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Bargaining power of
suppliers: Low. With its scale of company, Starbucks certainly has a
competitive edge in comparison with other rivals in the market. Though Starbucks
is able to buy its input goods from any supplier, the company spent 26% more
than the market price for all of its coffee in fiscal year 2014 report. Starbucks’
suppliers are comparatively limited, despite of the power Starbucks holds due
to the amount of goods demanded. For the input markets that are consisted of dairy
farmers and coffee bean plantations, price is decided by supply and demand.

Consequently, substitutes are accessible if Starbucks searches for a new price
range because of the high competitiveness of the market. Furthermore, with the
disadvantages of isolated placements and low retail abilities, suppliers can
not forwardly take actions by themselves. Basically, Starbucks possesses all
the power in the connections it has with its suppliers.

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Bargaining power of buyers: Low. The price ranges of Starbucks’
beverages is determined based on the price elasticity of its customers and the
present prices at other competing businesses. With the concept of higher
quality is based upon perception, the products of Starbucks are able to sell at
a higher price range. Therefore, prices are non?debatable as the consumers have no bargaining power with

Threat of new
entrants: Low to Moderate. The threat of newcomers for Starbucks in
Iceland is moderate. The saturation’s status in the field is comparatively high.

The starting investment to establish a coffee brand is not genuinely high, and the
same case could be applied for the barriers. Newcomers in Iceland can challenge
brands like Starbucks at a local level. Although, it is undoubtly difficult for
small businesses to compete against strong brands like Starbucks; therefore, their
chance of being successful stays low to moderate. Still, it gets lessened to an
abundant extent by several elements such as market share, brand loyalty and
brand image. It is also worth mentioning that Starbucks has an advantage with
its own network of suppliers and high quality materials. With all aspects
considered such as corporation’s size and potential to purchase, it is no doubt
that Starbucks has access to better quality coffee and an enormous amount of
suppliers worldwide. All these elements act to moderate the amount of threat
caused by the newcomers. Nevertheless,
Starbucks does not neglect the possibility of rivals coming into the picture
and has taken adaptation into action. For example, the firm had renovated its
coffee line to provide small-scale, cheaper cups while utilizing new machines
that create one cup of coffee individually so that the taste is fresher. This
act can be viewed as another way Starbucks is revamping in order to preserve
its tremendous market share, as well as restraining others from considering compete.

·       Threat of substitute products or services: Moderate.

The risk of consumers substituting away from Starbucks for direct rivals in
Iceland such as Te & Kaffi and Mokka is a genuine concern. As they all
honour themselves on customer service, specialty beverages, they are very hard
to differentiate. The available drinks section is diversed varying from energy
drinks to smoothies or juice. Although, Starbucks sells a huge range of these
drinks within its stores. While the greater part of coffee drinkers do not
replace coffee, the most direct replacement is tea, which Starbucks sells under
its own Teavana® Tea brand. This can be considered as an ideal example of how
Starbucks has successfully done a good job hedging against the risk of
replacements with the variety of drinks it provides.

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