Starbucks Essay Example | Topics and Well Written Essays - 750 words

Starbucks - Essay Example Back in the US, situations were totally different. The option to drink a cup of coffee that was prepared according to the customers’ preference was not available. The available options were fast-food restaurants or gourmet cafes which were not open in the early morning hours of the day. Schultz was influenced by these three factors; absence of coffee shops in the early morning hours or extended hours of the day, the inability of the shops to prepare coffee according to the choice of customers, and people’s interest in using cafes as places of public interaction. Thus, Schultz started his own Coffee bar that allowed customers to decide the nature of the coffee to be made. Thus, in 1986, Schultz opened his coffee bar in Seattle in the name ‘Il Giornale’ and on the first day, they served 300 customers and precisely according to his observation, most of the customers came in the morning hours. Soon, he acquired the Starbucks’ name and operation. Thus, it is evident that the success of Starbucks was largely dependent on its success in identifying the opportunity and bringing into practice what they have envisioned. 2. The five forces according to Porter’s Five-force model are: a) potential entry of new competitors, b) potential development of substitute products, c) bargaining power of suppliers, d) rivalry among competing firms, and e) bargaining power of consumers. When the first force is considered, the biggest threat comes from McDonalds’ McCafe as it is easy for McDonald to add coffee services to their existing retail services. As per reports, the income from McCafe is 15% higher than the income from a regular McDonald and presently, it is the largest in Australia and New Zealand. In addition, Starbucks has something to worry as it has not started providing canned or bottled coffee; and it is clear that one who wants to save time and money will certainly go for canned or bottled coffee instead of the Starbucks mug (Strategic Management PMS 3393). When the third point is considered, one has to accept that Starbucks is victimized to this situation very often. In 2001, Starbucks was forced to buy coffee bean at a higher price as the suppliers raised the price. However, prior agreements on price will help the company overcome this problem. In machines and technology, the company will have to go for the total ownership of supplies. However, rivalry among competing firms is the most important one. Currently, there are about 14,000 coffee outlets in the US and there are many restaurants and supermarkets where coffee is cheaper than that of Starbucks. Some other important competitors are Dunkin Donuts and Krispy Kreme followed by coffee brands like Tully’s and Pete’s Coffee. In addition, their non-coffee products are threatened by brands like Orange Julius and Jamba Juice (Starbucks: â€Å"The Non-Coffee Treat†). However, as far as Starbucks retains perfection and quality, these competitors will not raise any serious threat. The last point is the bargaining power of customers. It seems that customers bargain only when alternatives are available and hence, this will not create a threat to Starbucks. In addition, its huge popularity reduces the bargaining power of the public. In fact, the situation was totally different in the