Threat of New Entrants:
Starbucks’ brand image is very strong. CEO Howard Schultz has emotionally positioned Starbucks as a ‘third place’ in customers’ minds, alongside home and work, to make Starbucks a part of their routine. This creates power by reducing customer susceptibility to visiting competitor stores in proximity to Starbucks, making it an unattractive market for new entrants.
Furthermore, although two-thirds of the UK’s 15,000 coffee shops are independent, a report by the Public Accounts Committee in January 2014 says entrepreneurs will “struggle to obtain the finance they need to start up, operate or grow” their businesses despite government schemes to help small firms. Instead, larger companies have access to more funding sources, such as syndicated lending markets and can negotiate more favourable interest rates due to reduced risk on the lender’s part, helping to fuel Starbuck’s growth to 760 stores in 2014.