Tim Hortons Essay

Competitive Situation

In today’s competitive markets, organizations must remain proactive and innovative to fight off competitive to hold majority share of their respected market. For an organization to determine the degree of their competitive advantage and its sustainability, a look into their external analysis is required. This portion of the report will examine and analyze Tim Hortons Coffee and Bake Shop’s external environment vis-à-vis their internal strength and weaknesses to determine their competitive situation. This analysis will focus on Porter’s Five Forces to determine their competitive situation. Porter’s Five Forces looks at Supplier Power, Barriers to Entry, Buyer Power, Threat of Substitutes, and Competitive Rivalry (Jurevicius,

Tim Hortons in its main market being Canada has two main competitors being McDonalds and Starbucks which implies slow growth in the industry. Moreover, as products are minimally differentiated aside from roasting techniques, consumers can seek these products from other outlets. As there are other options for the consumer, competition must create loyalty through marketing initiatives to control much of available market shares. As success in the market is dependent on customer loyalty, this ultimately causes key players in the industry to wage price and promotion wars. The industry itself, generates three-billion dollars annually and puts any competitor in a good position if they can capture majority of the market share (Tedesco, 2013). Lastly, with McDonald's investing over a billion dollars to increase its market share (Tedesco, 2013), competitive rivalry in increased as McDonald's’ economy of scale could threaten Tim Hortons if a price war was to

Although the cost of producing coffee and pastries is relatively low compared to other offerings in other hospitality industries. For a competitor to enter the industry and threaten market share is unlikely. Even as products are almost identical, with Tim Hortons holding eighty percent of the Canadian market (Tedesco, 2013), and as a coffee drinker, there is a loyalty to the organization which one frequents for coffee. This loyalty makes taking over market shares owned by the three main competitors difficult to accomplish. Also, for a new entrant to threaten market share, the entrant would require a substantial investment to open locations in strategic locations across Canada. Such high costs coupled with the mention slow growth rate in the industry, drastically reduces threats of new entrants. Moreover, the economies of scale each competitor holds would require new entrants to hold inventory in large amounts to purchase coffee beans at a competitive