rely on coffee as a morning beverage of an afternoon or evenings pick me up. Coffee is a timeless product in which people will rely on indefinitely. However, energy drinks are something of a threat to this trend as people look to other sources for caffeinated energy.

Rivalry among Competitors - High