Jai Shah 5 Forces

Analysis of the five forces 1 threat of new entrants

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Unformatted text preview: cans aged 35 to 60 drink the most coffee. This is a large portion of the population, which is also more financially stable. Overall, the number of coffee drinkers has grown recently: today, 83% of American adults drink coffee, which is up by 5% from last year. (Coffee Grinds Fuel for the Nation) In the following paper, I will analyze how Porter’s Five Forces affect the specialty coffee industry and show what implications the forces have for Starbucks, a company that I will examine in the future. Analysis of the Five Forces: 1. Threat of New Entrants (Moderate) When considering the threat of new entrants, it is important to look at the barriers to entry that currently exist for potential entrants. Common features that a coffee shop must possess to be competitive in the market include free Wi- Fi, comfortable seating, a pleasant atmosphere and good service. These are easy to achieve and inexpensive, making it easier for new firms to enter the market. Depending on location, however, rent can be extremely expensive. Coffee shops tend to be located where the footfall is high, which will generally mean that the retail rent prices are also excessive. For example, the average retail rent price in Manhattan’s trendy Meatpacking District is currently valued at $373 per square foot. Though not all locations have a rent price as high as that of Manhattan, it is still considered to be the largest cost in opening a store that sells specialty coffee, as thus, acts as a large barrier to entry. (Street’s Sunny Side Costs Retailers More in Rent) Moreover, it is relatively easy for existin...
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