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Threat of new
entrants: Low to Moderate. The threat of newcomers for Starbucks in
Iceland is moderate. Newcomers in Iceland can challenge brands like Starbucks
at a local level. Although, it is undoubtly difficult for small businesses to
compete against strong brands like Starbucks; therefore, their chance of being
successful stays low to moderate. Still, it gets lessened to an abundant extent
by several elements such as market share, brand loyalty and brand image. It is also
worth mentioning that Starbucks has an advantage with its own network of suppliers
and high quality materials. With all aspects considered such as corporation’s
size and potential to purchase, it is no doubt that Starbucks has access to
better quality coffee and an enormous amount of suppliers worldwide. All these
elements act to moderate the amount of threat caused by the newcomers. Nevertheless, Starbucks does not neglect the possibility
of rivals coming into the picture and has taken adaptation into action. For
example, the firm had renovated its coffee line to provide small-scale, cheaper
cups while utilizing new machines that create one cup of coffee individually so
that the taste is fresher. This act can be viewed as another way Starbucks is
revamping in order to preserve its tremendous market share, as well as restraining
others from considering compete.

·       Threat of substitute products or services: Moderate.

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The risk of consumers substituting away from Starbucks for direct rivals in
Iceland such as Te & Kaffi and Mokka is a genuine concern. As they all
honour themselves on customer service, specialty beverages, they are very hard
to differentiate. The available drinks section is diversed varying from energy
drinks to smoothies or juice. Although, Starbucks sells a huge range of these
drinks within its stores. While the greater part of coffee drinkers do not
replace coffee, the most direct replacement is tea, which Starbucks sells under
its own Teavana® Tea brand. This can be considered as an ideal example of how
Starbucks has successfully done a good job hedging against the risk of
replacements with the variety of drinks it provides.

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