When looking at competition, there are several forces that have to be taken into account.
It will help the management of Starbucks understand their advantages/ disadvantages relative to competitors
To generate understanding of competitor's past, present and future strategies.
To provide an informed basis to develop strategies to achieve competitive advantage in the future.
Industry concept of competition
World coffee exports totalled 8.90 million bags in May 2007, an increase of over 4.76% compared with the volume of 8.50 million bags recorded in May last year . This is just an increase compared to the first quarter of 2006. The last couple of years the coffee market has increased immensely. The demand for specialty coffee has increased over the last couple of years, therefore a lot of new companies have entered the coffee market. Due to all the existing companies on the market, it is hard to establish a good brand name and remain a good position on the market.
The coffee industry can be defined as a monopolistic competition. There are many producers and consumers, the goods and services are heterogeneous but the companies are still able to differentiate their products. Differentiation in the market is through product differentiation, globalising and vertical integration. Since Fair Trade products became more popular and used more intensive more and more companies are using vertical integration. The companies try to stay ahead of their competitors by introducing new product(line)s. They extend their brand.
Globalization is a main form of differentiation as well, companies are starting at a small and local location, due to the growing competitors in the market. Therefore the companies are trying to expand en grow further all over the world.
A structural problem of the coffee market is that the entry barriers for
producers are relatively low whereas "exit barriers" are relatively high due to the nature... [continues]
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