Porter’s five forces analysis:

A threat of new entrant

As stated by Schaper et al. (2014), the US government has provided tremendous opportunities to
the businesses that are entering the business sector in the US. Along with that, to start a coffee
business, a firm shall not need to invest a considerable amount of money and coffee is not a costly
product either. Therefore, this is another factor for which any new company shall enter in the food
sector in the US.

On the contrary, it must be noted that the market share of Starbucks is enormous and it shall not
be easy for new entrants in the sector to compete with the vast customer base of Starbucks. In the
opinion of Wirtz et al. (2016), the heavy price of the food products of Starbucks is a factor that
puts a negative impact on the customers. Hence, they can shift to any brands that provide low-cost
products. Thus, the threat of new entrant for Starbucks is moderate.

The threat of substitute products

As studied by Ragozzino, Reuer and Trigeorgis (2016), the product range of Starbucks consists of
coffee products, tea products and snacks such as chips and pastries. Therefore, these products shall
easily be substituted with tea products or fruit juices. Pubs and restaurants are hosts to some
refreshment drinks, high-quality food and excellent ambience as well. Along with that, packaged
coffee and tea products are also available to the consumers which they can make at home.
Therefore, this has resulted in the high threat of substitute products in the industry. Starbucks faces
a massive risk regarding the products because they can be easily replaceable by the other
companies. However, the coffee products sold by Starbucks are somewhat unique and premium in
quality as well (Michelli, 2014). Thus, the other brands shall only substitute the products, but not
the high quality of the products.

Bargaining power of suppliers

Suppliers in the food sector; primarily the coffee sector in the US cannot opt for individual
purchases and therefore, they sell their products to a mass (Jackson, 2018). As a result of this, there
is not the much influential power of the suppliers in the sector. Moreover, in order to meet the
diverse needs of the population, the companies need to pay attention to the factor that the premium
quality of the coffee beans is maintained. Owing to the fact that there cannot be a vast product
range, the only factor that shall result in the innovation of the company is the quality of the coffee
products. However, as stated by Morsing and Roepstorff (2015), currently, the prices of coffee
products are being determined by the international market, and thus, the companies cannot keep
the costs of the products very high. As a result of that, the suppliers cannot demand the high cost
of raw materials. Therefore, due to that, there is low bargaining power of suppliers in the coffee
sector in the US.