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Five Forces Analysis Of The External Environment Of Starbucks

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2.0 External Environment
The external environment consist of forces and factors that affect the business and its operations both directly and indirectly. It also plays a critical role in shaping the future of entire industries and those of individual businesses (Teik, 2013). To keep the business ahead of the competition, companies must continually adjust their strategies to reflect the environment in which their businesses operate. So, it is crucial to analyze the external environment to gain a better understanding of factors that influence the company’s operations and forces that can hinder succesful strategy implementation.
2.1 The Broad Environment
The broad environment in which Starbucks operates include the political, economic, social, …show more content…

There is a virtually endless list of alternate food and beverage products that consumers can choose in place of Starbucks ' product (Maverick, 2015). The threat is strengthened by the low witching cost involved in customers switching to competitors or alternate products.
2.2.5 Threat of new entrants
Although the barrier to entry of the market is not too high, the threat of new entrant for Starbuck’s is moderate at best. Starbucks has a strongly established brand, and it will make it difficult for new entrants to match it for several years. The market is also mature and Starbuck’s has already secured substantial amount of real estate in prime locations (Maverick, 2015). Starbucks also benefit from economies of scale while new entrants would most likely not enjoy the same benefits and will make the competition difficult for newcomers (Investopedia, …show more content…

Starbucks has the ability to effectively leverage their product differentiation strategies by offering a product mix that is seen as premium by offering high quality beverages and snacks. Starbuck’s brand equity is built by providing each customer with a unique experience with good customer service, clean and well-maintained stores that reflect the culture of the communities in which they operate (Geereddy, 2013). So, the company’s core competencies are their focus on quality, outstanding customer service, care for its employees, continuous product advancement and the company’s drive to be involved in the community they are in. By focusing on these core competencies, Starbuck’s has been able to demand higher prices for their products and gained customer loyalty since their company is associated with high quality products and excellent customer service in the minds of their

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