Industry Definition: The industry analyzed is specialty coffee retailing in North America.
Threat of New Entrants:
1. Economies of Scale are low. The price of opening a new store does not gain substantial economies of scale when a firm already has many stores. Variable prices such as Aribica beans, cups, whipped cream, etc. will benefit from some economy of scale, but not enough to deter new entrants.
2. Capital Requirements are low. Property and inventory costs are not substantial enough to deter new entrants.
3. Product Differentiation is medium. Although there are over 3,485 competitors, only a few are large players. They have succeeded by selling an ‘experience’ as opposed to simply specialty coffee. In this way they have differentiated a seemingly identical product.
4. Switching Costs are low. There are no costs to consumers in switching specialty coffee retailers. A small indirect cost may be an emotional attachment to a specific brand.
Net Conclusion: Threat of new......
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Approximate Word Count: 523
Approximate Pages: 3 (260 words per double-spaced page) |