Strategic Analysis of Starbucks: Porter's Five Forces and VRIO Model

This report provides a strategic analysis of Starbucks using Porter's Five Forces and VRIO model. It evaluates the external market using Porter's Five Forces and analyzes the internal resources and capabilities of Starbucks using VRIO model.

MC's strategy module.

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
External analysis with Porters five force model.........................................................................3
Internal analysis with VRIO model.............................................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6
APPENDIX......................................................................................................................................7

INTRODUCTION
Strategic analysis of company is very important and effective part of growth because
through that companies are able to find out the ways to promote products at marketplace. The
present report is based on “Starbucks” which American company, is a premier roaster, marketer
and retailer of speciality in coffee around the world. The report will evaluate external analysis
through porter five force and uses VRIO model for internal analysis.
MAIN BODY
External analysis with Porters five force model.
Starbucks is operates in the retail coffee and snacks stores industry. It is the dominates
industry with a market share of 37.7%. In order to analysis external market source by using
Porter five force model.
The porter five force model is include five forces which are: threat of new entrants, threat
of substitutes, bargaining power of buyer, bargaining power of supplier and competitive rivalry.
Explanation in the brief are as follows:
Threat of new entrants (Moderate):
This is the moderate threat of new entrants into the industry as the barriers to entry are
not high enough to discourage new competitors to enter the market (Dondjio and Haafst, 2017).
The Starbucks have moderate impact with new entrants because new comers are come with new
and innovative idea at marketplace in order to proper compete in competitive edge. The expected
retaliation from the well-established companies for the brand equity, resource, prime real estate
location which is creates a moderate barrier to entry.
Threat of substitutes (High):
Threat from substitute product are very highly impact to Starbucks at the market place.
But in the market place have reasonable substitute products of coffee which are likely tea, fruit
juice, water and other soda or energy drinks. This creates threat from substitute products but ion
the other side, company have threat from customers are made their coffee at home by using
coffee machines. This decrease a cost of buying from the premium coffee retailers like
Starbucks.
Bargaining power of buyer (Moderate to low pressure):
The bargaining power of buyer are had impact to company moderate to low pressure. In
the industry there are many of buyer and no single buyer can demand price concession. It offers

vertically differentiated products with a diverse consumer base. This make low volume
purchases which erodes buyer. This impact to Starbucks coffee chain because company have
various growth aspects (Duke, 2018). The bargaining power of buyer is higher because they
power to reduce price of product as per needs throughout company.
Bargaining power of suppliers (Low to moderate pressure):
The main inputs into the value chain of the Starbucks is the coffee beans and premium
Arabica coffee grown in selected regions which is standard inputs. That makes the cost of
switching between substitute supplier and moderate to lower. The bargaining power of suppliers
are low to moderate pressure because company have great supply chain management which
created advantage for Starbucks but most of the time suppliers are not considered that move
another side. The suppliers in the industry also pose a low threat of competing against company
by forwarding integration which is lower form their power.
Competitive rivalry (High to moderate):
The company have a monopolistic competition, with company have the largest markets
share and its closest competitors. This also having significant market share, creating significant
pressure on Starbucks. Consumer has any cost of switching to other competitors that create the
highest intensity in rivalry. But in fact, Starbucks maintain their some competitive advantage as
it differentiates its products with premium products and services. This factors are created m ore
impact on growth of company because customer have switching options to move another option.
Through the analysis of external analysing by implementing porter five force, get an
aggregate industry analysis that strength of force and profitability in the coffee industry as the
moderate (Frynas, 2015). This is effective and valuable company to get their competitive
advantage.
Internal analysis with VRIO model.
The Starbucks is the well-known name in the world coffee. It has more than 22500 stores
opened globally. This has great brand image, and they try to achieve success throughout the
years of ethical business by making focus on customers services and products quality. Here is
select to internal analysis of company by using VRIO model are as follows:
Strong brand image:
Valuable:

The Starbucks have various valuable products and services as pert the innovation. Those
are created great value for company. There strong brand image is the valuable resource that
helped to growing the customers needs basis (Osorio Hernández and et.al., 2018). On the other
side, company have special flavour and quality of coffee to serves their customers in effective
manner. Their customers services are to good with that customers are more satisfied at
marketplace.
Rare:
Their strong brand image is not rare but challenge for competing brands. Their supply
chain management is difficult to achieve for others because they have requires both investment
and strategy. The global presence of company too difficult to achieve for other because have
significant financial investment involved (Taradolsirithitikul, Sirisomboon and Dachoupakan
Sirisomboon, 2017). Those are rare elements of Starbucks which had created great impact on the
company.
Inimitable and non-substitutable:
The inimitable elements of company is difficult for company to manage those in
marketplace which is in the effective manner. The strong brand image is difficult imitate but it is
possible in the long term for the further growth. Customers services are somewhat difficult to
imitate as well as store environment of Starbucks (Sakal, 2018). The global presence is highly
difficult to imitate because of investment purpose in proper manner.
Organized to exploit:
The organized to exploit by using their strong brand image at market place. Their
flavours and quality of coffee talk to the town and too important part of the company marketing
and customer retention strategy. The supply chain management of company is from the 99%
source its coffee ethically and exceptional quality beans are sourced from around the world
giving the brand and edge.
CONCLUSION
From the above study it had been concluded that the strategy for companies has played an
important role in the company for making their great effectiveness at marketplace. For that report
had been presented external analysis through Porter five force and internal analysis through
VRIO model.

REFERENCES
Books and Journals
Dondjio, I. and Haafst, R., 2017. Managing your business. Noordhoff uitgevers.
Duke, D., 2018. Porter’s Five Forces and the Coffee Industry. Management Teaching Review.
3(3). pp.241-251.
Frynas, J. G., 2015. Strategic CSR, value creation and competitive advantage. The Routledge
companion to non-market strategy. pp.245-262.
Osorio Hernández, R. and et.al., 2018. Bioclimatic analysis of three buildings for wet processing
of coffee in Colombia. Revista Facultad Nacional de Agronomía Medellín. 71(3).
pp.8609-8616.
Sakal, D. V., 2018. COMPANY ANALYSIS OF STARBUCKS CORPORATION.
Taradolsirithitikul, P., Sirisomboon, P. and Dachoupakan Sirisomboon, C., 2017. Qualitative and
quantitative analysis of ochratoxin A contamination in green coffee beans using Fourier
transform near infrared spectroscopy. Journal of the Science of Food and Agriculture.
97(4), pp.1260-1266.

APPENDIX
VRIO model
RESOURCE VALUABLE RARE INIMITABLE ORGANIZED
Strong brand
image
Yes No No Yes
Special Flavour
and quality of
coffee
Yes Yes No Yes
Customer
services
Yes No No Yes
Store
environment
Yes Yes No Yes