Tim Hortons

The barrier to enter this industry is low only for the local coffee and snack shops because the investment is quite low. Also, the foodservice regulations can be achieved and licensing required for this industry is not difficult to obtain. However, it would be high enter barrier for these specialty coffee shop or chain shop due to the mature life cycle of coffee and snack shops in Canada and high investment on both physical and human capitals. As stated in the article, the industry is concentrated with Tim Hortons and Starbucks with 86.9% market share. Brand identity is essential for the big player since it is difficult to change customer’s daily routine and taste. Also, the economies of scale help larger operators to negotiate favorable terms with suppliers. Moreover, due to the large capital requirement, these major players in the industry can extend their business against the potential competitors. So the newcomers would, therefore, have a cost disadvantage. There is medium pressure for the suppliers. For the coffee bean suppliers, they can increase the coffee bean price due to the supply shortage, and these coffee and snack shops can’t change their price in short time. Furthermore, as the concern of health issues, the demand for healthy meal options
Coffee and snack would be considered as normal good to customers, because as the increase in consumer’s income, they prefer consuming more coffee in coffee shops. Despite the fact that some customers prefer specialty coffee, the majority consumer group for this industry has to preference on lower-margin items. Therefore, Coffee and snack shops can hardly increase their price. Also, they have to offer the promotion to attract significant buyers (the individual customers.) Although the switching cost for customers is low due to numerous beverage products and different coffee shops, customers won’t give up consuming coffee and snacks due to habits and brand