Starbucks Industry Analysis

Industry Analysis of Starbucks Corporation

The aim of this paper is to analyze the industry of coffee and snacks store, the organization chosen for this task is the Starbucks Company. The paper structure would start with a brief introduction to the company and the external influences of its market followed by an application of the external of the External Evaluation matrix. The analysis will also include the company segmentation variables. At the end, the paper will conclude the importance of industry analysis over the strategy success.

Starbucks Corporation, an American company founded in 1971 in Seattle, WA, is a premier roaster, marketer and retailer of specialty coffee around world. Starbucks has about 182,000 employees across 19,767

(2008) Starbucks operates with major competitors like Costa, McDonald’s, Caribou Coffee, and Dunkin Donuts and thousands of small local coffee shops and cafes, which make a high rivalry. As there is no or minimal switching cost for customers with loads of offers available Starbucks customers tend to have more bargaining power. Substitutes for Starbucks Coffee include tea, juices, soft drinks, water and energy drinks, whereas bars can be highlighted as substitute places for customers to meet someone and spend their times outside of home and work environments which make a substantial threat. The main inputs into the value chain of Starbucks is coffee beans and premium Arabica coffee grown in select regions which are standard inputs, which makes the cost of switching between substitute suppliers, moderately low. However, coffee market nowadays is highly saturated and large amount of resources associated with buildings and properties are required in order to enter into the industry.

External Factor Evaluation Matrix

In order to evaluate the opportunities and threats affecting coffee and snacks store industry, an External Factor Evaluation Matrix was conducted as recommended by Grant, R. M., & Jordan J. (2012). Economic, social, demographic, political, and competitive information were gathered to develop the following key external factors:

Key External Factors Weight Rating W.

M., & Jordan J. (2012). Industry analysis is a tool that facilitates a company 's understanding of its position relative to other companies that produce similar products or services. So, understanding the forces at work in the overall industry is an important component of effective strategic planning.

Larson, R. (2008) pointed out that one of the most competitive industries in the world is the food and beverages companies and Starbucks can be considered to have a strong competition in the market. Despite their inflated prices, the company has been able to create a sense of brand loyalty with an array of loyal followers. Coffee is a fairly homogeneous item which Starbucks has been able to market their standards of portraying a luxurious lifestyle.

Starbucks operates in a monopolistically competitive market structure in which they have been able to maintain a control over their inflated prices. They have been able to create a standard for their coffee and in which they require their customer base to be exaggerated prices for a cup of their various brews. With usage of the Starbucks logo, quality, and various trademarks, they differentiate their coffees from their competitors. Starbucks prides itself on being completely different from any other coffee house and its competitors, which is a reason why Starbucks has become