Jai Shah 5 Forces

However basic coffee is of a considerable lower

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Unformatted text preview: coffee. However, this has never happened and also remains unlikely because of the capital costs of opening a shop. (Starbucks a Strategic Analysis) Overall, therefore, although increasing because of the power of unions and NGOs, because of the vast amount of farmers, the bargaining power of suppliers is low. 3. Threat of Substitute Products (Moderate) There are several products that can be considered substitutes of specialty coffee. For those who drink coffee as a stimulant, caffeinated soft drinks can be considered a primary substitute, posing a substantial threat as a substitute to coffee. Red Bull, and other soft drinks produced by Pepsi and Coca- Cola offer beverages that have the caffeine inherent in specialty coffee at significantly lower prices. However, because of the difference in price and taste, the demographic make up of consumers tend to contrast, with wealthier and older consumers tending to choose coffee and remaining unlikely to directly substitute coffee for caffeinated soft drinks. Moreover, in the past five years, studies done on the percentage of meals or snacks that included a carbonated soft drink as opposed to coffee have shown a reversal in consumer preference. Coffee has gradually gained preference over carbonated soft drinks, due to health critics pointing out the negative health effects of carbonated drinks. Tea can also be considered a substitute, as it is priced similarly and is drunk by a similar demographic to spet coffee drinkers. In fact, tea is the second most popular drink in the United States, after water. However, t...
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This document was uploaded on 03/02/2014 for the course MANAGEMENT MOA at NYU.

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