Index IntroductionIntroduction to Michael Porters FrameworkThreat of SubstitutesBargaining Power of BuyersBargaining Power of SuppliersCompetitive RivalryConclusionIntroductionCooperation Starbucks is one of the world's leading specialty coffee roasters and retailers. Since the first store opened in downtown Seattle in 1971, the global expansion of the Starbucks name has been rapid and strategic. In 2018, Starbucks had 29,324 stores worldwide, of which 15,041 were based in the company's home country of the United States. This dominant position in the American retail coffee and snack industry has given them considerable market power in determining industry trends. As a result, Starbucks strategically balances customer loyalty, high-value coffee, and family atmosphere within its stores to outperform its competition and excel among the American population. When discussing the concept of strategy, it is important to note that it encompasses the means by which an organization achieves its premeditated objectives. To successfully implement goals and objectives, whether they are profit- or customer-oriented, companies and organizations must formulate a strategy to work from. This includes understanding the organization's strategic position and establishing guidelines and principles for how a company might address these objectives. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an original essayIntroduction to Michael Porters frameworkUsing Michael Porters five forces framework, we can analyze and evaluate the industry environment by investigating the external influences that shape the competitive market and through this theory, organizations can devise an optimal strategy to achieve success on the market. The five forces used to formulate these influences are supplier power, the threat of entry and new competitors, industry rivalry, the threat of substitute products, and finally buyer power. When we apply Porter's five forces to Starbucks, we will be able to investigate the external environment that could influence Starbucks' competitive environment. Another key area of ​​the Porter 5 forces framework is the threat of new competitors. This area concerns the extent to which a new competitor could pose a threat to existing competitors in the same industry. Due to the competitive nature of the retail coffee industry with the United States, it is argued that there is a moderate threat of entry by new competitors into the industry. This is because the initial investment level is believed to be moderate to operate in the industry. In relation to Starbucks, it can be argued that they may feel threatened by new entrants as small coffee retailers can quickly establish themselves on a localized scale due to the fact that they have fewer sourcing needs and offer no switching costs for consumers. On the other hand, large, established brands like Starbucks lead the industry because they have advanced economies of scale and extensive brand development achieved over several years. This works in Starbucks' favor because, thanks to its advanced and large global scale, it has the necessary funds and developed distribution systems to be able to expand outside localized areas and therefore outside the United States. While this is a relatively easy market to penetrate, larger companies like Starbucks have an advantage in that they have a more focused and developed customer service strategy that is evident throughout their stores. This yesconsequently translates into the loyalty of customers who continually return to the Starbucks store. Threat of Substitutes Included in Porter's 5 Forces framework is the potential threat of substitute products within the industry. This takes into account whether a close substitute for a specific product exists within a market, thus increasing the likelihood that consumers will turn to alternative retailers for cheaper options or purchase other products in place of the industry's product. For example, the price of a product determines whether customers will buy it, if established companies try to charge higher prices than new competitors to decrease the threat level, this can lead to customer migration and lost profits. In the case of Starbucks it can be argued that the danger of substitutes is very high since products such as caffeinated carbonated drinks such as canned energy drinks and Pepsi and Coca-Cola products are on the rise. These products pose a threat to sales at Starbucks stores because they have a significantly lower retail price and can be purchased more easily from supermarkets. Furthermore, one could argue that these substitutes threaten companies like Starbucks because they are more convenient and accessible to customers; they do not require waiting in lines, face-to-face interaction with employees, or as previously stated, products like these can be purchased outside of Starbucks locations. To keep up with this trend and reduce the level of threat from these products, Starbucks has developed its own range of ready-to-drink canned products in collaboration with PepsiCo, such as their canned Nitro Cold Brew. On their website, they market these products as a "premium experience" that can be taken anywhere you want. Starbucks is strategically trying to overcome threats from new competitors by expanding its product range and keeping up with market trends. For example, in 2012 Starbucks acquired American tea retailers Teavana Holdings Inc which produce and market premium tea products. This move by Starbucks further consolidates customer loyalty by expanding into alternative products, under the same Starbucks brand. However, the threat of competing substitutes beyond Starbucks puts pressure on their margins; with the requirement to conceive new ideas or rival products to reduce this threat and continuously gain a competitive advantage. Bargaining power of buyers The bargaining power of buyers concerns the pressure and influence that customers/consumers can exert on companies to obtain a reduction in price or an increase in the quality of the product/service displayed. This power can impact the competitive environment as it influences the industry's ability to earn profits. Bargaining power of buyers can be determined by factors such as customers' bargaining leverage and buyer price sensitivity. If bargaining leverage is high, this translates into greater price sensitivity which effectively gives the buyer great power. It can potentially have a detrimental effect on their trade as products are marketed at a lower price, so profits are lost and consumer surplus is higher. In terms of Starbucks and the bargaining power of suppliers, price negotiations for primary buyers such as individual customers are incredibly difficult. This is partly due to the vast reach of this business; it would not be possible to apply exclusive prices to different customers. Thanks to the wide choice of takeaway coffee retailers in the StatesUnited, customers have the option to turn to alternative retailers that offer the same premium coffee, but at a lower price. To some extent, it can be argued that Starbucks offers its consumers the opportunity to bargain prices thanks to the 25¢ discount on reusable cups introduced in 2018. This discount encourages consumers to bring their own reusable coffee cups and in exchange they receive a 25¢ discount on their order. Starbucks also introduced its own line of reusable plastic coffee cups to encourage consumers to participate in this program. This strategic choice made by Starbucks conveniently gives consumers a sense of bargaining power while at the same time benefiting those who opt into the discount program by offering the means to do so, such as purchasing one of the Starbucks brand reusable cups. Bargaining power of suppliers It is known that the relationship between producers in an industry and their suppliers is comparable to the contact that producers can have with consumers. Suppliers have a great influence on the profit potential and competition of an industry, this is because suppliers have the ability to increase the prices of supplies and change the quality of goods sold to manufacturers. As included in the 2018 annual report, Starbucks coined the Starbucks Global Social Impact Strategy, which aims to act ethically and sustainably in sourcing coffee and also contribute to local communities. Due to the vast number of specialty coffee retailers and the numerous Arabica coffee bean suppliers commonly used by retailers, companies must differentiate their products to maintain a competitive advantage. This means companies like Starbucks seek higher quality products to distinguish themselves from other retailers, for example by outsourcing from premium coffee farmers. Because of this demand, these farmers have the ability to negotiate with producers since specialty farmers are not short of customers, which results in high bargaining power for Starbucks suppliers. On the other hand, due to the size of the Starbucks group in the United States and large sourcing needs, their financial loyalty to suppliers carries considerable weight. This consequently means that suppliers have low bargaining power towards Starbucks as their trade with the global brand is vital to their production. Competitive Rivalry Continuing, one of Porter's 5 forces includes the intensity of rivalry with an industry. Consider the amount of competition within the environment in which an industry operates and the impact this can have on profits. For example, a very competitive market can have many negative effects for the companies involved as there is less room for price negotiation and lower profit margins. Considering the intense nature of the specialty coffee market in the United States, competitive rivalry in this industry is very high. In the case of Starbucks, it falls into the category of monopolistic competition. This means that it exists in a market where there are a large number of resellers of the same product/service and therefore many buyers of those products. To try to compete with this, retailers try to offer product differentiation. As mentioned above, Starbucks has the largest market share in the United States at 39.8%. Although this figure dominates the other key players in the specialty coffee industry, it could be said that this puts pressure on Starbucks to maintain this influence within the industry and continually create strategic and innovative ways to retain existing customers and at the same time..