Entry into the Coffee Shop Market – Starbucks establishes in Gothenburg. The demand and supply of the domestic coffee shop market

Abstract

This thesis discusses the expansion of Starbucks to Gothenburg and their main preconditions and challenges when establishing. It also looks at the state of competition on the local coffee shop market, students’ preferences and associations towards Starbucks and the students’ willingness to pay for Starbucks’ coffee. In order to gather and analyze this information, a survey has been conducted. The econometric results from this survey combined with Porter’s five forces and the Structure-Conduct-Performance paradigm, have led to the following results and conclusions; The main descriptive statistic results are that the respondents have an average willingness to pay of 25 SEK for a black cup of Starbucks coffee. The willingness to pay increased for 47 % by on average 2, 10 SEK. A majority of the respondents value the factors ‘Good quality coffee’, ‘Availability’ and ‘Affordable’ highest when purchasing coffee. The main associations towards Starbucks are; ‘American’, ‘Expensive’, ‘Broad coffee supply’, ‘Popular’ and ‘International’. The econometric results show that Espresso House’s customers are more willing to visit and pay for Starbucks’ coffee, than the rest of the respondents. This, among other factors, indicates that the students see these two coffee shops as close substitutes. In order to avoid fierce competition, Starbucks and Espresso House need to differentiate from each other to achieve a positive sum competition. The main conclusions are that Starbucks will succeed if they manage to differentiate themselves from their competitors, mainly Espresso House, and given that they also live up to the students’ expectations and meet their preferences.