Executive SummaryStarbucks Corporation's success in the coffee industry has been arguably the most successful coffee chain in recent decades. The company has managed to continue to attract customers even though it is not positioned as the provider of low-cost coffee. Starbucks has been able to aggressively expand its business by attracting investors and selling its coffees at premium prices and increasing its profitability. The rapid growth of Starbucks has become a testament to the success of the expansion strategy developed in 1992 and 1993 when Starbucks developed a three-year expansion strategy (Shah, Hawk, & Thompson, 2010). This strategy focused on areas that had the desired demographic goals, as well as the infrastructure to support and serve their locations. For each expansion region, a large city is selected to serve as the central hub, staffed with teams that would branch expansion stores from that hub within the first two years (Shah, Hawk, & Thompson, 2010). This strategy of blanketing a metropolitan area with a “Starbucks everywhere” approach helps streamline the logistics and support management of these stores, as well as reduce queues at each of the stores and increase traffic in all locations. The graph on the next page represents the rapid expansion that Starbucks has experienced over the past two decades. From an IPO company with one hundred and sixty-five stores in 1992 to a large corporation at the end of 2013 with nearly twenty thousand stores worldwide (Starbucks Corporation, 2013). Starbucks' growth was significant during the years 2000 to 2008, when the company opened an average of sixteen hundred and fifty stores per year... half paper... years • Less concentrated suppliers • Competitive industry, but with local rivals smaller • Consumers are not price sensitive • Large number of potential suppliers to replace existing ones • Several large rivals, but relatively smaller than Starbucks • High degree of product differentiation dilutes buyer power Threat of substitute products: • Low threat for substitutes • High degree of differentiation offers less attractiveness to other products • Brand image and recognition is an important factor This market assessment shows that entry into the market is relatively easy for a well capitalized company. Furthermore, threats from competitors such as McDonald's, Dunkin Donuts and Burger King continue. The risk of beverage substitution is enormous and includes carbonated soft drinks, fruit juices, smoothies, water, beer and other alcoholic beverages.