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Threat Of Supplier Bargaining Power Marketing Essay

Paper Type: Free Essay Subject: Marketing
Wordcount: 1807 words Published: 1st Jan 2015

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The strongest competitive force or forces determine the profitability of an industry and so are of greatest importance in strategy formulation. For example, even a company with a strong position in an industry unthreatened by potential entrants will earn low return if it faces superior or a lowers-cost substitute product, as the leading manufacturers of vacuum tubes and coffee percolators have learned to their sorrow, so that in such situation , coping with the substitute product becomes the number one strategic priority.


Diagram 1

Resource from:  http://www.mindtools.com/pages/article/newTMC_08.htm

The threat of substitutes

The first forces are the threat of substitutes; substitution of Jamba Juice Company’s product can be very high. Based on the case study, “competitors began offering similar healthy juices and smoothies in the marketplace”, this will makes customers have many brands to choose that based on their interest, because of that there have a lot of brand product of juice can replace the Jamba Juice, according to the case, there show specialty juice and smoothie industry is their competitor and it’s are the substitutes for the Jamba Juice. Not only that, another reason to the high threat of substitutes for the Jumba Juice is the switching cost is low, the customer can easier to change the juice as they like. When the substitutes become more available in the market, both demand and the price of the products becomes more elastic. (Gigantino, 1999). Refer to Jamba Juice case scenario, the threat of substitutes is high because Jamba Juice has many competitors such as Smoothie King, Maui Wowi, Starbucks and so on which also provides such kind of healthy products. For Smoothie King is a Louisiana-based franchise specializing in nutritional, fresh fruit blended smoothies. Smoothie King offers healthy alternatives such as sports beverages, enegy bars snacks and vitamins and so on, Smoothie King is Jamba Jiice most note-worthy competitor.

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Threat of supplier bargaining power

The second forces are the threat of supplier bargaining power. In this forces can be very high. Based on the case study, Based on the case study, the suppliers of Jamba Juice Company can choose to supply to other companies that providing the same product with Jamba Juice Company. The suppliers can supply to Smoothies King or Starbucks as well. And another fact that the supplier bargaining power which is exert on the business by increasing the prices and lower the quality to sell to the buyers. In this case, the Jumba Juice should look for another strong supplier to supply to them as a reasonable price in the business transaction. Jumba Juice is more looking for the raw material for their making the product such as fresh fruit, sugar, cup or so on. If the supplier has an intention to keep increase the price however the quality is good it should be no problem, but in other hand once the quality is average therefore Jamba Juice can switch to another supplier.

The Threat of buyer’s bargaining power

The third force will be the threat of buyer’s bargaining power for the Jamba Juice. In this force toward Jamba Juice is high because the buyers have a lot of opportunity to switch to another drinks product. For example like Starbucks, Smoothie King, and Coffee Been. Which means there are too many competitor around Jamba Juice, and the different brand of drinks can cause the Jamba Juice sell drop and also easy to replace the Jamba Juice.

Not only that, the customer switch to another brand of drinks that means they are not a royalty customer and because of the cost of switching is low so that can increase the bargaining power of the buyers. However, it is similar with the threat of suppliers bargaining power is it because both are vice versa. Buyer’s bargaining power are the pressure that given from the buyers to the suppliers.

The threat of new entrant

The fourth forces would be the threat of new entrant for the Jamba Juice. For this threat of new entrant is high because there is not only Jamba Juice in this drinks market. Beside Jamba Juice, there got Starbucks, Smoothie King, Coffee Been, and there are a lot more of the similar juice product in the market. So that, the new entrant can enters the market easier because there have a lot of the opportunities for them to target different level of customer. The threat of new entrant is depend on the threat of new competitors in the drinks industry. (Swathen, 2011). In this day, customers are more toward to the health drink product. And it attracts more competitors to enter this drinks industry, because this type of business is profitable and easy to gain money. Once the drinks brands are famous and nice to drink, it will easy to attract more young generation people. Young generation are the target segment to the threat of new entrant it is because the young generation’s people will bring up the trend of drinking healthy juice.

