Since there was no mention of suppliers in this short article. Thus, "a" can be ruled out immediately. Porter lists seven things as factoring in to the bargaining power of buyers or buyer groups: (1) they are concentrated or their purchase volumes are large compared to the sellers sales (2) the products they purchase represent a significant fraction of its costs or purchases (3) the products they purchase are standardized or undifferentiated (4) they face few switching costs (5) they earn low profits (6) they pose a credible threat of backward integration and (7) the product is unimportant to the quality of the buyers' products or services.

Clearly, cappucino buyers are not concentrated. That is to say, their are many customers, thousands of them in Polly's case, not just a few large one dominating the market. And their purchases are very small compared to Polly's yearly sales volume. If the average customer spent $20/week in Polly's, that amount would be less than 1/10 of 1% of Polly's yearly sales, a very small amount. And given that most gourmet coffee drinkers are not poor, the purchases do not represent a signficant fraction of their income or yearly purchases on goods and services. Thus, neither point 1 or 2 would seem to hold.

The third point concerns product differentiation. By definition, a gourmet coffee shop would be taking great pains to have highly differentiated products. How different is a matter of debate. For some people, a cappucino from Starbucks and from Polly's may be no different, but for most, this is probably not the case. One way to interpret the purchase of the roaster is as a way to differentiate their beans and coffee drinks made from them from the coffee drinks of nearby shops. Thus, I would be inclined to say that there was product differentiation and that point three does not favor higher buyer power.

The fourth point, low switching costs, would seem to not be working in Polly's favor. As the article details, there are several decent coffe shops in the neighborhood, two of which are Starbucks. For those customers not wholly-convinced of the difference or superiority of Polly's products over its competitors', the cost of switching to another coffee shop is little or nothing, even if they are part of a frequent drinker program of some kind, e.g. free refills with the purchase of a thermos.

The fifth point, the buyers earn low profits, is not relevant because they are not businesses. Still, if we substitute income for profit, we'd might conclude that the typical gourmet java drinker has above average income.

The sixth point, the threat of backward integration, is interesting. There is, it seems, very little likelihood that every buyer would open his or her own coffee shop just to have better access to or lower priced supplies of coffee. That said, with a relatively small investment and a bit of effort, very good coffee drinks can be made at home for less money than one would pay for them at Polly's or Starbucks. Thus, there is some threat of "backward intergration" on the part of individual buyers.

Finally, point seven is not relevant for our purposes. On the whole it would seem that only one thing that Polly's did decreased the power of its buyers- it further differentiated its products and its service experience. The article attributes much of Polly's rebound to this fact alone. While I am inclined to think there was much more to the story, if we stick to the facts of the case, "b" seems like a good answer even though only one of Porter's seven criteria are met.

Options "c" and "d" relate to barriers to entry. In general, it is hard to argue that a firm increased it's profits by lowering barriers to entry. Thus, "d" should be immediately ruled out. As for "c", Polly's emphasis on product and service differentiation could also be interpreted as having raised the bar for new entrants, albeit slightly, by making personalized customer service and, perhaps, vintage-roasted-in-the-store beans something that it would could cost others to try to duplicate. By this line of think, "c" is also a decent answer.

Options "e" and "f" should also be dismissed. As far as we can tell, Polly's turnaround is not attributable to their coming up with a substitute for coffe drinks, either Starbucks' are anyone else's. If Polly's had started promoting tea along with coffee, we might think otherwise. This does not seem to be the case, however. As for option "f", increasing rivarly is rarely the path to higher profits. Rather, according to Porter, higher rivalry leads to lower profits. Thus, absent any evidence to the contrary, we can rule this option out.

To summarize, options "b" and "c" were the answers you should have chosen. And you should note the similarity between them- both related to differentiation, a term that will come up in many contexts this semester. Keep in mind that it will not always mean the same thing, however. In the organization structure and design, differentiation means something very different than it does to Porter. Similarly, in Hamel's "Business Concept Innovation"framework, the meaning is also different.