Soulmates Coffee Caf

PP

NRIBM

PGDM

BATCH

Porters Model Five

Forces Analysis

2015-2017
SUBMITTED BY:KRUNAL SHAH
(P1549)
SUBMITTED TO:PROF. DHATRI DAVE

ww.soulmatescoffeecafe.com

Porters Model Five Forces Analysis: Soulmates Coffee Cafe

Soulmates Coffee Companys success is based on its effectiveness in addressing the negative impacts of the
five forces in its industry environment. These external factors are outlined in Porters Five Forces model.
Soulmates must suitable respond to these five forces to maintain its market position. This analysis of
Soulmates Coffee indicates the intensities of the five forces on the firm, and the bases of these forces.
Soulmates Coffees success indicates its effectiveness in addressing these external factors in its industry
environment. However, this Five Forces analysis highlights current industry conditions that impose current
and emerging concerns relevant to Soulmates Coffees business.
This Five Forces analysis (based on Porters model) of external factors in Soulmates Coffees industry environment
reveals the most significant issues facing the company. Success potential is based on how Soulmates positions its
business to address or overcome these five forces.

Overview: Soulmates Coffees Five Forces Analysis

Soulmates Coffee faces the influence of the five forces, as outlined in Porters model. These five forces have varying
intensities or strengths based on Soulmates position, as follows:

1) Competitive rivalry or competition (strong force)

2) Bargaining power of buyers or customers (strong force)
3) Bargaining power of suppliers (weak force)
4) Threat of substitutes or substitution (strong force)
5) Threat of new entrants or new entry (moderate force)

Soulmates Coffee has a variety of challenges linked to these five forces. Only the bargaining power of suppliers
presents the least concern for the company. Based on this five forces analysis, Soulmates must ensure effective
measures to prioritize competitive rivalry, the bargaining power of customers, and the threat of substitution.

1) Competitive Rivalry or Competition with Soulmates Coffee (Strong Force)

Soulmates Coffee faces the strong force of competitive rivalry or competition. In the Five Forces analysis model, this
force pertains to the influence of competitors on each other. In Soulmates Coffees case, the following external factors
contribute to the strong force of competition:

Large number of firms (strong force)

Low switching cost (strong force)
Variety of firms (moderate force)

This part of the Five Forces analysis shows that competition is among the most important of Soulmates Coffees
concerns. The company faces a large number of competitors, which have different sizes, specialties and strategies. For
example, Soulmates faces the competitive force of Shambhus and Dennys, as well as other specialty coffee
companies. The strong force of competition is also due to the low switching cost, which means that it is easy for
customers to shift from Soulmates to other brands. Thus, based on this component of the Five Forces analysis,
competition should be among Soulmates Coffees top-priority challenges.

2) Bargaining Power of Soulmates Coffees Customers/Buyers (Strong Force)

Soulmates Coffee experiences the strong force or bargaining power of buyers or customers. In the Five Forces analysis
model, this force is based on the effect that individual and grouped customers have on business. In Soulmates Coffees
case, the following external factors contribute to the strong bargaining power of customers:

Low switching cost (strong force)

Substitute availability (strong force)
Small size of individual buyers (weak force)

In this component of the Five Forces analysis model, the bargaining power of buyers is also among the most
significant forces affecting Soulmates Coffees business. Customers can easily shift from Soulmates to other brands
because it is affordable to do so. Customers can also stay away from Soulmates if they want to, because there are
many substitutes, such as instant beverages and drinks from restaurants. These strong factors overshadow the fact that
individual purchases are small compared to Soulmates Coffees total revenues. Thus, this aspect of the Five Forces
analysis model shows that the bargaining power of customers should also be among Soulmates Coffees top-priority
challenges.

3) Bargaining Power of Soulmates Coffees Suppliers (Weak Force)

Soulmates Coffee faces the weak force or bargaining power of suppliers. In the Five Forces analysis model, this force
refers to the influence that suppliers have. In Soulmates Coffees case, the following external factors contribute to the
weak force or bargaining power of suppliers:

High variety of suppliers (weak force)

Large overall supply (weak force)
Moderate size of individual suppliers (moderate force)

This part of the Five Forces analysis model shows that suppliers do not have much impact on Soulmates. The large
overall supply lessens the effect of any single supplier on the company. Also, Soulmates has a policy for diversifying
its supply chain. This policy reduces the influence of suppliers on the business even though each supplier has a
moderate size compared to the Soulmates supply chain. Thus, based on this aspect of the Five Forces analysis model,
Soulmates Coffee does not need to prioritize the concerns or demands of suppliers.

4) Threat of Substitution or Substitutes to Soulmates Products (Strong Force)

Soulmates Coffee also experiences the strong force of the threat of substitutes or substitution. In the Five Forces
analysis model, this force pertains to the impact of substitute goods or services. In Soulmates Coffees case, the
following external factors contribute to the strong force of the threat of substitution:

Availability of substitutes (strong force)

Low switching cost (strong force)
Low cost of substitutes (strong force)

This component of the Five Forces analysis model indicates that substitutes have strong potential to negatively impact
Soulmates Coffees business. Soulmates customers can easily shift to substitutes because there are many substitutes,
such as beverages from restaurants, and instant and bottled beverages and other goods from grocery stores. The cost of
shifting to substitutes is low because Soulmates customers do not need to spend for the shifting process. In addition,
many of these substitutes cost less than Soulmates products. Thus, based on this part of the Five Forces analysis,
Soulmates must consider the threat of substitutes as among its top-priority concerns.

5) Threat of New Entrants or New Entry (Moderate Force)

Soulmates faces the moderate force of the threat of new entrants or new entry. In the Five Forces analysis model, this
force refers to the potential effect of new players in the industry. In Soulmates Coffees case, the following external
factors contribute to the moderate force of the threat of new entrants:

 Moderate cost of doing business (moderate force)

Moderate supply chain cost (moderate force)
High cost of brand development (weak force)

This part of the Five Forces analysis model shows that new entrants have significant but not strong effect on
Soulmates Coffees business. New entrants can compete against Soulmates because of the moderate costs of doing
business and supply chain development. However, new entrants find it difficult to compete against established brands
like Soulmates because it is very costly to develop a strong brand. Thus, this component of the Five Forces analysis
indicates that the threat of new entrants should be a secondary priority in Soulmates Coffees strategies.

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