Porter s five forces of coca cola

From operations to marketing every part requires a large investment.

porters five forces of coca cola ppt

The Coca Cola Company needs to focus on differentiating its products so that the actions of competitors will have less effect on its customers that seek its unique products. New entrants are less likely to enter a dynamic industry where the established players such as The Coca-Cola Company keep defining the standards regularly.

soft drink industry five forces analysis

Type D personality and cardiac output in response to stress. Fear of Retaliation It is very difficult for new player to enter in this industry because; they will be highly retaliating by local players in local markets and in global scenario they have to face the duopoly of Coke and Pepsi.

The number of substitutes of Coca Cola products is high.

Cola wars continue: coke and pepsi in 2010 five forces

Most notably, if trends go against soda and bottled drinks, Pepsi may be able to hedge its bets with its other lines. However, the level of differentiation between Pepsi and Coca cola is low. Moreover, the small scale companies do not have the potential to affect the market share of Coca-Cola to a significant degree, thus indicating that the main competition is among Pepsi and Coca-Cola, which has led to the term Cola Wars to define the rivalry between the two firms. Share this:. New entrants to the beverage industry are another possibility. This makes the industry prone to disruptions in the supply-demand balance, often leading to overproduction. This makes the bargaining power of suppliers a stronger force within the industry.

Williams, L. However, the level of differentiation between Pepsi and Coca cola is low. Suppliers in dominant position can decrease the margins The Coca-Cola Company can earn in the market.

The overall impact of higher supplier bargaining power is that it lowers the overall profitability of Beverages - Soft Drinks.

Porters five forces example

Managers can form strategies based on an analysis of these forces to increase the profitability of their business. This competitive landscape suggests that there is moderate threat of competitive rivalry, with the main competition originating from Pepsi Co. The five forces that this model evaluates are a part of every industry and every market. Threat of Substitute Products Large numbers of substitutes are available in the market such as water, tea, juices coffee etc. Similarly, Coca-Cola also has to contend with what buyers could purchase instead of its products. Bargaining Power of Suppliers All most all the companies in the Beverages - Soft Drinks industry buy their raw material from numerous suppliers. They also sponsor different games and teams and also featured in countless television programs and films.

Similarly, Coca-Cola also has to contend with what buyers could purchase instead of its products. This makes the bargaining power of buyers a weaker force within the industry.

This is because the global market of carbonated drinks is highly saturated and new entrants cannot benefits from the economies of scale extensively exploited by existing market players.

porter five forces model company example ppt

While there are several suppliers, the size of individual suppliers is small or moderately large. Together, they explain the competitive forces that could impact how a company does business.

Coca cola threat of substitutes

Moreover, there is no switching costs for customers and the price elasticity of products further increases buyer purchasing power. On the other hand, individual consumers seem to have limited bargaining power. Threat of New Entrant There are many factors that make it hard for new player to enter the beverage industry some of important factors are brand image and loyalty, advertising expense, bottling network, retail distribution fear of retaliation and global supply chain. Frameworks such as the Porter's five forces model seem very simple, but it is important to understand how a company competes in an industry and what factors could complicate that competition before investing , especially for longer positions. Threats of Substitute Products or Services When a new product or service meets a similar customer needs in different ways, industry profitability suffers. Since Coca-Cola is a globally recognized brand that is consumed in more than countries, the presence of small scale players and new entrants has no significant impact on the operations of Coca-Cola. Granted, it would have to have a very positive and very viral image or spend a fortune to create the type of brand recognition Coca-Cola enjoys, but it is not impossible. Trefis Team. That can lead to losses for any of the suppliers. The government policies within the industry require strict licensing and legal requirements to be fulfilled before a company can start selling. This means that the threat of substitute products is weak within the industry. The Coca Cola Company can focus on innovation and differentiation to attract more buyers. The profit margins in each of these segments noticeably demonstrate the buyer power and how special buyers pay diverse prices based on their power to bargain.
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SSE Cola Wars Group3 2