Comprehensive Report: Starbucks Business Strategy and Porter's Model

This report provides a comprehensive analysis of Starbucks using Porter's Five Forces model. It begins with an introduction to Starbucks and its position in the coffee industry, highlighting its revenue growth. The analysis then delves into the five forces: the threat of substitute products and services, the bargaining power of customers, and the overall business model of Starbucks. The report examines the availability of substitutes, low switching costs, and the impact of homemade products. It assesses the moderate to low bargaining power of customers and the diverse product mix offered by Starbucks. The business model section outlines key aspects, including the company's global presence, target customers, and competitors like McDonald's and Dunkin' Donuts. The report also touches on Starbucks' marketing strategies and technological developments. Finally, the conclusion summarizes the key challenges, such as low-cost competitors and higher coffee bean prices, and recommends that Starbucks adapt to customer demand. The report references several academic sources to support its analysis.

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Business information system

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Contents
Introduction......................................................................................................................................3
Substitute products and services......................................................................................................3
Position of the company in term of customer..................................................................................4
Business model of Starbucks...........................................................................................................5
Conclusion.......................................................................................................................................7
References........................................................................................................................................8

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Introduction
Starbucks Corporation is an American Coffee Company. It has well known position in
the beverage and coffee industry. In the comparison of its competitors the revenue of the
Starbucks has increased by 2% in 2017 (CSI market, 2017). Porter’s five forces model is aided
an organization to evaluate the position of the company. The position of the company in terms of
substitute products and services are defined below.
Substitute products and services
Threat of substitute takes place when companies are forced to compete within same
industry produced substitute products and services. The range of substitute product is high for
the Starbucks brand coffee. The characteristics of Starbucks are availability of substitutes, low
switching cost and low cost of substitute. This element of five forces model depicts that
substitute have firm potential to negatively influence of Starbucks. There is possible chance that
the customer of Starbucks can easily switch from one place to another due to availability of
substitute of coffee in the market ( Magretta, 2011). The shifting cost of substitute is low because
the customers of Starbucks are not required to spend for the purpose of shifting. Another threat
source for Starbucks is homemade products which can provide the facility many customers to
make at home. Apart from that the efficient customer service, excellent ambience and premium
quality in coffee, Starbucks provides premium packaged coffee and coffee makers to its
customers. The brand loyalty and efficient quality of products and services are able to extent the
threat of substitutes.

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Position of the company in term of customer
The bargaining power of customer or buyers of Starbucks is moderate to low. Although the
customers of the Starbucks are getting premium quality in coffee but there is a possibility that
many of them can move to another brand if they get premium quality in low cost (Cheng 2013).
There are so many substitutes available of the products of Starbucks which can force customer to
have other brand’s beverages and switch from it to another. The power of buyer is affected by
number of availability of products in the market. It has been analyzed that the product mix of
Starbucks is diverse. Customers are attractive towards the brand of coffee which is provided by
Starbucks. Thus, the aspect of force model of porter’s defines that the customers are precious for
Starbucks but there is a possible chance that the other brand might get attract of its customers by
providing low cost beverages.

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Business model of Starbucks
The business model of Starbucks contains 9 models which aids it to do something innovative
with its products and services. The description of business model of Starbucks is mentioned
below.
Figure 1: business model of Starbucks
Source: (DaSilva & Trkman, 2014).
Starbucks is possessing approximately 20,000 stores worldwide inclusive of Starbucks
Coffee, Teavana, Seattle’s Coffee &development of renewed retail locations (Geereddy, 2013).
The target customer of Starbucks is men and women aged 25 to 40. The size of the organization
is wider and Starbucks is establishing itself in present as well as future market as well by opning
its store in all over the world. It secures reliable customers trust and preserve market share as
well. The first Starbucks was opened in Washington in 1971 by three partners. Gordon Bowker,
Jerry Baldwin and Zev Siegl were founder of Starbucks Company (Mason, Cole & Goza, 2017).

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The competitors of the Starbucks are McDonalds, Costa Coffee and Dunkin’s Donuts. In the
context of marketing and sales, Starbucks focuses on the premium high quality items and upper
level of client administration (Garthwaite, et. al., 2017). The technology development of
Starbucks is remarkable because it provides the premium quality and maintains the consistency
in the flavour and menu to connect with the customers for a long time (Tu, Wang and Chang,
2012).

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Conclusion
It has been recommended that the Starbucks are popular brand for the coffee. Apart from
the positive aspects there are some major challenges such as low cost products by competitive
brands, higher prices of coffee beans and variety in the food provided by the competitors who
may impact the Starbucks adversely. It has been recommended that it should operate its business
as per analysing and evaluating the demand of customers.

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References
Cheng, D.S. (2013). Analyze the hotel industry in porter five competitive forces. Journal of
Global Business Management, 9(3), p.52.
CSI market. (2017). SBUX Sales vs. its Competitors Q2 2017, Retrieved from .
DaSilva, C. M., & Trkman, P. (2014). Business model: what it is and what it is not. Long range
planning, 47(6), 379-389.
Garthwaite, C., Garthwaite, C., Busse, M., Busse, M., Brown, J., Brown, J., & Merkley, G.
(2017). Starbucks: A Story of Growth. Kellogg School of Management Cases, 1-20.
Magretta, J., (2011). Understanding Michael Porter: The essential guide to competition and
strategy. Harvard business press.
Mason, A., Cole, T., & Goza, N. (2017). Starbucks: a case study of effective management in the
coffee industry. Journal of International Management Studies, 17(1).
Tu, Y.T., Wang, C.M. and Chang, H.C. (2012). Corporate brand image and customer satisfaction
on loyalty: An empirical study of Starbucks coffee in Taiwan. Journal of Social and
Development Sciences, 3(1), pp.24-32.

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