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1. Industry identification
2. Analysis of the above industry
Porters 5 forces
PEST analysis
1. Industry identification
The industry being analysed is the
Coffee-bar/Coffee-recreation
industry.
This industry includes bars serving
basic coffee and/or specialty coffee,
regional & national players, etc
The industry revolves around the
entire social experience around
coffee rather than just coffee as a
product
Contribution to
power
Reason
Fixed Cost
Low
Number of
Competitors
High
Industry Growth
High
Exit Barriers
Low
Capacity Expansion
Low
Rivals Personality
Low
Contributi
on to
power
Reason
Economies of scale
Low
Product Differentiation
Low to
Medium
Capital Requirements
Low
Switching costs
Low
Low
Cost Disadvantages
independent of scale
Medium
Government Policy
Low
Expected Retaliation
Low
Contribut
ion to
power
Reason
Concentration of
suppliers
Low
Product
differentiation;
Criticality of
suppliers goods to
industry
High
Importance of
industry to the
supplier groups
Low
Presence of
substitutes for
suppliers
High
Threat of forward
Low
Contribution
to power
Reason
Switching costs;
Low
Product differentiation
Low
Price sensitivity
Medium
Threat of backward
integration
Low
Contribution
to power
Reason
Lifestyle choices
Low to
Medium
Price/Performance
ratio advantage
Low to
Medium
Opportunities
Threat
Political/Legal
Economic
Social
Technological
3. Evaluation of Industry
attractiveness
Porters 5 Forces: Industry is attractive because degree of competitive
rivalry is low, threat of substitutes is low to medium, suppliers power is
medium. Even though threat of new entrants is high, the industry growth is
very high, so there is a huge scope for growth without difficult price wars.
2000
1500
1000
500
0
1990
1994
1998
Ground
regular
Ground
Decaf
Ground
Secialty
Instant
Regular
Instant Decaf
Whole bean
Ready to
drink
Proprietary
computer software
One-way valve
technology; Closed
loop system
Transportation Rate
Sound forecasting
model
Complex bakery
distribution model
Operational excellence;
integrated supply chain
Fully integrated
manufacturing &
distribution process
Relationship with realestate
managers/brokers &
street-sniffers
Shelf-life policy
Close-relationships
with exporters
Vision &
Leadership in the
form of Howard
Schultz
Social capital
Quality
recruitment
procedures
Company
policies :
hospitality,
production,
education
Company values:
Passion, Integrity,
Competitive
Spirit, Respect,
Entrepreneurial
spirit
Training procedures
Flat organizational
structure
Sourcing
Operations
Distribution
Marketing
Service
Procureme
nt from the
best
sources,
Excellent
reputatio
n
amongst
exporters,
Stringent
three-level
quality
checks
Signature
roasting
curves,
open-valve
technology,
closed loop
system
Transportation
Rate, Sound
forecasting
model,
Complex
bakery
distribution
model, Fully
integrated
manufacturin
g&
distribution
process
Brand equity,
Premium
quality image
Starbuckscoffee-social
experience
stemming from
brand image,
Great people,
First-rate music,
Comfortable &
upbeat meeting
place, Sound
advice on
brewing
Company
Policies,
Values
Human
Resources
Social
Capital
Financial
Performa
nce of
venture
Proprietar
y
Technolog
ies
Social
Capital
Brand
Image:
Signature
Starbucks
lifestyle &
passion
for
quality
coffee
Company
values,
spirit:
Consisten
t,
premium
social
Starbuck
s
experienc
e
Verdict
Contract
with
Dreyers
Ice-Cream
Continue
Bottled
Frappuccin
o with
Pepsi Co.
Continue
Penetrating
the grocery
market
Discontin
ue
Introductio
n of
Discontin
ue
Performa
nce of
venture
Proprietar
y
Technolog
ies
Social
Capital
Brand
Image:
Signature
Starbucks
lifestyle &
passion
for
quality
coffee
Company
values,
spirit:
Consisten
t,
premium
social
Starbuck
s
experienc
e
Verdict
Introductio
n of
Doppio
Coffee
carts
Discontin
ue
Mail-order
business
Barnes &
Nobles
bookstores
Continue
Red-Hook
Breweries
Continue
8. Recommendation
Starbucks should continue with its ideas of
bottled Frappuccino, Starbucks ice-cream,
collaboration with Barnes& Nobles and Red
Hook Breweries as they are aligned with
almost all of Starbucks core competencies.
The others should be discontinued even if
they might be performing well because
they are not aligned with the core
competencies that the company stands for.