Starbucks Coffee and Snack Industry Analysis

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According to IBIS World Report the major players in the US coffee and snacks retail market are Starbucks and Dunkin’ Brands at 36.7% and 24.6% market share respectively with other competitors occupying the remaining market share of 38.7%. The industry is at the mature stage of its life cycle, has low barriers to entry and intense competition and rivalry between the players. The regulation and technological change within the industry is medium (IBIS world report)

The coffee bean supplier market is made up of mostly a few large suppliers, which would suggest suppliers have significant bargaining power. This power is limited by the sheer size of Starbucks which continues to grow, which mitigates supplier power as achieving such a large contract as with Starbucks is very lucrative. Furthermore, Starbucks has engaged in backward vertical integration, purchasing coffee farms in China and Costa Rica, to ensure their supply of high quality beans at a reasonable price, regardless of the increasing demand of high quality beans and the limited suppliers.

In terms of machinery or technological suppliers, suppliers to the restaurant industry enjoy moderate power, as suppliers are few. This applies to suppliers of coffee, latte and espresso machinery as well due to the small number of organizations servicing the industry. Due to their success in differentiating themselves as providers of premium coffee, Starbucks faces little bargaining power from their customers around the globe. However, a lesson from their entry into the Chinese market has been that an organization needs to clearly understand their target consumers and price their products accordingly to avoid demand challenges.

As the startup investment required for this industr...

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...y due to a water wastage allegation (). Another weakness is their premium pricing, which has competitors with lower prices eroding their market share, especially in times of economic downturn. Pricing has also proved to be a weakness in markets such as China.

Opportunities available to Starbucks include growth of its supplier range, expansion to emerging economies, increased diversification of its product offerings and the growth of its retail operations; which are aimed at growing Starbucks’ profitability and market presence.

The threats facing Starbucks include trademark infringements and increased competition from local cafes and specialization of other coffeehouse chains, and the saturation of the markets in developed economies, and supply disruptions. Furthermore, the increasing prices of its inputs such as dairy products and coffee beans pose a threat

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