Dunkin Donuts Porter Five Forces Analysis
Five Forces analysis of Dunkin Donuts covering threat of new entrants & substitutes, bargaining power of buyers & suppliers and competitive rivalry.
Threat of New Entrants:
Dunkin Donuts is a global brand serving donuts, snacks & beverages to customers worldwide. With the increasing middle-class population, the coffee and snacks industry has the potential to grow, and a lot of new ventures are entering the market. The capital requirements of starting a business similar to Dunkin Donuts in this industry are low, which makes it a more accessible business to start. Due to low barriers the entry, the threat of new entrants is also high. The products of one restaurant to another are also not that well differentiated. The permission required to start a business is not that hectic in this industry. The switching cost for the customers in this industry is low as the products are not that well differentiated from one another so more entrants would be willing to enter into this market. The challenge that new entrants would face is the presence of large restaurant's chains in the market, which might stop them from entering into the business. Hence, we can conclude that there is a moderate threat of new entrants.
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This concludes the threat of new entrants in the Dunkin Donuts Porter Five Forces Analysis.
Threat of Substitutes:
Below are the threats of substitute products of Porter’s Five Forces analysis of Dunkin Donuts:
The threat of substitute products is high in this industry. There are a lot of local and international restaurant chains in the market.
The coffee and snack sectors are considered as being threatened by substitute items. Dunkin Donuts is one of the various retail outlets that sell coffee, doughnuts, and other treats, all of which are accessible at Dunkin Donuts. In a market where substitutes are plentiful, a company might gain a competitive edge by focusing its strategy on customer satisfaction and brand loyalty. Dunkin Donuts has focused on offering a high-quality customer experience as a result of the higher risk of replacement items. In addition, the company has invested in creating a simplified version of the menu for the benefit of its customers.
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Bargaining Power of Customers:
In the Dunkin Donuts Porter Five Forces Analysis the bargaining power of the customers can be explained as:
The bargaining power of customers is high as a number of restaurant's are there in the market selling the same product. But the customers coming to Dunkin Donuts are getting the quality and ambience of the restaurant. The concentration of buyers is high, but the buying volumes are low, so the customers cannot bargain a lot. The switching cost of customers is low in the restaurant's industry which leads to competitive pricing between the restaurants. The buyers have a lot of information available on the online channels so they can easily compare the prices and move to a suitable product. The customers of Dunkin Donuts are quality-focused, and therefore, Dunkin Donuts can charge them a premium price. The brand is not just selling food, but a whole experience and customers are willing to pay more for it.
Hence, we can conclude that the bargaining power for customers is low.
Bargaining Power of Suppliers:
Following is the bargaining power of suppliers in the Porter’s Five Forces analysis of Dunkin Donuts:
The firms that are part of the procurement process of Dunkin Donuts are Continental Mills, Rice Products Crop and Dean Foods. All these are large firms with well-established supply chain networks. There are a lot of suppliers of raw materials, but the success of the coffee and snacks business is dependent on the quality ingredients, and hence the company must find suppliers who can meet these high expectations. The suppliers who are able to form contracts with large business-like Dunkin Donuts in this industry, have to compromise on the price structure and adjust according to the demand of the large firms. The suppliers' products are also not that differentiated or customized; hence the switching cost for the buyer is not high in this industry. The threat of forward integration is low. Creating a brand similar to Dunkin Donuts would require huge capital. Hence, we can conclude that the bargaining power of suppliers is low.
Competitive Rivalry:
The impact of key competitors in the Dunkin Donuts Porter Five Forces Analysis is as follows:
Some of the key competitors for Dunkin Donuts are brands like Starbucks, McDonald’s, Baskin Robbins, Subway, Pizza Hut etc. The sector is facing severe competition from the local and national companies in the beverage and snacks section. There are also numerous equally balanced competitors of Dunkin Donuts like star bucks in the hot beverage's section. The initial capital requirement required to create a restaurant business similar to Dunkin Donuts would require huge capital. The switching cost for the customers in this industry is low as the products are not that well differentiated from one another.
Hence, we can conclude that the competitive rivalry for the industry is high.
To conclude, the above Dunkin Donuts Porter Five Forces Analysis highlights the various elements which impact its competitive environment. This understanding helps to evaluate the various external business factors for any company.
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