Porter's Five Forces: An Analysis of the Coffee Industry Dynamics

This report provides a comprehensive analysis of the coffee industry using Porter's Five Forces model. It examines the bargaining power of suppliers and buyers, competitive rivalry among existing firms (including examples like Costa, Greggs, and Cafe Nero), the threat of substitution (focusing on drinks like Latte and its competitors), and the threat of new entrants. The analysis includes graphical representations of the forces and provides an interpretation of each force's impact on the industry. The report also highlights the innovative strategies companies employ to gain a competitive advantage and includes references to relevant sources. The report concludes with an overview of the industry's dynamics and its key competitive factors.

Porters five forces coffee
industry

Table of Contents
Porter's Five Model..........................................................................................................................1
REFERENCES................................................................................................................................4

Porter's Five Model
Coffee Beans is coming up with OYO coffee as their innovative product in the open
market place. The forces of porters are discussed as follows:
Bargaining power of suppliers: The degree of power is more when there is less number
of suppliers in the competitive market place. By this act high rate are charged from the
consumers and coffee industry are able to accomplish huge revenue (Barganing power of
suppliers, 2018). Here, more of human resource exploitation take place and the power is in the
hand of supplies. The power is high in certain cases which is explained as:
 Product has few substitutes
 Unique products are served to the customers
 Limited number of suppliers
Bargaining power of buyer: The bargaining power of buyer Coffee industry is high
when there are concentrated goods are homogeneous in nature in the open market place.
Customers can force the supplier to decrease the prices of the product in the market (Harding,
2017). This forces not only affect the prices of the product but create impact on investments and
producer's cost in certain situation. By this better quality products and services are offered to the
consumers as well as less exploitation is done (Barganing power of buyers, 2019). The power is
high because it has seen in the data that around 150 billion consumers drink coffee on daily
basis. Some of the examp0les of coffee are Cappucciono, frozen coffee beverages, mocha, latte.
Cafe etc.
Competitive rivalry: To survive in the market firm come up with innovative idea to bit
the existing competitors. Competition is said to be fair when there are less sellers offering similar
goods to the consumers. In order to gain competitive rivalry Coffee industry adopts various like:
 Innovative product
 Price tactics
 Improved quality
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Illustration 1: Competitors
The above graph it is summarized that costa, Greggs, Cafe NERo etc. are creating tough
competition for the organization. In order to gain competitive advantages in the global market
innovation is necessary. Here, Preta Manger covers 55% of share in the market whereas, Costa
covers 38%. This firm covers the less share in the market place.
Threat of substitution: The degree of power is more when there is more substitution
available in the market (Kharub and Sharma, 2017). Here the loyal customers can easily switch
to other firm if there is slight change in prices, taste, affordability etc. The threat can be
measured when :
 Up-to-date trends
 switching costs of consumers
 The relative cost for performance of substitute
2

From the above data it can be calculated that the degree is high as in UK Latte is more
consumed in the market place (Competitive rivary, 2018). The demand for this drink is more as
compared to Macchiato, Mocha, Flat white etc. Whereas, the competitors of Latte is Americano
nad cappucciono.
Threat to new entry: The biggest threat to Coffee industry is the present industry
working in the same domain. As they have captured a large ratio of market it is difficult to
overcome that position. The threat to new entry is high when they come up with innovative
product in less price. As ell as are financially strong in the competitive market place (Shenoy,
and Aithal, 2017).
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Illustration 2: Porters five force model graph, 2018
Interpretation: The above mentioned graph covers all the five forces of porters five
force model. The blue colour states that threat to new entrant is high if company is monetary
stable in the market. Whereas, red colour depicts that degree of power is high in other
competitive industry. The rating scale start from 0 to 5. highest is 5 and lowest is 0.
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REFERENCES
Books and Journals
Amara, S. and Tiriveedhi, V., 2017. The five immune forces impacting DNA-Based cancer
immunotherapeutic strategy. International journal of molecular sciences. 18(3). p.650.
Harding, S., 2017. MBA management models. Routledge.
Kharub, M. and Sharma, R., 2017. Comparative analyses of competitive advantage using Porter
diamond model (the case of MSMEs in Himachal Pradesh). Competitiveness Review:
An International Business Journal. 27(2). pp.132-160.
Shenoy, V. and Aithal, P. S., 2017. Quantitative ABCD Analysis of IEDRA Model of Placement
Determination. International Journal of Case Studies in Business, IT and Education
(IJCSBE), 1(2), pp.103-113.
Online
Porter's five force model graph. 2018 Online]. Available through: <
https://consultingwithresults.wordpress.com/2011/08/03/financial-services-meet-
porters-five-forces//>
Barganing power of suppliers. 2018 Online]. Available through: <
https://www.slideshare.net/pratiksharma731/ccd-1//>
Barganing power of buyers. 2019. Online]. Available through: <
http://www.e-importz.com/coffee-statistics.php//>
Threat of substitute. 2018. Online]. Available through: < https://www.bbc.com/news/business-
43742686//>
Competitive rivary. 2018. Online]. Available through: <
https://www.marketforce.com/en-gb/greggs-and-pret-manger-are-uk%E2%80%99s-
most-desired-coffee-shopsnack-hotspot//>
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