Industry Analysis of Finland
So to help the marketing department out at Starbucks, I decided to conduct my own brief industry analysis of the Finnish market to further convince them that coming to Finland was a great idea ;)
Using the help of the well-known Professor Michael Porter, I conducted an analysis based on his Five Forces. Porter’s five forces analysis is a framework for industry analysis and business strategy development, therefore a perfect tool to help me assess the attractiveness of the Finnish market for Starbucks!
Intensity of Rivalry
Finland’s main competition in the coffee store culture consists of three main coffee retail chain: Coffee House owned by the Finnish S-Group, Robert’s Coffee founded by Paulig, and the Swedish Wayne’s Coffee. There are many more traditional cafes in Helsinki, but these three focus mainly on specialty coffees and therefore would be a noticeable competitor for Starbucks. According to the Finnish Restaurant Guide, there are approximately 300 cafes in Helsinki. This number includes both the amount of cafes and restaurant-cafes. This means that there are around 2000 consumers per café. One must take into consideration, that the number of cafes offering gourmet coffee products is much lower.
There are approximately 12 Wayne’s Coffee outlets, 16 Robert’s Coffee stores and 5 Coffee Houses in the capital area. Wayne’s Coffee has a product selection consisting of 11 different hot drinks and 10 cold drinks. They also offer 6 different fresh food options including soups, bagels and wraps. Along with the savory options, Wayne’s Coffee has a selection of sweet pastries such as muffins, brownies, cookies, and cinnamon rolls. Coffee House’s product selection is very similar to that of Wayne’s Coffee. Robert’s Coffee on the other hand concentrates more on providing drinks than food.
The consumption of gourmet coffees is continuously rising, which means that there is a lot of potential in this market. Because of this rapid growth Robert’s Coffee and Wayne’s Coffee have been looking for new, possible franchises. This means that if Starbucks came to Finland, it would not need to steal consumers from competition rather it would help satisfy the need for more coffee stores.
Threat of New Entrants
There is always the possibility of new coffee chains opening in Finland. However, Starbucks has the advantage of being such a well-known and recognized brand worldwide. With this title, the company already has a name established for itself in Finland, while competitive coffee chains would have to focus more on marketing and promoting themselves.
Threat of Substitute Products
One possible threatening substitute product could be espresso machines, which are made for home use. As the consumption of gourmet coffee increases, consumers may be more interested in making their own specialty coffees at home, therefore saving money. Starbucks has though taken this threat already into consideration and has begun to sell espresso machines, brewers, and grinders under the brand Barista to its consumers. However, going to coffee stores is not just about drinking a cup of coffee. It offers much more than what can be achieved at home. Starbucks emphasizes the whole concept of visiting their stores as an experience. A relaxing place to meet your friends, do your homework, read the daily paper while enjoying a specialty coffee. Additionally, Starbucks offers the ease for individuals to grab a coffee-to-go on their way to or from work.
In order to meet the challenges of supporting the company’s fast-pace growth, Starbucks seeks experienced individuals who have a variety of technical and leadership skills. Technical skills in the three core areas of procurement, manufacturing, and logistics are highly valued. The logistics focuses on increasing efficiency and lowering costs associated with transporting, distributing and channeling its coffee products worldwide.
Starbucks attains its supplies from the actual coffee growers, resulting in the company efficiently bypassing most of the middle market. This not only reduces a lot of the supplier’s power but also helps to reduce costs. Also since Starbucks is such an internationally successful company, which needs a large amount of goods, suppliers do not want to jeopardize their co-operation with the company.
Finland becoming more international is noticeable in the growing amount of gourmet coffee consumption. At the moment specialty coffee consumption is around 2% of all coffee consumption in Finland, however it is estimated to have a nearly 20% growth rate yearly (www.paulig.com). Since the consumption of gourmet coffee is relatively low it means that there is a lot of room and potential for growth in this market.