·       Threat of substitute products or services: Moderate.

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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