Jai Shah 5 Forces

Rivalry between starbucks and dunkin donuts is high

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Unformatted text preview: more, because the cost of a cup of specialty coffee does not represent a large fraction of a consumer’s income, the price sensitivity of the buyers tends to decrease. However, on the other hand, because in the specialty coffee industry, coffee shops tend to sell similar products, buyers have more power. For example, Starbucks, McDonalds, and Dunkin Donuts all sell a latte and a cappuccino. Because the largest customer source is individual consumers, they face no switching costs and can easily move from one coffee shop to another, increasing their bargaining power. Furthermore, though a coffee cup does not represent a large proportion of a consumers’ income, there is still evidence that consumers are slightly price sensitive, with the demand of premium coffee decreasing during the financial crisis in 2008- 2009. (Fairtrade and Coffee) Moreover, the buyer or consumer in the specialty coffee industry does not have full information. The consumer does not know the market price or supplier costs which greatly shrinks their bargaining power. (Starbucks a Strategic Analysis) Overall, therefore, the bargaining power of the buyers or customers of the specialty coffee industry, because it consists largely of individual consumers, is low. 5. Industry Rivalry (High) The largest competitor in the Specialty Coffee Industry is Starbucks, with 13,279 in the US alone. (Loxcel Starbucks Store Map FAQ) Second to this, Caribou Coffee can be considered the next biggest competitor which is directly in the industry, however, the company, relative to Starbucks, is extremely small, with only...
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