Porter's Five Forces Analysis of Starbacks

Porter's Five Forces Analysis of Starbacks

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Michael Porter's Analysis Of Starbucks

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Autor: radonda_84 11 March 2009

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Words: 2738 | Pages: 11

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Michael Porter, a Harvard Professor introduces his ideology of the Five Forces model that shapes the competition in the industry. Each force is interrelated and therefore leads into the other to show the elements directly involved in the further success or ultimate success of the firm.

Starbucks Coffee Co. throughout its existence since 1971, with its great management team, innovative style of thinking and strong will to succeed in compliance with its mission and vision statements has and continues to overcome its barriers by recognizing such strategic planning as those included in Porter's five forces model. The model includes such components as Barriers to Entry, Supplier and Buyer Power, Threat of Substitutions, and most importantly the Industry Competitors. Starbucks throughout its existence has addressed each and every one of Porters forces with a positive edge that has greatly contributed to the success of the company. Starbucks took many risks and spent capital that it really did not have. To build a corporation based on intuition and a trip to Italy has undoubtedly paid off in the long run which is evident throughout the year that Starbucks has been in operation. Howard Schultz, CEO and founder of the company, has stuck to his conviction not to "sacrifice long-term integrity and values for short-term profit." He knew if he played his cards right and stuck to his guns it would only be a matter of time that Starbucks would become the world largest coffee industry in the world. He wanted the company to become and international outlet for coffee consumers which not only included men and woman but also addresses the needs and wants of those of all ages and nationalities, children, students and any other category of people that have and interest in Starbucks diverse product line. With constant dedication to the company's vision and mission statement and believing in the value of market share and name recognition and how critical they are to the success of the company, he was able to achieve his goal within a few years. During this time of course he has been able to open a total of 1,100 stores and continues to do so until this day.

Starbucks Coffee Co. continues to address the issues introduced in Porter's Five-Force Model as such:

New Entrants (Barriers to Entry in to the Coffee Industry):

There are many barriers to entry such as economies of scale where new firms entering the market will have to contend to the competition in the area of price and costs. The aspiring new firm may have to conform to the economic scales already set for them which may mean high cost and high pricing or may have to result to a cost disadvantage. These disadvantages may effect production, marketing, research and development and many other elements directly related in the determined success of ones company. Product differentiation which ties in brand identification that can and will result in new firms having to spend a lot of capital earnings to break the customer loyalty that has already been established. Brand identification is a result of costly advertising and customer service that a companies plays out to gain the market share needed to bring in a profit. Capital is a must for all startup companies for investment and survival purposes. Capital can create barriers for new entrants because it may not exist for them to make up the lost expenses used to contend to the many other barriers that were previously introduced. Starbucks because it was always Starbucks took a major risk starting up which costs a lot of capital which of course was made back through much profit and undoubted success. Yes, Starbucks did have to overcome the may barriers listed and it was costly and time consuming but it did pay off in the long run because of the management team and the leadership and eagerness of Schultz. Another barrier may include the access a company has to the distribution of its products. It becomes a major concern when