Jai Shah 5 Forces

For those who drink coffee as a stimulant caffeinated

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Unformatted text preview: y where many chains such as Starbucks buy their coffee from, there are over 150,000 coffee farmers. Because they are all producing the same good, the supplier is less concentrated than the industry it sells coffee to, decreasing the bargaining power of the suppliers. (Fairtrade and Coffee) Moreover, as there is so much competition amongst suppliers, they are unable to capture value for themselves by charging higher prices. They depend on the business of the coffee shops in the west for their income and must adhere to the prices set by them. As the availability of similar suppliers is so high, the switching costs are low, further reducing the bargaining power of suppliers. On the other hand, many farmers that supply Starbucks and other premium coffee chains are now part of unions such as ‘TransFair USA,’ which allows the coffee to be labeled as ‘Fair Trade’ when sold, and also allows the farmers to act as a one larger entity, increasing their power. NGOs such as Oxfam are also campaigning to increase the power of suppliers. Furthermore, as the industry has grown and more restaurants are demanding specialty coffee in the west, buyers have increased their power as the relative importance of the major competitors like Starbucks has decreased for them. (Starbucks a Strategic Analysis) Lastly, to analyze the bargaining power of suppliers it is necessary to look at the likelihood that suppliers can integrate forward in the industry. Coffee farmers can achieve this by setting up coffee shops and supplying them directly with their own...
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This document was uploaded on 03/02/2014 for the course MANAGEMENT MOA at NYU.

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