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Integrative Case 1.1- Starbucks

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Submitted By amandafev
Words 681
Pages 3
Amanda Fevurly
19 January 2016
FINA 375
Jiri Tresl
Integrative Case 1.1- Starbucks While coffee is a simple product, the “Starbucks Experience” that is mentioned several times throughout the case is exactly what creates value for their customers and makes their company successful. Their strategy includes creating a home away from home included as a part of their day-to-day routine that reflects the personalities of their consumers and community. Consumers are willing to pay more for Starbucks because they have a greater perceived value through experience. Regarding Porter’s Five Forces, Starbucks confronts a variety of challenges that has presented difficulties specifically from 2007 to 2010. Starting with the competitive rivalry and competition, Starbucks faces many direct and indirect competitors. Facing competitors such as fast food companies like McDonalds, Donut shops like Krispy Kreme or Dunkin’ Donuts, fast-casual restaurant like Panera, and the thousands of local coffee shops pose as rivals to Starbucks. As one of its most important concerns, Starbucks faces fierce competition in the global market place. Next, the threat of new entrants in the coffee market exists at a high level but does not necessarily propose a significant effect on Starbucks because of economies of scale. While there are not necessarily entry barriers, Starbucks has created a brand that would be very costly and difficult to develop from scratch giving them a strong sustainable competitive advantage.
The third force, the threat of substitutes, contributes a glaring force on Starbucks. There is a low switching cost for consumers of coffee and a large number of substitutes available who often offer lower prices. This also affects the buyer’s power, the fourth force, because there are a large number of buyers in the industry who can easily switch to the large number of substitutes

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