Starbucks, with its size and scale, has the power to take advantage of its suppliers but it maintains a Fair trade
certified coffee under its coffee and farmer equity (C.A.F.E) program, which gives its suppliers a fair
partnership status, which yields them some moderately, low power.7
The suppliers in the industry also pose a low threat of competing against Starbucks by forward vertical
integration, which lowers their power.
Starbucks also forms a highly important part of the suppliers business, due its size and scope, which make the power of the suppliers lower. Given these factors, suppliers pose a moderately low bargaining power.
Intensity of Competitive Rivalry: High to Moderate
The industry has a monopolistic competition, with Starbucks having the largest markets share and its closest
competitors also having a significant market share, creating significant pressure on Starbucks.
Consumers do have any cost of switching to other competitors, which crates high intensity in rivalry.
But its important to note that Starbucks maintain some competitive advantage as it differentiates its products
with premium products and services, which cause a moderate level of intensity in competition.
The industry is mature and growth rate has been moderately low which cause the intensity of competition
among the companies to be moderately high due to all of them seeking to increase market shaper from
established firms like Starbucks.
This industry does not have over capacity currently and all these factors contribute to the intensity among
rivals to be moderately high.
Looking at the Porters five forces analysis, we can get an aggregate industry analysis that the strength of forces and the profitability in the retail coffee and snacks industry are Moderate.
3) Internal Analysis of Starbucks Corporation:
3.1) Starbucks Core Competence:
The core competence of Starbucks has been its ability to effectively leverage their cornerstone product differentiation strategies by offering a premium product mix of high quality beverages and snacks. Starbuck’s brand equity is built on selling the finest quality coffee and related products, and by providing each customer a unique “Starbucks Experience”, which is derived from supreme customer service, clean and well-maintained stores that reflect the culture of the communities in which they operate, thereby building a high degree of customer loyalty with a cult following. Its other core competence is its human resource management's values- based approach for building very strong internal and external relationships with suppliers, which drives the successful deployment of its business strategy of organic expansion into international markets, horizontal integration through smart acquisitions and alliances that maintains their long-term strategic objective being the most recognized and respected brands in the world.