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Political –how changes in government policy might affect the business, like a decision to subscribe building new houses in an area could be good for a local brick works.

2. Most successful companies like Starbucks have started programs to oversee and make sure their farmers are treated well. C.A.F.E.( Starbucks ' program) is Coffee and Farmer Equality this program ensures the farmers safety and the quality if the product. This program has shown to boost productivity between the company and the grower and between the workers and the owners of the plantations. Even though this program is in place the workers are still paid poorly. An expert picket can collect about 6-7 baskets of coffee berries a day, yet they are paid very little. 71% of farms in Brazil are less than 10 lectares, 25% of them are less than 50 lectares and 4% are more than 50 lectares.*

Regardless of the nation of the business may be operating in, all aspect of any business must comply by the laws and policies of businesses set by the government of that nation in order to success. Political policies often alter business legal regulations and thus leading to business opportunity, such as taxation rates, WH&S standards, public safety and health policy, and environment policies all contribute to business success. An example of recent government policy is Carbon Tax. The

A Customized Textbook, Supply Chain Management SCHM2301, ISBN9781308037400 Copies are on reserve in the library

Bargaining power of Suppliers - The specialty coffee industry threatens to promote the price of the beans in the production of coffee. The suppliers as small to medium-sized family-owned farms typically drive the price up by selling their crops to processors in the local markets, thus raising the consumer price (Porter, 1998).

Since that time coffee has spread throughout the country and they have become the best at it. During the 1920’s, Brazil, monopolized the international coffee market and supplied 80% of the world’s coffee. (Rahman, 2014)

Governments establish many rules and regulations that guide businesses. Businesses will normally change the way they operate when government changes these rules and regulations. Government economic policy and market regulations have an influence on the competitiveness and profitability of businesses. Business owners must comply with regulations established by federal, state and local governments.

Both companies list many of the same risk factors which are inherent in the specialty coffee market as well as many other industries, such as the inability to import coffee beans at a reasonable price, economic conditions in the US as well as in the countries in which they do business, or the loss of key personnel to name a few.

Legal Factors: Businesses can be affected by many aspects of government policy. In particular, all

Brazil is a main exporter of coffee, which is a favorite commodity of the world, along with other popular exports needed worldwide. When doing plenty international trade, it is essential to be aware of certain business cultures to ensure a pleasurable and successful experience and to maintain a business relationship with each other.

Illy’s core capabilities lie in its Italian-style, focus on design and aesthetics, high quality, espresso culture. The increasing demand for coffee worldwide represents a huge opportunity for Illy to venture into global markets. I believe Illy has competitive advantages based on “VIRO” analysis. Illy is capable of creating value overseas with its unique, high quality Espresso. Its high-end restaurants and unique culture and customer experience are rare and hard to imitate. Given the success in

Despite the fall in production however coffee earnings continue to grow in Brazil owing to the favorable global prices of the commodity. It should be noted carefully that Brazil is the only great producer of coffee that experiences frosts conditions. This puts its global competitiveness in terms of quantity and quality to be at stake since the other large scale producers do benefit a lot during the periods when Brazilian coffee is affected by frost. Additionally, these frosts are advantageous to the other suppliers in that when Brazilian coffee is affected an extremely large supply gap is felt by the global market. This makes the demand for coffee to outstrip its supply leading to increased prices of coffee in the world market. This scenario was experienced in the year 1994 when heavy frost struck Brazil and destroyed vast coffee estates. This caused a reduced volume of coffee in the market and consequently the prices of the good in the world market skyrocketed, (Ponte, 202).

Coffee Bean are sensitive to the price issue due to Coffee Bean is target market characteristics. It were targeted the youth generation which had become a weakness for the firm. Another weakness is franchisee's policy. It will not let master franchisees in the Middle East and Asia exporters of any sub-franchise.

Raw Materials (Coffee Beans): Coffee bean farming is not vertically integrated into Starbucks; the company purchases coffee beans from farmers. Starbucks choose to outsource farming due to the low potential hold-up problem. For its coffee, Starbucks uses only high-quality Arabica beans, instead of regular commodity and lower quality robusta beans. Since there are a lot of market participants trading Arabica beans (i.e. farmers & Arabica beans buyers), there is an established market price. Moreover, farm land has a low degree of asset specificity, and therefore farmers’ investments do not depend only on Starbucks as

In terms of competition and the forces, which could limit the success of Starbucks it is important they stay ahead or even with other companies concerning innovative products. Many more micro companies are coming up with new products with a similar quality and a lower price/cost. It is important that Starbucks continues to search for innovative products to continually satisfy their customers. At the same time “rivalry” amongst Starbucks and smaller providers of coffee will continue to increase as the demand for coffee continues. The buyers bargaining power is significant as they can determine the cost, type of product, quantity and ultimately