Porters coca cola 1 Porters five-force analysis is an outline to analyze level of competition within a business and corporate strategy development It

Porters Five Forces Analysis of Coca Cola

In a recent interview with Bloomberg, Coca-Cola’s CEO stated, “As increasing number of consumers order groceries online, picking up a bottle of Coca-Cola is often ‘forgotten’” . E-Commerce growth can negatively impact Coca-Cola performance as consumers move away from shopping at brick and mortar stores. The consumer of today, prefers the convenience of shopping online, this adversely impacts Coca-Cola’s ability to reach the loyal consumer. There is high bargaining power of the buyers due to excellent competitors.

Coca-Cola can reexamine and rebuild its strategy by distinguishing external threats and weakness which is essential to cementing a business strategy to grow and move the organization forward. The purpose this PEST and Porter’s Five Forces analysis is to identify various external factors which serves as guide to make better strategic decisions. Since the bottlers are the primary customer for the concentrate manufacturer, Coke and Pepsi have invested heavily in bottling location and structure. They are able to contract individual bottlers and set the price and terms and conditions of operations, which is a huge benefit. Although concentrated syrup production is much more profitable, they are in the bottling business to gain a strategic competitive advantage.

Bargaining Power of Suppliers:

Customer switching costs – These are well illustrated by structural market characteristics such as supply chain integration but also can be created by firms. Porter developed his five forces framework in reaction to the then-popular SWOT analysis, which he found both lacking in rigor and ad hoc.

  • The production of products within the industry requires an increase in capacity by large increments.
  • It has held a very significant market share for a long time and loyal customers are not very likely to try a new brand.
  • Porter’s five-forces framework is based on the structure–conduct–performance paradigm in industrial organizational economics.
  • Additionally, the concentrate manufacturers directly price set with bottlers and charge well above the cost of materials, unlike the bottlers.
  • The Coca-Cola brand it is the most recognizable and popular brand in the world .
  • As Coca-Cola’s cost of goods sold fluctuates due to materials, transportation, or manpower, either the beverage company or its distributors have to absorb the loss.

This means that these will engage in competitive actions to gain position and become market leaders. This industry is well known as a Duopoly with Coke and Pepsi as the companies competing. These both players have the majority of the market share and rest of the players have very low market share.

The threat of substitute products

Given the recent events in the US Airways and American Airlines merger, one has to wonder, is the airline industry monopolistic? Do a competitive analysis on Phoenix Grill Company which is famous for grilling bacon. We’ve updated our privacy policy so that we are compliant with changing global privacy regulations and to provide you with insight into the limited ways in which we use your data. Brand equity refers to the value a company gains from a product with a recognizable and admired name when compared to a generic equivalent. But understanding the competitive environment in which the company operates can go a long way towards helping you make the decision. This is a real risk, but it is one that every other entrant in the beverage mass market would face. It seems more likely that either Coke or Pepsi would buy the newcomer and add it to the mix.

What is a real life example of Porters Five Forces?

One example of Porters Five Forces is the Vision 2050 Report by the International Air Transport Association (IATA). The report shows how airlines make dismal profits while vendors and customers make significant gains. Airfares become cheaper, travel becomes safer and the quality of on-board products get better.

Health concerns –Carbonated drinks are one of the major sources of sugar intake. However, Coca-Cola hasn’t devised any health alternative or solution for this problem yet. Buyer power There are different buyers throughout the process of selling CSD; the bottler who buys the concentrate and the consumers who buy the final product. The bottlers act as a contracted franchise agreement that takes prices and territories with very little buyer power from the concentrates providers as there are not many substitutes for concentrates. Whereas the end consumer has much higher buyer power as there are no barriers to switch products and there are many substitutes for CSDs. Michael Porter’s Five Forces is a classic tool used to analyze the competitors of a business or the competitive environment of the business. This tool studies the competitive market by analyzing the five forces namely, threat of new entrants, rivalry among competitors, threat of substitution, buyer power and supplier power.

Appendix III: Comparative strategies of Coca-Cola and its close competitor, Pepsi.

These 2 leading players are of similar size and offer similar products. Porter refers to these forces as the microenvironment, to contrast it with the more general term macroenvironment. They consist of those forces close to a company that affects its ability to serve its customers and make a profit.

Individual customers generally buy small volumes and they are not concentrated in specific markets either. However, the level of differentiation Porters Five Forces Analysis of Coca Cola between Pepsi and Coca-cola is low. Switching costs are not high for customers and still, the two brands enjoy high brand loyalty.

Picking a stock means trying to choose the best out of a group of competitors. Porter’s Five Forces Model can help by focusing attention on five direct and pertinent questions about the company’s ability to compete within an industry. Esploro Company is a research and consultancy firm catering to markets in Asia-Pacific, Europe, Middle East, Latin America, and North America. We strongly believe that research and consultancy form the backbone of informed decisions and actions.

On the other hand, as a result of increased marketing, both giants have increased the perception of differentiation between products, decreasing rivalry to a lower degree. The exit barriers within the industry are particularly high due to high investment required in capital and assets to operate.

Coca Cola Five Forces Analysis

Coca-Cola Company has been commanding the lead in the soft-drinks industry. The company has been striving to influence customers across the ages.

Porters Five Forces Analysis of Coca Cola

It is much easier to ship concentrate as the boxes are shipped in cardboard boxes, which are much lighter than the primary raw materials in bottling. Additionally, the concentrate manufacturers directly price set with bottlers and charge well above the cost of materials, unlike the bottlers.

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