Introduction
Starbucks Corporation, an American corporation founded in 1971 in Seattle, WA, is a renowned roaster, producer, and retailer of specialty coffee worldwide. Starbucks has roughly 182,000 employees across 19,767 company-managed & licensed outlets in 62 countries (Goh et al., 2020). Industry demand determination and industry life cycles are the two main macro-environments. The industry’s demand for premium coffee and snack items is mainly determined by several factors: expendable cash, per capita coffee consumption, attitudes regarding health, world pricing of coffee, and demographics. This sector is highly vulnerable to macroeconomic factors that influence the rise in household disposable income. During the downturn, the reduction in disposable income for households due to increased joblessness and stagnating wages created a negative strain on the revenue and performance margins of the business. Another significant aspect for analyzing the customers’ needs is the per capita coffee intake, where the rise in caffeine leads to the rise of coffee & snack shops.
Main body
Porter’s five forces analysis provides crucial information to assess the performance of the Starbucks industry. Firstly, threats of new entrants have a moderate intensity since there are few barriers to discourage new competitors, and the industry is composed of a monopolistic structure. Secondly, the threats of substitutes are high since there are other options, such as tea, water, and fruit juices. Thirdly, suppliers have low to moderate bargaining power in that the company adheres to the coffee and farmer equity program that maintains a fair trade between the two parties. Fourthly, buyers have moderate to low-pressure bargaining power since the industry has multiple purchasers who cannot demand price concession, meaning their bargaining power is eroded (Goh et al., 2020). Lastly, there is high to moderate intensity in the competitive rivalry since Starbucks’s competitors have an almost equal market share as the company, raising the pressure.
Conclusion
Starbucks has resorted to making acquisitions to enable it to gain a competitive edge. The top three competitors, including Whitbread, Subway, and McDonald’s, have started acquiring greater market shares, which has prompted Starbucks to acquire smaller businesses to expand. The company has acquired Teavana, Bay Breads, and Evolution Fresh, aiming to expand physically and competition-wise (Goh et al., 2020). Additionally, the company has broadened its globalization capacity by establishing new branches in Brazil, India, Mexico, and South Africa. Generally, the current Starbucks position is defined by extensive acquisition and internationalization.
Reference
Goh, S. Y., Kee, D. M. H., Ooi, Q. E., Boo, J. J., Chen, P. Y., Alosaimi, A., & Ghansal, M. (2020). Organizational culture at Starbucks. Journal of the Community Development in Asia (JCDA), 3(2), 28-34. Web.