Porter's Five Forces analysis is a strategic framework used to evaluate the competitive intensity and attractiveness of an industry. This analysis provides insights into the factors that shape competition within an industry, helping businesses make informed strategic decisions. In this presentation, we will apply Porter's Five Forces framework to compare Starbucks and Costa Coffee, two prominent players in the global coffeehouse industry. Porter's Five Forces analysis highlights the dynamic and competitive nature of the coffeehouse industry, with both Starbucks and Costa Coffee navigating various challenges and opportunities to maintain their market positions and drive growth. Understanding these forces is essential for formulating effective strategies and staying ahead in the ever-evolving market landscape.

1. COMPARATIVE ANALYSIS
PORTER’S FIVE FORCE

4. STARBUCKS
Coffee Company

5. STARBUCKS
StarbucksCorporationisaninternationalcoffee
andcoffeehousechainbasedinSeattle,
Washington,UnitedStates.Itopenedasasingle
smallstoreopenedin1971andbecameacoffee
giantattheendofthemillennium.Starbuckshas
ledacoffeerevolutionintheUnitedStatesand
beyond.

6. HISTORY
 Starbucksembarked on itsjourney with the opening of its
inauguralstore in Seattle'sPike Place Market in 1971.
 Founded by three studentsfrom the University of San
Francisco, Starbucksbegan itsinternationalexpansion in
1996, with Japan hosting its firststore outsideNorth America.
 In 1995, Starbucksdiversifieditsofferings with Frappuccino
blendedbeverages, now boasting a staggering36,000
combinations.

7. Starbucks
Porter's Five Forces
Analysis

8. Competition in
the industry
(Strong force)
The Threat of
new entrants
(Moderate
force)
Bargaining Power
of Buyers or
Customers
(Strong Force)
Bargaining Power
of Suppliers
(Moderate Force)
Threat of
Substitutes or
Substitution
(Strong Force)

9.  Starbucks operates in an industry
characterizedby intense competition.
 There are numerous coffeehouses and food-
servicefirms, rangingfrom multinational
corporations to local cafes,vyingfor market
share.
 A strong force of large numbers of firms
because of limited barriers of entry and exit.
1 Competition in the
Industry (Strong force)

10.  Starbucks shows that buyers have a strong
influence because of high competition and
choice.
 This is primarily due to the low switchingcosts
between coffee shops, allowing consumers to
easilyswitch brands basedon their
preferences.
 Customers wield significant influence in the
coffeehouse industry, exerting strong
bargainingpower over companies like
Starbucks.
2 Bargaining Power of Buyers
or Customers (Strong Force)

11.  Starbucks hasa very interestingand multi-
facet relationship with suppliers.
 Individual suppliers aremoderate-sized,and it
is a moderate force.
 The weak force of multiple suppliers.
 Individual suppliers also value Starbucks
because of its high volume order.
3 Bargaining Power of
Suppliers (Moderate Force):

12.  Starbucks facesa strong threat of substitution
from alternative products and services.
 A large pool of substitute availability is a strong
force.
 Low switchingcosts are another strong force.
 Thelow price of substitute products also
contributes to the threat of substitute products
is another strong force.
4 Threat of Substitutes
or Substitution (Strong
Force)

13.  Starbucks, has that the brandimage,brand
loyalty, andmarket share of Starbucks can
mitigate this risk effectively.
 The moderate cost of doing business means
more new entrants; it's a moderate force.
 Supply chain cost is also not very high, making
it another moderate force.
5 Threat of New Entrants
or New Entry (Moderate
Force)

14. Here We Conclude the
Porter’s Five on
Starbucks

16. COSTA COFFEE
Coffee Company

17. COSTA COFFEE
Costa Coffee is a UK multinational company headquartered in
Dunstable, UK. The company was started by two brothers,
Bruno and Sergio Costa, back in 1971 with the intention of
supplying coffee shops and local caterers with slow-roasted
Mocha Italia coffee. Costa Coffee delivers products include
food, coffee, mocha & hot chocolate, specialty drinks, tea,
costaexpress,costaice,andcostaathome.

18. HISTORY
 However, by 1978, the company diversified into retailing coffee by
openingitsfirststorealongLondon’sVauxhallBridgeRoad.
 In 1995, the company was acquired by Whitbread, a large, UK hotel
chainthathashotelinterests acrosstheglobe.
 Today, Costa Coffee has over 1,700 stores across a span of 35
countries, making it the world’s second largest house after
Starbucks.

19. Costa Coffee
Porter's Five Forces
Analysis

21. Threats of New Entrants
 Entry in the industryrequiressubstantialcapital
andresourceinvestment.
 Costa GroupHoldingsLimitedwill face the low
threat of new entrantsif existing regulatory
frameworkimposescertainchallenges to the new
firms interestedto enter in the market.
 Newentrantswill be discouragedif accessto the
distributionchannels is restricted.
1

22. Threat of Substitute
Products or services
 A cheaper substitute product/service is available
from another industry
 The psychological switching costs of moving from
industryto substitute productsarelow.
 Substitute product offers the same or even superior
quality and performance as offered by Costa Group
HoldingsLimited’sproduct.
2

23. Rivalry among existing
firms
 There are only a limited number of players in the
market
 The industry is growing at a fast rate. There is a
clear marketleader
 The products are highly differentiated, and each
marketplayer targetsdifferentsub-segments
 The economic/psychological switching costs for
consumers arehigh.
3

24. Bargaining Power of
Suppliers
 Suppliers have concentrated into a specific region, and
their concentrationis higherthan their buyers.
 When suppliers are few and demand for their offered
product is high, it strengthens the suppliers’ position
againstCosta GroupHoldingsLimited
 Suppliers’ forward integration weakens the Costa Group
Holdings Limited’s position as they also become the
competitors in that area.
4

25. Bargaining Power of Buyers
 A more concentrated customer base increases their
bargainingpower againstCosta GroupHoldingsLimited
 Buyer power will also be high if there are few in number
whereas a number of sellers (business organizations)
aretoo many.
 Low switching costs (economic and psychological) also
increasethe buyers’ bargainingpower.
5

27. CONCLUSION
In conclusion, Porter's Five Forces analysis offers valuable insights into the
competitive dynamics of the coffee industry, particularly when applied to Starbucks
andCosta.
Despite facing intense rivalry within the market, both companies have managed to
maintain their positions through strategic differentiation, brand loyalty, and global
expansion.
However, the threat of new entrants and the bargaining power of suppliers remain
persistentchallenges, requiringongoinginnovationandadaptation.
By leveraging their strengths in branding, customer experience, and product
innovation, Starbucks and Costa can continue to navigate the complexities of the
industryandsustaintheir competitiveadvantagein the yearsto come.