Financial Accounting Analysis
Case 1.1
Industry and Strategy Analysis a. Apply Porter’s five forces framework to the specialty coffee retail industry. 1. Rivalry among Existing Firms. Direct rivalry among existing firms is often the first order of competition in an industry. Starbucks competes with a broad scope of coffee beverage retailers, including fast-food chains, doughnut chains, and convenience stores associated with many gas stations. Also, there are a number of companies that were growing chains of retail coffee shops that could be compared to Starbucks, such as Panera Bread. However, these types of outlets offer an experience that is very different from what Starbucks offers. Thus, how to make “Starbucks experience” stand out among competitors is a key issue regarding to Starbucks’ success. Rivalry among firms appears to be moderate. 2. Threat of New Entrants. Starbucks had developed a global brand that was synonymous with the quality of the “Starbucks Experience”, which is estimated worth of 3 billion. Also, Starbucks has a larger numbers of retail store both in domestic US and in the international market. Thus, brand name and large number of retail stores becomes the main entrance barrier. The threat of new entrants which will offer the similar retail concept is fairly low. However, whether other existing firms can add specialty coffee service like “Starbucks experience” to compete is still unknown. 3. Threat of substitutes. Starbucks faced intense direct competition. There are numerous beverage substitutes to specialty coffee, which will make the threat of substitutes high. However, very few companies were implementing a business strategy comparable to that of Starbucks, with emphasis on the quality of the experience, the products, and the service. Thus, the threat of substitutes is moderate to high. 4. Buyer power. Consumer views specialty coffees as high quality and more unique. This will increase consumers’ willingness to pay more for such coffee. They are
Industry and Strategy Analysis a. Apply Porter’s five forces framework to the specialty coffee retail industry. 1. Rivalry among Existing Firms. Direct rivalry among existing firms is often the first order of competition in an industry. Starbucks competes with a broad scope of coffee beverage retailers, including fast-food chains, doughnut chains, and convenience stores associated with many gas stations. Also, there are a number of companies that were growing chains of retail coffee shops that could be compared to Starbucks, such as Panera Bread. However, these types of outlets offer an experience that is very different from what Starbucks offers. Thus, how to make “Starbucks experience” stand out among competitors is a key issue regarding to Starbucks’ success. Rivalry among firms appears to be moderate. 2. Threat of New Entrants. Starbucks had developed a global brand that was synonymous with the quality of the “Starbucks Experience”, which is estimated worth of 3 billion. Also, Starbucks has a larger numbers of retail store both in domestic US and in the international market. Thus, brand name and large number of retail stores becomes the main entrance barrier. The threat of new entrants which will offer the similar retail concept is fairly low. However, whether other existing firms can add specialty coffee service like “Starbucks experience” to compete is still unknown. 3. Threat of substitutes. Starbucks faced intense direct competition. There are numerous beverage substitutes to specialty coffee, which will make the threat of substitutes high. However, very few companies were implementing a business strategy comparable to that of Starbucks, with emphasis on the quality of the experience, the products, and the service. Thus, the threat of substitutes is moderate to high. 4. Buyer power. Consumer views specialty coffees as high quality and more unique. This will increase consumers’ willingness to pay more for such coffee. They are