Jamba Juice Porter’s Five Analysis

Jamba Juice Porter’s Five Analysis

Introduction

Strategic management involves the application of tools to understand forces that determine the competition in a particular market. With proper analysis, companies can adjust their operations to increase market share and increase the profit margin. One of the techniques employed by managers is Porter’s Five Forces, and it can be used to examine the competitive environment for Jamba Juice. While the levels of new entrants and bargaining power of suppliers are low, the levels of rivalry, substitute, and bargaining power of buyers are high.

The threat of New Entrants

The threat of entry in the industry in which Jamba Juice operates is low. The start-up capital is high as revealed by Services Acquisition Corp. International when it acquired Jamba Juice Company For $265 million (241). It implies that the business has a high value which is expensive to establish and maintain. The costs of operations are also high to discourage new entrants (see fig 1) The business owner incurs the costs of labor, administration, leasing the premises among others which may lower profitability.

A Graph of Total Costs Between 2014 and 2016

Fig. 1. Source: Author

Threat of Substitute

The threat of substitute to Jamba’s Juice products is high. Replacements for its products are available, and they include the energy drinks, soft drinks, and healthy juices. These products have similar quality and almost the same price to Jamba Juice.

Rivalries

The level of rivalry in Jamba Juice is high. Some of the competitors are Starbucks, McDonald’s, Panera Bread, and Burger King. These companies reduce the market for smoothies, thus, lowering the sales for Jamba Juice. They also apply a similar business model to Jamba Juice, in the production of such products as muffins, sandwiches, quiches, among others.

Bargaining Power of Suppliers

The provider power of the suppliers is low. Jamba Juice works with independent distributors who offer ingredients for vitamins, proteins, and juices. Because they are several suppliers, the prices and availability of the products are determined by the forces of demand and supply.

Bargaining Power of Buyers

The purchasing power is high.  The franchise business model provides multiple options for the buyers to select the products they prefer. The high number of stores means that purchasers can visit the premises of their choice (see fig. 2). The costumers can also shift easily from Jamba Juice to its rivalries.

A Line Graph Showing the Number of Jamba’s Juice International Stores

Fig. 2. Source Author

Based on Porter’s Five analysis, Jamba Juice can adjust its tactics to suit the increases its competitive advantage. As the company has strengths of offering a wide variety of products, it can consider differentiation to keep them distinct and unique. It can also improve its weaknesses to counter the strong rivalry forces.

Works Cited

“Jamba”