The threat of existing rivalry

In the last force in the Jamba Juice which is threat of existing rivalry. In this threat is considered high because there showed Jamba Juice has competition highly fragmented in the specialty juice and smoothie industry in the case study. Besides, they will try to stealing the market share and potential profits from one another. (swathen, 2010) Usually they targeted on competitors who are well-known. For examples, Starbucks ,Smoothies King it is the existing rivalry to the Jamba Juice due to both company have some juice bar, smoothie, and yogurt which are similar to Jamba Juice. So that, the customer will easy to change their favourite to another brand shop because the product is almost the same.

General environmental


In the Jamba Juice Company the objective to the primary marketing objective is to make Jamba Juice the largest active, healthy lifestyle company in the United Kingdom and use this success to eventually expand it into other markets. Because due to Jamba Juice is still new brand in the UK and also unknown brand in the UK also, an advertising budget is needed to increase brang awareness in the new market. So that Jamba Juice Company plan to do so by following a strategic plan using these specific steps; identify Jamba Juice target audience, the product does not cater to any particular age or gender, so all demographics will be considered. However, the company primary target market that Jamba Juice will try to attract those people ages between 15 to 34 years old. Develop specific campaign objectives; the company objective is to gain 30 percent of the market share of the grab and go beverage market within 4 years. However Jamba Juice Company will be selling direct to their consumer and by passing intermediaries and also to other distribution channels. Therefore Jamba Juice will provide more potential workers and they has been trained and will use personal selling and trade promotion strategy as promotional tools to their target customer. (Phoenix, U. o. 2010)


In the section of economic towards to the Jamba Juice Company, the highlight for the 13 weeks ended October 2012 compares to the 12 weeks eneded October 4 2011, the company owned comparable store sales has increased 3.9% and franchise operated comparable stores sales has increased 1.0% and the system -wide comparable store sales increased 2.5%, all are increasing the percentage which is good result in the financial report. In the future Jamba Juice Company outlook for year 2013, based on the financial result, the company will deliver positive company owned comparable store sales of 4% to 6% and store level margin of 20% and achieve income from operations of 2.5% to 3% of revenue.(Dierks, D., 2012)

What internal resources and assets does Jamba Juice have that may give it a competitive advantage?

Michael Porter’s defined the value chain. It is the theory that underlies activity based management and ultimately, Norton and Kaplan’s balanced scorecard. By analyzing the process flow through business, identifying the critical success factors for the key processes,


Diagram 2

Value Chain Activity


Inbound logistics

In this inbound logistics towards to the Jamba Juice, Jamba Juice should distribution facilities, material control systems and provide more warehouse layouts.


Jamba Juice must have the efficient work flow design and the quality control system, so that it will maintain the royalty customer to the company.

Outbound logistics

Conditions of goods should provide 100% to the customer and efficient scheduling, finished goods processing.

Marketing and sales

In the marketing department, the head of the department should motivated sales people, innovative advertising and promotion, effective pricing, customer segments, and distributive channels; therefore, it will bring more profit to the company.


Ability to ask for customer feedback and respond, ask for the feedback is because Jamba Juice company need to improve to serve better to the customer.

Secondary or Support :


Win-win relationship with suppliers so that the supplier will give the better offer to the company.

And also will reduced dependence on single supplier.

Technology development

State of the art hardware and software, innovative culture and qualified personnel

Human resource management

Effective recruitment, incentives and retention mechanisms

General administration

Effective planning systems to establish goals and strategies, access to capital, effective top management communication, relationship with diverse stakeholders

Intangible assets of the Jamba Juice Company

In intangible assets of the Jamba Juice Company, the intangible assets are amortized over their estimated useful lives using a method of amortization that reflects the pattern in which the economic benefits of the intangible assets are consumed or otherwise realized. Estimated useful lives for the franchise agreements are 13.4 years. The useful life of reacquired franchise rights is the remaining term of the respective franchise agreement. The useful life of the favourable lease portfolio intangible is based on the related lease term. Which mean the most important intangible assets is the franchise agreement due to the date is 13.4 years. (Jamba Inc,2012).

Tangible assets of the Jamba Juice Company


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