Shin Min Thant Lwin

H1acc-1
Organizational analysis and design- Assignment
Porter's Five Forces analysis for Starbucks
Porter's Five Forces analysis is a strategic tool developed by Michael E. Porter to
assess the competitive forces and attractiveness of an industry or market. It helps
businesses identify potential threats and opportunities and make informed strategic
decisions. The five forces considered in the analysis are:
1. Competitive Rivalry: This force evaluates the intensity of competition
among existing companies in the industry. High competition can lead to
price wars and reduced profits, while low competition can allow for more
favorable market conditions.
2. Bargaining Power of Buyers: This force examines the influence that
customers have over the industry. Strong buyer power means customers can
demand lower prices or higher quality, impacting the profitability of
businesses.
3. Bargaining Power of Suppliers: This force assesses the control suppliers
have over the industry. Strong supplier power can result in increased costs
for businesses and limit their ability to negotiate favorable terms.
4. Threat of Substitutes: This force considers the likelihood of customers
switching to alternative products or services. The presence of close
substitutes can affect demand and pricing within the industry.
5. Threat of New Entrants: This force looks at the barriers faced by new
companies trying to enter the industry. High barriers make it challenging for
new entrants to compete, while low barriers can lead to increased
competition.
By analyzing these five forces, businesses can gain insights into the competitive
landscape and formulate effective strategies to stay competitive and succeed in
their market.
Porter's Five Forces analysis for Starbucks focuses on evaluating the competitive
forces and potential threats in the coffeehouse industry. Here is a summary of the
analysis for Starbucks:
 1. Competitive Rivalry (Strong Force): Starbucks faces intense competition
from a large number of coffeehouses and food service firms in the
industry. Competitors aim at the same customer groups with similar
products and services, making the competitive rivalry strong. Price cuts
and aggressive strategies to gain dominance are common in the
coffeehouse market.
2. Bargaining Power of Buyers (Strong Force) : Customers have significant
bargaining power in the coffeehouse industry. Low switching costs
between coffee shops and a high availability of substitute foods and
beverages give customers the ability to demand lower prices or higher
quality from Starbucks.
3. Bargaining Power of Suppliers (Moderate Force): Starbucks experiences
moderate bargaining power from suppliers. Individual suppliers are
moderately sized, and there is limited variety among them. However,
supply shortages, such as crop issues, can strengthen suppliers'
bargaining power.
4. Threat of Substitutes (Strong Force): Starbucks faces a strong threat of
substitution due to the high availability of substitute foods and beverages,
low switching costs between coffeehouses and substitutes, and the
affordability of substitute products. Customers have many options to
choose from besides Starbucks.
5. Threat of New Entrants (Moderate Force): The threat of new entrants
poses a moderate challenge for Starbucks. While the cost of doing
business and supply chain costs may not be excessively high, the high
cost of brand development and established market presence act as
barriers for potential new entrants in the coffeehouse industry.
Based on this analysis, Starbucks needs to focus on leveraging its strengths, such
as brand development and marketing strategies, to address the strong competitive
forces and customer bargaining power. Improving supply chain diversity and
operations management can also help mitigate supplier power. Additionally,
enhancing its unique customer experience can counteract the threat of substitutes
and new entrants in the coffeehouse market.