USING PORTER’S FIVE FORCES MODEL TO ANALYZE THE COMPETITIVENESS OF THE COFFEE

INDUSTRY FOR DUNKIN’ DONUTS

NAME: MONA ALQAHTANIINSTRUCTOR: DR. DESSA DAVID

OUTLINE

• INTRODUCTION TO DUNKIN’ DONUTS• INDUSTRY OVERVIEW AND PERFORMANCE • INFLUENCING FACTORS• KEY PLAYERS• PORTER’S COMPETITIVE ANALYSIS• ANALYSIS SUMMARY• PRESENTATION ANALYSIS • RECOMMENDATIONS• REFERENCES

INTRODUCTION TO DUNKIN’ DONUTS

• Established in 1946• William Rosenberg started catering services with name of “Industrial Luncheon Services”

• Started business of Coffee and snacks • Change name to “Open kettle” and started coffee and snacks business

• Leading baked goods and coffee chain • Today more than 10,000 stores with name of “Dunkin’ Donuts” all over the world• Competitor of Starbucks• Acquired its primary competitor “Mr. Donut” in 1990

INDUSTRY OVERVIEW

• Dunkin’ Donuts beats the analysts’ earning and revenue estimates

• Starbucks beat the earnings estimates in 1Q14 by two cents (2.7%)

• Core market of Coffee industry is penetrated in well way• It has roughly 9,000 people per store

• Some areas in U.S.A needs franchises

• More than 31 Billion U.S Dollars revenue forecasted in U.S.A

• This industry has growth opportunities in non-traditional market places• Like train stations, casinos and universities

INDUSTRY PERFORMANCE

INFLUENCING FACTORS • Increased cost

• Increases in cost of high quality Arabica coffee beans

• Weather • Variations of weather in coffee producing countries like Vietnam and India

• Economic and social conditions • Socio economic conditions of countries

• Currency fluctuations• The sudden increase or decrease between rates of currencies

• Trade regulations• Every country has its own trade regulations which influence the growth of market

KEY PLAYERS

REVENUE COMPARISONS

Company name

Starbucks Dunkin’ Donuts

Costa Coffee MacDonald's

Revenue in 2014

$9272 Million $748.7 Million $2.2Billion $1.09 Billion

PORTER’S FIVE FORCES MODEL

WHY PORTER’S MODEL

• Looks at five specific forces to estimate business profitability

• Provide framework for understanding and influence of competition

• Help to understand where power lies in business

• Help to make strategy

BARGAINING POWER OF BUYERS

• Relatively low level of threat from buyers• Large number of customers in coffee industry with small purchases

• Low switching costs• Not a significant cost for buyers to switch from one shop to other

• Buyers got more power• Buyers can switch of make coffee at home which gives them more power

OPPORTUNITIES

• Focus on quality of coffee and snacks

• Less delivery time

• Use of creativity

• Less costs

BARGAINING POWER OF SUPPLIERS

• Very low threat related to bargaining power of suppliers• Inputs for industry are standard

• Easy to switch between suppliers

• Raw material for coffee industry is not much differentiated

OPPORTUNITIES

• Continued collaboration with suppliers

• Sigh loyal contracts

• Focus on quality of product

THREAT FROM NEW ENTRANTS

• Relatively low threat• According to chart in U.S threat of new entrants in coffee business is low

• Reasons for low threat• Existing firms has advantage in terms of cost and quality

• Well established industry

• They understand how to cut cost

• Existing companies have large market share

OPPORTUNITIES

• Acquire smaller competitor

• Focus on customer satisfaction

• Creativity to attract customers to coffee shop

THREAT FROM SUBSTITUTES

• Very high threat of substitutes• Has very high threat from substitutes in U.S

• Many substitutes according to coffee buyers• Tea, chocolate and energy drinks

• Coffee can be brew • People can brew coffee which is same as shop bought coffee

OPPORTUNITIES

• Excellence in terms of service

• Customer satisfaction

• First movers

• Ready to adopt new flavors and tastes

• Best prices

RIVALRY AMONG EXISTING PLAYERS

• High rivalry • Chart shows how high the rivalry is among competitors

• Reason for high rivalry• Slow pace of industry growth

• Mature market

• Switching is easy for customers

• Products are not very complex

• Industry does not have over capacity

OPPORTUNITIES

• Leader of industry • Make first move and create trends in coffee business like Starbucks

• Best customers relations• Customer satisfaction

• Customer loyalty programs

• Develop cost advantage

ANALYSIS SUMMARY

Threat Category Opportunity Recommendation

Bargaining power of buyers

Low Improved quality and strong relations

Product and service excellence

Bargaining power of suppliers

Low Low diversity and contracts with suppliers

Supplier diversity

Threat of new entrants

Low Acquisition of new entrants and creativity

Excellence in customer relation

Threat from substitutes

High Increase quality and use advertisement

Use differentiation strategy

Rivalry among existing players

High Improve customer service and cost advantage

Decrease cost to compete with players

PRESENTATION ANALYSIS

• Coffee industry is very competitive

• Rivalry among existing players need to control

• Coffee industry is now mature

• Have big names with huge market shares like Starbucks and Dunkin’ donuts

• Need to create customer satisfaction

• Creativity can attract more customers

• Quality of service needed

REFERENCES

• HTTP://SITES.CDNIS.EDU.HK/STUDENTS/022210/2014/08/26/INTRODUCTION-TO-DUNKIN-DONUTS/

• HTTP://MARKETREALIST.COM/2014/02/COFFEE-INDUSTRY-BRIEF-OVERVIEW/• HTTP://WWW.STATISTA.COM/TOPICS/1670/COFFEEHOUSE-CHAIN-MARKET/• HTTP://WWW.WIKINVEST.COM/STOCK/COFFEE_HOLDING_(JVA)/RISK_FACTORS_RELATED_C

OFFEE_INDUSTRY• HTTP://SPIDERBOOK.COM/STARBUCKS-COMPETITORS.HTML• HTTP://WWW.ABOUTMCDONALDS.COM/CONTENT/DAM/ABOUTMCDONALDS/INVESTORS/M

CDONALD'S%202014%20ANNUAL%20REPORT.PDF• HTTP://INVESTOR.DUNKINBRANDS.COM/RELEASEDETAIL.CFM?RELEASEID=894871• HTTPS://WWW.MINDTOOLS.COM/PAGES/ARTICLE/NEWTMC_08.HTM