Porter's Five Forces Analises - Essay Example

This essay will implement porter’s five force model to conduct an analysis of the competitive environment of UK coffee industry. Discussion Porter’s five forces model is an analytical tool that helps organizations to determine the competitive force of supplier’s bargaining power, buyer’s bargaining power, industry rivalry, threat of substitutes and threat of new entrants within an industry. Industry Rivalry UK coffee market is highly competitive as several leading global coffee chains and potential local chains are competing with each other within this similar industry.

Starbucks is the leading organization within the UK coffee industry. High concentration among the rivals, high fixed costs, static market growth and presence of several perishable products, such as coffee drinks and food items are the major characteristics of UK coffee industry (Kine, 2010, p.245). Organizations like Starbucks and Costa are competing with each other for the same customers. These organizations have similar corporate goals, such as customer friendly products and employee friendly business policies and strategies.

Zero switching cost for the potential customers promotes price war among the organizations (West, 2012, p.165). On the other hand, static market growth forces the existing organization to fight with each other for the market share. This intense market competition forces the organizations to adopt aggressive marketing strategy to survive in the market (Hill and Jones, 2008, p.12). Looking into these above aspects, it can be stated that the rivalry among existing organization within UK coffee market is quite high.

Threat of New Entrants It is true that organizations within this industry require large capital to developed coffee chain stores. Therefore, it is difficult for the newcomers to compete with the potential and existing organizations with high capital and more than sufficient finance (Kim and Mauborgne, 2005, p.66). On the other hand, significant and favourite locations are already occupied by the leading organizations. Therefore, it is tough for the new entrants to enjoy maximized footfall. Significant brand differentiation and differentiated product line increases the brand preference of leading players.

It is difficult for the new organizations to compete with these leading players at the initial stage. Last but not the least; high legal entry barriers and market saturation can make it difficult for the new entrants to maximize market share at initial starting phase. Looking into these factors, it can be stated that the threat of new entrants is low. Threat of Substitutes Coffee is considered as a major energy drink products. The popularity and acceptance of this product is unavoidable. Recently, several food retail chains and soft drink manufacturing and distributing organizations are introducing several substitute calories free and differentiated energy drink products (Hutchens, 2009, p.31). Globalization and advanced technology is motivating organizations to offer substitute products.

Somehow, these differentiated substitute products is affecting the total market share growth of the coffee industry. In addition to this, low or negligible switching cost to other substitute products in encouraging the potential customers to taste the differences. Though, several coffee chains are trying to differentiate their brand and product level, but