Business Analysis of Starbucks: Dynamic and Competitive Industry

Introduction

In today’s competitive and rapidly changing business environment, it’s important to understand the strategic issues opposite organizations and enhance the ability for long term success; Organizations must study the external and internal environment. Porter’s five forces model exams organizations external environment and value chain exams internal environment. Five forces aid businesses to determine the attractiveness and the profitability of a market they competing and assist organizations to make a qualitative evaluation of their strategic position. Wit and Meyer (2010: p264) suggests that the ultimate purpose of competitive strategy is to deal with rules in the industry and if possible make changes for the firms favor, whether this industry is local, or global or produces a product or service, the competition is embodied in five competitive forces: the entry of a new competitor, the bargaining power of buyers, the bargaining power of suppliers, the threat of substitutes and the rivalry among the existing competitors. I will apply Starbucks on my analysis.

¬¬¬¬The Threat of new entry

New competitors can raise, influence the degree of competition and profitability in the industry. The threat of new entry depends on the market entry barriers, these barriers can be present in different forms and are utilized to prevent an entry of new firms into an industry. Higher barriers exist in some industries (e.g. Pharmaceuticals, airline), whereas some industries have low barriers of entry e.g. restaurants (Jobber 2010; P: 706). “If entry barriers are low and newcomers expect little retaliation from entrenched competitors, the threat of entry is high and industry profitability is moderated. It is threat of entry, not wheth...

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...rter's Five Forces and Value Chain analysis are powerful strategic tools for Starbuck to assess its present dynamic and competitive industry. Understanding these strategic tools is starting point and essential for Starbuck towards developing a successful long-term strategy for the organizations going forward. It also provides Starbuck a foundation for sizing up its strength and weaknesses. Therefore Starbuck should use these analyses to create and sustain competitive advantages, in order to cope and incorporate industry conditions and organization’s capabilities into their strategy. Porter (2008: p88) suggests that five forces assist managers to develop a productive strategic action to better cope with industry competition, forecast & exploit changes in the industry and form balance between the five forces to build a more positive industry structure for the firm.