Coca Cola

The five forces analysis is a framework developed by Michael Porter of Harvard Business School in 1979.   Inherent within the notion of strategy is the issue of competitiveness.   In business this is about gaining advantage over competitors.   As the diagram below shows, the forces in question relate to the microenvironment and how a change in any of the forces normally requires a company to re-assess the marketplace.   When using the framework to understand competitive forces it is essential to consider that the five forces are not independent of each other, in that pressures from one direction can trigger off changes in another in a dynamic process of shifting sources of competition.   Also competitive behaviour can disrupt the forces framework in that competition and their strategies can affect the industry.

For the purpose of this essay I am going to use Porter’s five forces framework to analyse the sources of competition in the soft drink industry with a specific focus from the aspect of Coca Cola, a company with a global share in the industry of around 50%.   INSERT MORE ABOUT THE INDUSTRY/ COMPETITORS ETC

Barriers to Entry

• Barriers to entry are factors that need to be overcome by new entrants if they are to compete successfully.
• New entrants are not a strong competitive pressure for the soft drinks industry.
• Market fully saturated and growth is small – difficult for new/unknown entrants
• Coca Cola and Pepsi Co dominate the industry with;
o Strong Brand Name – advertising and marketing spend in industry is high.   Difficult for an entrant to compete and gain any visibility.   Established brand names and loyal customers impossible to match.
o Distribution Channels – Retailers enjoy high margins of 15-20% on these soft drinks for the space they offer.   New entrants cannot convince retailers to substitute Coke/Pepsi for their new products.
o Bottling Network – Both firms have agreements with their existing bottlers that prohibit bottlers from... [continues]

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