Specialty Coffee Industry Hong Kong

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The two strategies used in most specialty coffee stores in Hong Kong Specialty coffee industry in Hong Kong is kind of oligopoly competition. There are few dominants such as Starbucks and Pacific Coffee, which have established 137 stores and 83 stores in Hong Kong respectively, having the major market share. There are also few small specialty coffee shops which are not associated with others such as Elephant Grounds and Lof10. The two different types of coffee stores, chain stores, and the mom-and-pop store will take different strategies to compete with other coffee stores. Product differentiation Based on the above analysis of five forces and their factors, we know that the threat of substitute is strong since tea and instant coffee have…show more content…
The chain coffee shops enjoy economies of scale so that they have the comparative advantage to new entrants and cafés strive to do product differentiation by providing heterogeneous products make it difficult for the newcomers, it restricted others to enter the market. The threat of new entrants is weak. For the threat of substitutes, specialty coffee faces the challenge of the tea industry and instant coffee. These two provides similar flavor and purpose of specialty coffee which poses a strong threat of substitutes. For the bargaining power of buyers, most specialty coffee consumers are individuals that would not purchase it in bulk and the purchase cost only a small percentage of buyer’s income so the pressure consumers exert on specialty coffee shops is weak. The impact of inputs on cost and differentiation, the presence of substitute inputs and labor and expertise to the firm affect the bargaining power of supplier. There are chain store and small-scale shops in the specialty coffee industry in which the large-scale cafés enjoy purchasing economies, marketing economies, and managerial economies while small-scale coffee shops suffer higher production cost. For the rivalry among existing competitors, there are many competitors in Hong Kong specialty coffee industry, but the inequality of size and power among them gets the rise in the diversity of specialty coffee stores.The diversity of services and products of firms make them become heterogeneous firms which encourage their initiative in searching prices in the market. However, the growth in the industry’s fixed costs will make companies’ profits lower, and the growth of the industry in intangibles that limit new entrants to the market is
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