Starbucks Value Chain Analysis Paper

Introduction

We have various cafes, coffeeshops and coffeehouses that serves the general audience with food and beverages. Each franchise and outlets have their own purpose and business direction which will affect the type of environment and direction they are in. The general purpose of a Coffeehouse chain is providing a public place specializing mainly in food and beverages with informal entertainment.. Certain powerhouses of coffeehouse chains we can see around the world would be Starbucks, The Coffee Bean And Tea Leaf, Coasta Coffee and so on. With the influx of small coffeehouse chains due to the change of the audience dynamics be it age group or interest, there will be competition amongst these powerhouses of coffeehouse chains and these

The main reason of persistent losses is not due to lack of interest of coffee enthusiast, but in fact, in 2012 Starbucks’ made £70 million pounds on £414 million on beverage sales. It also made a whooping £98 million losses in administrative and royalty payments, enabling the division to declare a £30 million losses. (The Economist. 2015, February 14)

Social / Sociocultural

In the spring of 2015, Starbucks launched a social campaign “Race Together” to raise awareness on racial issues in the United States. It was met with backlash as Starbucks took heavy criticism and mockery on social media, Twitter, which led to the media and public’s questioning why the organisation would address such sensitive social issue. Although Starbucks stood firm to their commitment and beliefs on their campaign but it after receiving heavy fire from both the media and public, their “Race Together” initiative was ended as soon as it first began. (Ziv, S., 2015, March 23)

However the threat is more general. Customers seeking specific products, for instace, Starbucks specialize in coffee, the threat of having a subsitute is lessen as Starbucks is being established as a premium preffered product. (Investopedia. 2015, December 08)

Bargaining power of Buyers: Low

Starbucks’s customers have little bargaining power as the purchases are of very little quantity as compared to the company’s overall revenue. Thus no single customer carries enough weight to significantly affect the market pricing of Starbucks. However, Starbucks must be sensitive as to how much of a premium their customers are willing to fork out before their customers decides to boycott Starbucks for much cheeper alternatives. (Investopedia. 2015, December 08)

Bargaining power of suppliers: Low

There’s more than enough suppliers for Starbucks to choose from with relatively low switching cost. Starbucks is a major customer for most suppliers, which in turn lessens the bargaining power of the suppliers. Although Starbucks has the upperhand on negotiating with suppliers, they have not been taking advantage of their suppliers. Starbucks undertook a fair trade practice, coffee and farmer equity (C.A.F.E) program, which provides suppliers with a partnership with the coffee giants. (Investopedia. 2015, December