Porter’s five forces model is a framework for the industry analysis and development of business strategy. Three (3) of Porter’s five (5) forces refers to rivalry from external/outside sources such as micro environment, macro environment and rest are internal threats. It draws ahead Industrial Organization economics to develop five forces that conclude the competitive intensity and consequently attractiveness of a market place or industry. Attractiveness in this framework refers to the generally overall industry profitability. An "unattractiveness" in industry is one in which the mixture of these five forces proceed to constrain behind overall profitability. An extremely unattractive industry would be one moving toward "pure competition", in which existing profits for all companies are moving down to zero.
The threat of the entry of new competitors
Advertising and Marketing
Soft drink industry needs huge amount of money to spend on advertisement and marketing. In 2000, Pepsi, Coke and their bottler’s invested approximately $2.58 billion. In 2000, the average advertisement expenditure per point of market share was $8.3 million. This makes it exceptionally hard for a new competitor to struggle with the current market and expand visibility.
Customer Loyalty/ Brand Image
Pepsi and Coke have been investing huge amount on advertisement and marketing throughout their existence. This has resulted in higher brand equity and strong loyal customers’ base all over the globe. Therefore, it becomes nearly unfeasible for a new comer to counterpart this level in soft drink industry.
Retail Distribution
This industry provides significant margins to retailers. For example, some retailers get 15-20% while others enjoy 20-30% margins. These margins are reasonably enough for retailers to entertain the existing players. This makes it very difficult for new players to persuade retailers to carry their new products or substitute products for Coke and Pepsi.
Fear of Retaliation
It is very difficult to enter into a market place where already well-established players are present such as Coke and Pepsi in this industry. So these players will not allow any new entrants to easily enter the market. They will give tough time to new entrants which could result into price wars, new product line, etc in order to influences the new comers.
Bottling Network
In this industry manufacturers have franchise contracts with their presented bottler’s that have privileges in a definite geographic area in eternity such as both Pepsi and Coke have contracts with their presented bottler’s. These contracts forbid bottler’s from taking on new competing brands for similar products. Latest consolidation between the bottler’s and the backward integration with Coke buying considerable numbers of bottling firms, it makes very difficult for new player to contract with bottler’s agreeable to distribute their brands. The alternative is that new entrances build their bottling plants, which will need intense capital and exertion. Because in 2000 new bottling plant needs capital of $80 million.
The intensity of competitive rivalry
The industry is almost dominated by the Coke and Pepsi. 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. Otherwise; competition is comparatively low to result any turmoil of industry structure. Coke and Pepsi primarily are competing on advertising and differentiation rather than on pricing. This resulted in higher profits and disallowed a decline in profits. Pricing war is nevertheless experienced in their global expansion strategies.
Composition of Competitors
Except the Coke and Pepsi other competitors are of unequal size especially in local markets. Coke and Pepsi both players have the majority of the market share and rest of the players have very low market share.
very nice….hope it gets copied
Very valuable post. It will be good if we can copy to use in study or class notes only.
these types of lectures must be posted for the help of those who needs it, to promote the level of study i encourage of this writer well done sir keep it up.
Great strategy to grow market share and business
i got to study on Porters Five Forces on our marketing class its interesting and thanks for your post. 🙂
its vry gud, i clear my test nd balle balle
very helpful…
It is very help full sir, I hope that can copy it,it will be good if we can copy it. Actually I refer that to study this model to use my MBA assignment.
thnx…4 posting….i was looking 4 dis…:)
WITH THE HELP OF THIS TOMORROW MUJE TEACHER KE DAT NHI KHANE PDEGE
gud one 🙂 thanx for posting
very helpful, used it for my assignment
If we read anything with an example it will very easy to understand its core concept 🙂 thanks for this post 😉
wonderful may u pliz send this to may email above
wow! you are amazing!
Helpful topic though a little specificity to Coca Cola would have been more useful. Also the facts and figures need to be updated. Nevertheless a good source of information. Keep up the good work.
why this material do not copied?
thank you for posting sir…this posting can help me in my reposting…thanks a lot i learn about your idea…
my question is which of them are external threats and which are internals??? and why
Thnx 4 de post sir….
Vry helpfull sir, thnk you 4 postng
Infact am using it right now
This Pos very helpfull, but in Vietname It become to change.
Dr Thanh or 0C is more popular because of there natural product.
Excellent work.Needs a copy pls
nice
Really helpful.
Analytical discription…. well done
Very helpful, would be great if I can copy.
great work
great work & vry helpful material
this paper is too much helpful in my mphil study. thanks for this post
Very nice with best of explanations!!! Sir keep it up!!!
Very helpful for my studies. Thanks for publishing
I thank the person who conducted this analysis of coca cola may god bless you
great stuff sir… fitting so well with my MBA assignment.. thatnx… tho making manipulatable/rewritable
good work sir
Thank you so much it was very help
i can’t understand the points under the bargaining power of customer which are the vending machine and convenience store, y it is low? i need deeper explanation TQ
Thank you so much!
Accurate report 🙂
file save as .txt file
VERY NICE TO WE BUSSINESS STUDENT’S
how can i copy this sir? want to use itfor making an assignment
Good work, quite detailed explanations!