Starbucks Case Analysis

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Wei Guo
MGT 409-001
Starbucks Case Analysis
From the very beginning sentence of Starbucks case, it is tells us the share price of Starbucks reduces 50 per cent, and the quantity of customer declines nowadays. In other words the business of Starbucks is becoming worse than previous 20 years. Although the net revenue and net earnings are increasing dramatically every year since 1995. There are still some issues affect Starbucks negatively: the strategic issue in this case is that when the number of customers becomes large, the service will be slower, thus, the customers always wait for a long time; besides that these waiting customers even cannot find a place to sit, due to the seats are not enough for so many customers. Porter’s Five Forces analysis:

* Competitive rivalry within an industry is high for Starbucks Coffee. Companies like McDonald’s, Dunkin Donuts and Peet’s Coffee & Tea are all possible competitors within this industry. * Threat of new entrants is low due to the coffee market in America has been almost saturated. Customers can easily find a coffee shop anywhere. * Threat of substitute products is medium, because lots of other drinks such as Red Bull and Monster which can also keep people awake and conscious. * Bargaining power of customers is very low since Starbucks implements “standardization” as one of the important step of their brand-building strategy. This means customers will pay same amount of money for same products. * Bargaining power of suppliers is low due to the huge number of coffee bean producers. And Starbucks purchases 14 percent of the fair trade-certified coffee in the world which makes it a big buyer who will not affected by the suppliers. From analysis of the Porter’s Five Forces above, it shows the biggest challenge for Starbucks are the company like McDonald’s, Dunkin Donuts and Peet’s Coffee & Tea, due to their ability of offering fast service and capacity of their stores. Therefore, the low speed...
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