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. For the input markets that are consisted of dairy
farmers and coffee bean plantations, price is decided by supply and demand.
Consequently, substitutes are accessible if Starbucks offers for a new price
range because of the high competitiveness of the market. Furthermore, with the
disadvantages of isolated warehouses 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.