Green Mountain Coffee the Coffee Industry Is Essay

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Green Mountain Coffee

The coffee industry is only moderately attractive. The bargaining power of buyers is relatively high for a few reasons. There is a fairly low level of differentiation in the coffee business, so consumers are apt to substitute one coffee for another if the price is not right. In addition, the bargaining power of suppliers is relatively high, since coffee is traded on the global commodities market. Green Mountain does not have the size to move the coffee market, although some competitors like Nestle might. There is only a moderate threat of substitution, since coffee's attractiveness is both the caffeine and the ritual. Tea is the closest substitute, and it is possible that cigarettes could be a substitute, though it is more likely that they will be a complement. The threat of new entrants is high, since there are few serious barriers to entry. This has worked in Green Mountain's favor. The intensity of rivalry with the industry is moderate. Coffee is dominated by a handful of companies, but most are conglomerates who can exit the business. All told, the coffee industry is at best moderately attractive, with medium to high pricing pressures on all sides.

2. In order to generate revenues and profits in this challenging environment, Green Mountain is utilizing a differentiated strategy.

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The company's coffee is not particularly differentiated, but the methods it uses to bring its coffees to market are. The unique packaging and the brand image that Green Mountain has cultivated contribute to this differentiation, and these sources of differentiation appear to be the main selling points for Green Mountain. Green Mountain is most assuredly not a price leader, but it could be argued that Green Mountain is a niche player. I do not believe that Green Mountain's long-term strategy is geared to them being a niche player, however. I believed that they are seeking to cultivate the mass market, and that makes them a differentiated player. That they support this with multiple points of differentiation only lends credence to this theory.

3. Green Mountain has a unique approach to the coffee business, and is building its brand. The product is also a source of strength, and so is the company's management team. Among its weaknesses, however, include its relative lack of buying power compared with major competitors, the size of its sales force and its relative lack of capital. Green Mountain must succeed as a differentiated player because it lacks the size and scope to compete any other way.….....

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