Table of ContentsIntroductionIntroduction to Michael Porters FrameworkThreat of SubstitutesBargaining Power of BuyersBargaining Power of SuppliersCompetitive RivalryConclusionIntroductionCooperation Starbucks is one of the world's leading specialty coffee roasters and retailers. Since opening its first store in downtown Seattle in 1971, the global expansion of the Starbucks name has been rapid and strategic. As of 2018, Starbucks represented 29,324 stores worldwide, of which 15,041 are based in the United States, the company's home country. This dominance within the U.S. retail coffee and snack industry has given them significant market power to determine industry trends. As a result, Starbucks strategically balances customer loyalty, premium coffee, and family atmosphere within its stores to overcome its competition and excel among the American population. When discussing the concept of strategy, it is important to note that it encompasses the means by which an organization achieves its premeditated goals. In order to successfully implement objectives and goals, whether profit or customer oriented, businesses and organizations must formulate a strategy within which they work. This involves understanding the strategic position of the organization and defining the broad outlines and principles of how a business might achieve these goals. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”?Get the original essayIntroduction to Michael Porters' FrameworkUsing Michael Porters' Five Forces Framework, we can analyze and evaluate the environment of the industry by investigating the external influences that shape the competitive market. and through this theory, organizations can design an optimal strategy to succeed in the market. The five forces used to formulate these influences are supplier power, threat of entry and new competitors, industry rivalry, threat of substitute products and finally buyer power. When we apply Porter's five forces to Starbucks, we will be able to study the external environment that may affect Starbucks' competitive environment. Another key area of ​​Porter's 5 Forces framework is the threat of new entrants. This area concerns the extent to which a new entrant could pose a threat to existing competitors within the same industry. Due to the competitive nature of the retail coffee sector with the United States, there is a moderate threat of new competitors entering the sector. This is because it is only a moderate level of initial investment to be able to operate within the industry. As for Starbucks, it can be argued that they might feel threatened by new entrants, as small coffee retailers can quickly establish themselves on a localized scale due to their supply needs. lower and offer no switching costs to consumers. On the other hand, large established brands such as Starbucks lead the industry because they have advanced economies of scale and extensive brand development carried out over several years. This works in favor of Starbucks because, due to its large and advanced global scale, the company has the necessary funds and developed distribution systems to be able to expand outside localized areas and therefore outside the United States. Although it is a relatively easy market to enter, larger companiessuch as Starbucks hold an advantage because they have a more focused and developed customer service strategy visible in all of their stores. This consequently results in customer loyalty who continually return to the Starbucks store. Threat of Substitutes The potential threat of substitute products within the industry is included in Porter's 5 Forces framework. This takes into account the case where a close substitute for a specific product exists within a market, therefore increasing the likelihood that consumers will turn to alternative retailers for cheaper options or purchase other products instead of the industry's product. For example, the price of a product determines whether customers will buy it; If established businesses seek to charge more than new entrants in order to lower the threat level, this can ultimately lead to customer migration and loss of profits. In the case of Starbucks, it can be argued that the threat of substitutes is very high, as products such as caffeinated soft drinks, canned energy drinks, and Pepsi and Coca-Cola products are on the rise. These products pose a threat to Starbucks' in-store sales because they have a significantly lower retail price and can be purchased more easily in supermarkets. Furthermore, it could be argued that these substitutes threaten companies like Starbucks because they are more convenient and accessible to customers; they do not require waiting in lines, face-to-face interaction with employees and, as previously stated, products like these can be purchased outside of Starbucks outlets. To keep up with this trend and reduce the threat level posed by these products, Starbucks has developed its own line of ready-to-drink canned products in partnership with PepsiCo, such as their canned Nitro Cold Brew. On their website, they market these products as “a premium experience” that can be taken anywhere you want. Starbucks is strategically trying to overcome the threats of new entrants by expanding its product line by following market trends. For example, in 2012, Starbucks acquired American tea retailer Teavana Holdings Inc, which produces and markets premium tea products. This decision by Starbucks further strengthens customer loyalty by expanding into alternative products, under the same brand as Starbucks. However, the threat of substitute products competing with Starbucks puts pressure on their margins; with the demand to design new ideas or competing products to reduce this threat and continually gain competitive advantage. Bargaining Power of Buyers Bargaining power of buyers relates to the pressure and influence that customers/consumers can exert on businesses to obtain a reduction in price or an increase in the quality of the product/service displayed. This power can impact the competitive environment because it influences the industry's ability to make a profit. Buyer bargaining power can be determined by factors such as customer bargaining leverage and buyer price sensitivity. If trading leverage is high, this results in greater price sensitivity, which effectively gives the buyer great power. This can potentially have a detrimental effect on their trade, as products are sold at a lower price, leading to lost profits and higher consumer surplus. Regarding Starbucks and the bargaining power of suppliers,Price negotiations for both primary buyers and individual customers are incredibly difficult. This is partly due to the scale of this activity; it would not be possible to charge exclusive prices to different customers. Due to the wide selection of takeaway coffee retailers in the United States, customers have the option to go to alternative retailers offering the same premium coffee, but at a lower price. To some extent, it can be argued that Starbucks is giving its consumers the opportunity to negotiate their prices through its 25¢ discount on reusable cups introduced in 2018. This discount encourages consumers to bring their reusable coffee cups and in exchange , they receive a gift. 25¢ off their order. Starbucks also launched its own line of reusable plastic coffee cups to encourage consumers to participate in this program. This strategic choice made by Starbucks rightly offers consumers a sense of bargaining power while benefiting those who opt into the discount program by providing them with the means to do so, such as purchasing an own-brand reusable cup Starbucks. Bargaining power of suppliersIt is a known fact that the relationship between producers in a sector and their suppliers is comparable to the contact that producers can have with consumers. Suppliers have a great influence on an industry's profit potential and competition because they have the ability to raise the prices of supplies and change the quality of goods sold to producers. As noted in its 2018 annual report, Starbucks coined the Starbucks Global Social Impact Strategy, which aims to act ethically and sustainably when sourcing coffee and further contribute to local communities. Due to the large number of specialty coffee retailers and the many suppliers of Arabica coffee beans, commonly used by retailers, companies must differentiate their products in order to maintain a competitive advantage. This means that companies such as Starbucks are seeking higher quality products in order to differentiate themselves from other retailers, for example by outsourcing to premium coffee producers. Due to this demand, these farmers have the ability to negotiate with producers, as specialized farmers have no shortage of customers, giving high bargaining power to Starbucks' suppliers. On the other hand, due to the size of the Starbucks company in the United States and significant supply needs, their financial loyalty to suppliers carries considerable weight. This therefore means that suppliers have little bargaining power against Starbucks because their trade with the global brand is essential to their production. Competitive Rivalry One of Porter's five forces includes the intensity of rivalry with an industry. It takes into account the degree of competition in the environment in which an industry operates and its impact on profits. For example, a highly competitive market can have many negative effects for the companies involved, as there is less room for price negotiation and lower profit margins. Given the intense nature of the specialty coffee market in the United States, competitive rivalry in this sector is very high. In the case of Starbucks, it falls into the category of monopolistic competition. This means that it exists in a market where there are a high number of retailers of the same product/service and therefore many buyers of those products. In order to try to compete with this, retailers are trying to offer a..