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5 Forces Analysis Of Specialty Coffee Industry

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Customers a) This industry has a great # of customers, therefore they have less power.

b) The customer makes relatively small purchases, as coffee is a generally low involvement product.

c) Specialty coffee purchases are relatively small in regard to other purchases. Over the course of a consumers life however, coffee purchases can equivocate to a substantial amount.

d) The specialty coffee industry offers much product differentiation. The specialty coffee industry involves great importance when it comes to which brand to purchase.

e) Specialty coffee’s target consumer is relatively HIGH profit customer. This includes many with college degrees.

f) Knowledge about specialty coffee has become widely available due in part to the emergence of the Internet. In general, the Internet has raised consumer awareness at all levels.

g) Customers must in some way deal with the specialty coffee companies in order to obtain their desired product. It would be virtually impossible for most consumers to grow and roast their own specialty coffee. (Or any coffee for that matter) h) Customers can easily switch from one seller to another within the specialty coffee industry. As well as leave the specialty coffee genre entirely.

Suppliers a) There are a limited number of suppliers available to the industry. It is estimated the 1/3 of the coffee farms in the world are less than 3 acres.

b) Suppliers offer companies in this industry the only available products. Because of the climate needed to grow coffee, and necessary conditions there are not many substitutes available.

c) The suppliers are directly dependant on the buyers. Without buyers, the sellers would be producing coffee for no one.

d) The buyers must have the product to survive. In specialty coffee, the seller must have the product in order for the buyer to survive.

e) Most suppliers, offer only coffee. However, specialty coffee differs in the sense that coffee beans can still be made by suppliers without making specialty coffee.

f) There is no known cost at this time between switching between suppliers.

g) Suppliers and buyers are interdependent in the specialty coffee industry, Existing Industry Competitors a) The specialty coffee industry is growing at a rapid rate. Everyone within the industry should experience some kind of growth.

b) There is a general low fixed cost associated with the coffee industry. The product can be sold at a greatly large profit margin.

c) There is a somewhat product similarity within the specialty coffee industry. Pricing amongst competition is critical.

d) There are a great # of competitors in the specialty coffee industry.

e) Most of the specialty coffee vendors are in the market for the sole benefit of the specialty coffee dollar. There is a high exit barrier within this industry.

Potential Competitors a) In the specialty coffee industry it is more efficient to produce a larger amount in a large facility than to have many smaller facilities producing smaller amounts.

b) A small company can enter this market with somewhat low start-up costs.
This is because a supplier relationship can be established, and a unique brand can be developed overnight.

c) The specialty coffee industry has loyal consumers to particular brands. Therefore, although the capital requirement may be low to enter the market, consumers have already established the leading specialty coffee brands.

d) There is a low cost to switch to the competitor.

e) Companies can easily gain access to the specialty coffee market, making it somewhat easy to put a specialty coffee product on the shelf.

f) There are certain government regulations in regard to importing that may affect coffee distribution for up and coming competitors. These barriers have more than likely already been accessed by the companies that had the FMA. First mover Advantage.

g) Some specialty coffee firms have technology that patents their unique roasting methods, however these technologies don’t restrict other companies from discovering their own methods. There are no specific patents on the process of being able to roast a specialty coffee bean.

h) There is no proven aggressiveness or hostility towards new entrants into this specialty coffee market.

Substitutes a) Although specialty coffee seems to be an industry on the rise, it is a very trendy area. Coffee houses have been around for years, however until now haven’t had the success that they currently are facing. Health factors have reduced the number of people who drink coffee, and there is no telling if a substitute beverage will be created that will draw from the specialty coffee industry. There is the possibility that a trend towards bottled or flavored waters could reduce the appeal of specialty coffee, or even the resurgence of specialty teas.

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