· high, as well as the retreat

·      
Rivalry among
existing competitors: Moderate. The fixed expenses related
to Starbucks are high, as well as the retreat barriers because of the expenses
of assets and resources they have obtained. The switching costs to buyers are
low since there are many other coffee options, and the prices of Starbucks are
the highest. The increase of competition in Iceland from direct competitors is
rising from Dunkin Donuts with promotions on social media and opening 16 stores
all throughout the country. With Iceland’s lack of big commercial chains like
Starbucks and McDonald’s, smaller businesses have had a chance to blossom (Te
& Kaffi, Mokka, Stofan Cafe).

·      
Bargaining power of
suppliers: Low. With its scale of company, Starbucks certainly has a
competitive edge in comparison with other rivals in the market. Though Starbucks
is able to buy its input goods from any supplier, the company spent 26% more
than the market price for all of its coffee in fiscal year 2014 report. Starbucks’
suppliers are comparatively limited, despite of the power Starbucks holds due
to the amount of goods demanded. Consequently, substitutes are accessible if
Starbucks searches for a new price range because of the high competitiveness of
the market. Furthermore, with the disadvantages of isolated placements and low retail
abilities, suppliers can not forwardly take actions by themselves. Basically,
Starbucks possesses all the power in the connections it has with its suppliers.

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·      
Bargaining power of buyers: Low. The price ranges of Starbucks’
beverages is determined based on the price elasticity of its customers and the
present prices at other competing businesses. With the concept of higher
quality is based upon perception, the products of Starbucks are able to sell at
a higher price range. Therefore, prices are non?debatable as the consumers have no bargaining power with
Starbucks.

·      
Threat of new
entrants: Low to Moderate. The threat of newcomers for Starbucks in
Iceland is moderate. Newcomers in Iceland can challenge brands like Starbucks
at a local level. Although, it is undoubtly difficult for small businesses to
compete against strong brands like Starbucks; therefore, their chance of being
successful stays low to moderate. Still, it gets lessened to an abundant extent
by several elements such as market share, brand loyalty and brand image. It is also
worth mentioning that Starbucks has an advantage with its own network of suppliers
and high quality materials. With all aspects considered such as corporation’s
size and potential to purchase, it is no doubt that Starbucks has access to
better quality coffee and an enormous amount of suppliers worldwide. All these
elements act to moderate the amount of threat caused by the newcomers. Nevertheless, Starbucks does not neglect the possibility
of rivals coming into the picture and has taken adaptation into action. For
example, the firm had renovated its coffee line to provide small-scale, cheaper
cups while utilizing new machines that create one cup of coffee individually so
that the taste is fresher. This act can be viewed as another way Starbucks is
revamping in order to preserve its tremendous market share, as well as restraining
others from considering compete.

·       Threat of substitute products or services: Moderate.

The risk of consumers substituting away from Starbucks for direct rivals in
Iceland such as Te & Kaffi and Mokka is a genuine concern. As they all
honour themselves on customer service, specialty beverages, they are very hard
to differentiate. The available drinks section is diversed varying from energy
drinks to smoothies or juice. Although, Starbucks sells a huge range of these
drinks within its stores. While the greater part of coffee drinkers do not
replace coffee, the most direct replacement is tea, which Starbucks sells under
its own Teavana® Tea brand. This can be considered as an ideal example of how
Starbucks has successfully done a good job hedging against the risk of
replacements with the variety of drinks it provides.