Porter's Five Forces Analysis: Starbucks vs. Costa Coffee

Porter's Five Forces analysis is a strategic framework used to evaluate the competitive intensity and attractiveness of an industry. This analysis provides insights into the factors that shape competition within an industry, helping businesses make informed strategic decisions. In this presentation, we will apply Porter's Five Forces framework to compare Starbucks and Costa Coffee, two prominent players in the global coffeehouse industry.
Porter's Five Forces analysis highlights the dynamic and competitive nature of the coffeehouse industry, with both Starbucks and Costa Coffee navigating various challenges and opportunities to maintain their market positions and drive growth. Understanding these forces is essential for formulating effective strategies and staying ahead in the ever-evolving market landscape.

1. COMPARATIVE ANALYSIS PORTER’S FIVE FORCE

2. STARBUCKS Coffee Company

3. STARBUCKS Coffee Company Starbucks Corporation is an international coffee and coffee house chain based in Seattle, Washington, United States. It opened as a single small store opened in 1971 and became a coffee giant at the end of the millennium. Starbucks has led a coffee revolution in the United States and beyond. The

4. STARBUCKS Starbucks Corporation is an international coffee and coffee house chain based in Seattle, Washington, United States. It opened as a single small store opened in 1971 and became a coffee giant at the end of the millennium. Starbucks has led a coffee revolution in the United States and beyond. HISTORY

5. HISTORY Starbucks embarked on its journey with the opening of its inaugural store in Seattle's Pike Place Market in 1971. Founded by three students from the University of San Francisco, Starbucks began its international expansion in 1996, with Japan hosting its first store outside North America. In 1995, Starbucks diversified its offerings with Frappuccino blended beverages, now boasting a staggering 36,000 combinations.

6. Starbucks Porter's Five Forces Analysis Competition in the industry (Strong force) The Threat of new entrants (Moderate force) Bargaining Power of Buyers or Customers (Strong Force) Bargaining Power of Suppliers (Moderate Force) Threat of Substitutes or Substitution (Strong Force)

7. Competition in the industry (Strong force) The Threat of new entrants (Moderate force) Bargaining Power of Buyers or Customers (Strong Force) Bargaining Power of Suppliers (Moderate Force) Threat of Substitutes or Substitution (Strong Force)

8. Starbucks operates in an industry characterized by intense competition. There are numerous coffeehouses and food-service firms, ranging from multinational corporations to local cafes, vying for market share. A strong force of large numbers of firms because of limited barriers of entry and exit. 1 Competition in the Industry (Strong force)

9. Starbucks shows that buyers have a strong influence because of high competition and choice. This is primarily due to the low switching costs between coffee shops, allowing consumers to easily switch brands based on their preferences. Customers wield significant influence in the coffeehouse industry, exerting strong bargaining power over companies like Starbucks. 2 Bargaining Power of Buyers or Customers (Strong Force)

10. Starbucks has a very interesting and multi-facet relationship with suppliers. Individual suppliers are moderate-sized, and it is a moderate force. The weak force of multiple suppliers. Individual suppliers also value Starbucks because of its high volume order.  3 Bargaining Power of Suppliers (Moderate Force):

11. Starbucks faces a strong threat of substitution from alternative products and services. A large pool of substitute availability is a strong force. Low switching costs are another strong force. The low price of substitute products also contributes to the threat of substitute products is another strong force. 4 Threat of Substitutes or Substitution (Strong Force)

12. Starbucks, has that the brand image, brand loyalty, and market share of Starbucks can mitigate this risk effectively.  The moderate cost of doing business means more new entrants; it's a moderate force. Supply chain cost is also not very high, making it another moderate force. 5 Threat of New Entrants or New Entry (Moderate Force)

13. Here We Conclude the Porter’s Five on Starbucks

14. COSTA COFFEE Coffee Company

15. COSTA COFFEE Coffee Company

16. COSTA COFFEE Costa Coffee is a UK multinational company headquartered in Dunstable, UK. The company was started by two brothers, Bruno and Sergio Costa, back in 1971 with the intention of supplying coffee shops and local caterers with slow-roasted Mocha Italia coffee. Costa Coffee delivers products include food, coffee, mocha & hot chocolate, specialty drinks, tea, costa express, costa ice, and costa at home . HISTORY

17. HISTORY However, by 1978, the company diversified into retailing coffee by opening its first store along London’s Vauxhall Bridge Road. In 1995, the company was acquired by Whitbread, a large, UK hotel chain that has hotel interests across the globe. Today, Costa Coffee has over 1,700 stores across a span of 35 countries, making it the world’s second largest house after Starbucks. COSTA COFFEE Costa Coffe e Porter's Five Forces Analysis

18. Costa Coffe e Porter's Five Forces Analysis

19. Threats of New E ntrants

20. Threats of New E ntrants Entry in the industry requires substantial capital and resource investment. Costa Group Holdings Limited will face the low threat of new entrants if existing regulatory framework imposes certain challenges to the new firms interested to enter in the market. New entrants will be discouraged if access to the distribution channels is restricted. 1 Threat of Substitute Products or services

21. Threat of Substitute Products or services A cheaper substitute product/service is available from another industry The psychological switching costs of moving from industry to substitute products are low. Substitute product offers the same or even superior quality and performance as offered by Costa Group Holdings Limited’s product. 2 Rivalry among existing firms

22. Rivalry among existing firms There are only a limited number of players in the market The industry is growing at a fast rate. There is a clear market leader The products are highly differentiated, and each market player targets different sub-segments The economic/psychological switching costs for consumers are high. 3 Bargaining Power of Suppliers

23. Bargaining Power of Suppliers Suppliers have concentrated into a specific region, and their concentration is higher than their buyers. When suppliers are few and demand for their offered product is high, it strengthens the suppliers’ position against Costa Group Holdings Limited Suppliers’ forward integration weakens the Costa Group Holdings Limited’s position as they also become the competitors in that area. 4 Bargaining Power of Buyers

24. Bargaining Power of Buyers A more concentrated customer base increases their bargaining power against Costa Group Holdings Limited Buyer power will also be high if there are few in number whereas a number of sellers (business organizations) are too many. Low switching costs (economic and psychological) also increase the buyers’ bargaining power. 5

25. CONCLUSION In conclusion, Porter's Five Forces analysis offers valuable insights into the competitive dynamics of the coffee industry, particularly when applied to Starbucks and Costa. Despite facing intense rivalry within the market, both companies have managed to maintain their positions through strategic differentiation, brand loyalty, and global expansion. However, the threat of new entrants and the bargaining power of suppliers remain persistent challenges, requiring ongoing innovation and adaptation. By leveraging their strengths in branding, customer experience, and product innovation, Starbucks and Costa can continue to navigate the complexities of the industry and sustain their competitive advantage in the years to come.