Assignment #1

Porter’s Five Forces Analysis for Starbucks’ Launch in

Pakistan

Name: Anum Sheraz

Reg #: MBE203007
Submitted To: Mr. Haris Bin Khalid
Dated: October 2nd, 2020

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 Porter’s Five Forces Analysis for Starbucks’ Launch in
Pakistan

Company selected for analysis: Starbucks

Country of Origin: USA

Level of Rivalry
If Starbucks is launched in Pakistan coma the major rivalry will be experienced from Nestle
Nescafe. Nescafe coffee is one of the widely recognized coffee brands in both rural and urban
areas of Pakistan. Nestle Nescafe has the same brand Positioning as Starbucks has in USA. Other
competitors for Starbucks in Pakistan include espresso Gloria Jeans, New York coffee, Coffee
Planet and butlers coffee. These are some of the most widely recognized and well-established
brands in Pakistan that can give a tough competition to Starbucks. Another source of competition
for Starbucks coffee in Pakistan will be coffee served in Fast Food outlets like McDonalds and
KFC.

Potential for New Entrants

 Investment: The barriers to entry in the coffee retail Industry in Pakistan are relatively
low especially for foreign companies like Starbucks. The fact that more than 51% foreign
direct investment is allowed in Pakistan retail sector also facilitates to lower the entry
barriers for Starbucks. A well-established and large company like Starbucks can easily
understand the market dynamics of Pakistani retail sector and enter it with foreign direct
investment. Starbucks can easily fund the investment and capital requirements for
entering the coffee retail industry of Pakistan.
 Market Experience and Research: Another requirement for entering the Coffee retail
industry is market experience which is available to the management of Starbucks.

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 However in order to be successful in Pakistani market, the management at Starbucks
must carry out market research in order to understand the preferences of Pakistani market
before entering the market. Given the abundance of resources available to Starbucks,
carrying out extensive market research is not a problem.
 Differentiation: There is no much room for differentiation in the coffee sold at such
chain retail stores. The major differentiation lies in the customer service experience and
the brand name. Starbucks is known for its good customer services and ambiance which
serves to differentiate the brand from other established brands in Pakistan.
Threat of Substitutes Products
Pakistan is a country that has a tea based predominant culture therefore it is important for retail
coffee sellers to create effective awareness about coffee and its benefits in the Pakistani
audience. Other substitute besides tea include beverages like fruit juices, soft drinks, soda and
lemonades. Starbucks will also have a theatre substitute from other burger joints like KFC and
McDonald's because Starbucks will also be selling fast food items like burgers in Pakistan. Fruit
shakes and
Bargaining Power of Suppliers
It is quite true to state that suppliers of coffee retail industry do not enjoy a lot of bargaining
power especially when they are working for giants companies like Starbucks. Buyers like
Starbucks buy coffee beans in bulk from suppliers thus having the advantage to bargain/negotiate
lower prices. There are sufficient number of supplier alternatives/options available to Starbucks
which gives the company the upper hand in negotiations. Therefore the bargaining power of
suppliers of Starbucks will be quite low because there are a number of options available to the
company from where we can source coffee beans.
Bargaining Power of Buyers
Up until recently, the buyers of fast food items in Pakistan did not enjoy a lot of bargaining
power because of the scarcity of well-established food retail brands within the country. However
now that many international brands have penetrated the food retail industry within Pakistan,
consumers have a lot of choices to choose from. When the number of choices is increased, the
bargaining power of buyers also increases. Therefore when Starbucks is launched in Pakistan, it
will be quite difficult for the management to successfully influence the Pakistani audience to pay
excessively high prices for their products. Especially when other options like coffee from
McDonalds and Hardee's is available at lower prices. The bargaining power of buyers is
relatively high. It is also important to note that the income level, especially the disposable
income level of an average Pakistani customers is quite low which makes it a difficult decision to
spend a lot of money on one cup of coffee every single day.

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