· Rivalry amongexisting competitors: Moderate. The fixed expenses relatedto Starbucks are high, as well as the retreat barriers because of the expensesof assets and resources they have obtained.
The switching costs to buyers arelow since there are many other coffee options, and the prices of Starbucks arethe highest. The increase of competition in Iceland from direct competitors isrising from Dunkin Donuts with promotions on social media and opening 16 storesall throughout the country. With Iceland’s lack of big commercial chains likeStarbucks and McDonald’s, smaller businesses have had a chance to blossom (Te& Kaffi, Mokka, Stofan Cafe). · Bargaining power ofsuppliers: Low. With its scale of company, Starbucks certainly has acompetitive edge in comparison with other rivals in the market.
Though Starbucksis able to buy its input goods from any supplier, the company spent 26% morethan the market price for all of its coffee in fiscal year 2014 report. Starbucks’suppliers are comparatively limited, despite of the power Starbucks holds dueto the amount of goods demanded. For the input markets that are consisted of dairyfarmers and coffee bean plantations, price is decided by supply and demand.Consequently, substitutes are accessible if Starbucks offers for a new pricerange because of the high competitiveness of the market. Furthermore, with thedisadvantages of isolated warehouses and low retail abilities, suppliers cannot forwardly take actions by themselves.
Basically, Starbucks possesses allthe power in the connections it has with its suppliers. · Bargaining power of buyers: Low. The price ranges of Starbucks’beverages is determined based on the price elasticity of its customers and thepresent prices at other competing businesses. With the concept of higherquality is based upon perception, the products of Starbucks are able to sell ata higher price range.
Therefore, prices are non?debatable as the consumers have no bargaining power withStarbucks. Threat of new entrants: Lowto Moderate. The threat of newcomersfor Starbucks in Iceland is moderate. The saturation’s status in the field is comparativelyhigh. The starting investment to establish a coffee brand is not genuinely highand the barriers are not high either.
Newcomers in Iceland can challenge brandslike Starbucks at a local level. Although, their chance of being successfulstays low to moderate. Still, it gets lessened to an abundant extent by severalelements such as market share, brand loyalty and brand image. It is worthmentioning that Starbucks has an advantage with its own network of suppliersand high quality materials. With all aspects considered such as corporation’ssize and potential to purchase, it is no doubt that Starbucks has access tobetter quality coffee and an enormous amount of suppliers worldwide. All theseelements act to moderate the amount of threat caused by the newcomers. Nevertheless,Starbucks does not neglect the possibility of competition and has takenadaptation into action.
For example, the firm had renovated its coffee line toprovide small-scale, cheaper cups while utilizing new machines that create
