porters 5 model Essay

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Porter’s Five Forces is a measure to analyze the competition between the industries and develop strategy to sustain in the market. Industry analysis is used to regulate the factors that influence the profitability of an organization. Porter (2008) describes these forces as the main drivers of profitability for an organization.

Threat of New Entrants / Competitor
Existing marketing culture so new entrants face difficulty.
Lack of research in international marketing.

Threat of Substitute Products
The threat of substitute products is significant due to:
Increase in various substitute products like energy drinks.
Increasing focus on negative affects of caffeine on the media and among consumers

Bargaining Power of Buyers
The bargaining power of buyers is high due to the following reasons:
The numbers and variety of offers in the industry exceeds the demand
No or minimum switching costs to other companies Bargaining Power of Suppliers
Suppliers have strong bargaining power as:
Raw material (coffee beans) is available only from limited geographical areas such as Africa, Latin America, and some parts of Asia
The level of competition amongst coffee chains is fierce Rivalry among Existing Competitors
The extent of rivalry among existing competitors is very high, and the numbers of branded coffee shops have been increasing in the Australia . Copied version but might help
Well conceived market research involving both primary and secondary data, including qualitative and quantitative approaches, would have uncovered the extent of the ‘coffee culture’ that existed in 2000 when Starbucks entered the Australian market. It seems inconceivable that Starbucks management, or at least its Australian representatives, were not sufficiently apprised of the extent to which many consumers were already well acculturated in terms of buying and consuming European styles of coffees such as short black, lattes and cappuccinos, nor the extent to which many customers were in fact loyal to their suburban café or competitive brands such as Gloria Jean’s. As a late market entrant, Starbucks clearly failed to do thorough homework on the market before entry – this is a failure in terms of due diligence. Alternatively, they chose to ignore the messages that were coming from any due diligence that they had undertaken.
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