Porter’s Five Forces Model of Coca Cola

&NewLine;<&excl;-- WP QUADS Content Ad Plugin v&period; 2&period;0&period;95 -->&NewLine;<div class&equals;"quads-location quads-ad1" id&equals;"quads-ad1" style&equals;"float&colon;left&semi;margin&colon;0px 0px 0px 0&semi;">&NewLine;&NewLine;<&sol;div>&NewLine;<p align&equals;"justify">Porter&&num;8217&semi;s five forces model is a framework for the industry analysis and development of business strategy&period; Three &lpar;3&rpar; of Porter&&num;8217&semi;s five &lpar;5&rpar; forces refers to rivalry from external&sol;outside sources such as micro environment&comma; macro environment and rest are internal threats&period; It draws ahead Industrial Organization economics to develop five forces that conclude the competitive intensity and consequently attractiveness of a market place or industry&period; Attractiveness in this framework refers to the generally overall industry profitability&period; An &quot&semi;unattractiveness&quot&semi; in industry is one in which the mixture of these five forces proceed to constrain behind overall profitability&period; An extremely unattractive industry would be one moving toward &quot&semi;pure competition&quot&semi;&comma; in which existing profits for all companies are moving down to zero&period;<&sol;p>&NewLine;<h3>&&num;160&semi;<&sol;h3>&NewLine;<h3>The threat of the entry of new competitors <&sol;h3>&NewLine;<p> <strong><&sol;strong><&sol;p>&NewLine;<p align&equals;"justify"><strong>Advertising and Marketing<&sol;strong> <&sol;p>&NewLine;<p align&equals;"justify">Soft drink industry needs huge amount of money to spend on advertisement and marketing&period;&&num;160&semi; In 2000&comma; Pepsi&comma; Coke and their bottler&&num;8217&semi;s invested approximately &dollar;2&period;58 billion&period; In 2000&comma; the average advertisement expenditure per point of market share was &dollar;8&period;3 million&period; This makes it exceptionally hard for a new competitor to struggle with the current market and expand visibility&period; <&sol;p>&NewLine;<p align&equals;"justify"><strong>Customer Loyalty&sol; Brand Image<&sol;strong> <&sol;p>&NewLine;<p align&equals;"justify">Pepsi and Coke have been investing huge amount on advertisement and marketing throughout their existence&period; This has resulted in higher brand equity and strong loyal customers&&num;8217&semi; base all over the globe&period; Therefore&comma; it becomes nearly unfeasible for a new comer to counterpart this level in soft drink industry&period; <&sol;p>&NewLine;<&excl;-- WP QUADS Content Ad Plugin v&period; 2&period;0&period;95 -->&NewLine;<div class&equals;"quads-location quads-ad2" id&equals;"quads-ad2" style&equals;"float&colon;none&semi;margin&colon;0px 0 0px 0&semi;text-align&colon;center&semi;">&NewLine;&NewLine;<&sol;div>&NewLine;&NewLine;<p align&equals;"justify"><strong>Retail Distribution<&sol;strong> <&sol;p>&NewLine;<p align&equals;"justify">This industry provides significant margins to retailers&period; For example&comma; some retailers get 15-20&percnt; while others enjoy 20-30&percnt; margins&period; These margins are reasonably enough for retailers to entertain the existing players&period; This makes it very difficult for new players to persuade retailers to carry their new products or substitute products for Coke and Pepsi&period; <&sol;p>&NewLine;<p align&equals;"justify"><strong>Fear of Retaliation<&sol;strong> <&sol;p>&NewLine;<p align&equals;"justify">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&period; So these players will not allow any new entrants to easily enter the market&period; They will give tough time to new entrants which could result into price wars&comma; new product line&comma; etc in order to influences the new comers&period; <&sol;p>&NewLine;<p align&equals;"justify"><strong>Bottling Network<&sol;strong> <&sol;p>&NewLine;<p align&equals;"justify">In this industry manufacturers have franchise contracts with their presented bottler&&num;8217&semi;s that have privileges in a definite geographic area in eternity such as both Pepsi and Coke have contracts with their presented bottler&&num;8217&semi;s&period; These contracts forbid bottler&&num;8217&semi;s from taking on new competing brands for similar products&period; Latest consolidation between the bottler&&num;8217&semi;s and the backward integration with Coke buying considerable numbers of bottling firms&comma; it makes very difficult for new player to contract with bottler&&num;8217&semi;s agreeable to distribute their brands&period; The alternative is that new entrances build their bottling plants&comma; which will need intense capital and exertion&period; Because in 2000 new bottling plant needs capital of &dollar;80 million&period;&&num;160&semi; <&sol;p>&NewLine;<h3 align&equals;"justify">&&num;160&semi;<&sol;h3>&NewLine;<h3 align&equals;"justify">The intensity of competitive rivalry <&sol;h3>&NewLine;<p align&equals;"justify">&&num;160&semi;<&sol;p>&NewLine;<p align&equals;"justify">The industry is almost dominated by the Coke and Pepsi&period; This industry is well known as a Duopoly with Coke and Pepsi as the companies competing&period; These both players have the majority of the market share and rest of the players have very low market share&period; Otherwise&semi; competition is comparatively low to result any turmoil of industry structure&period; Coke and Pepsi primarily are competing on advertising and differentiation rather than on pricing&period; This resulted in higher profits and disallowed a decline in profits&period; Pricing war is nevertheless experienced in their global expansion strategies&period; <&sol;p>&NewLine;<p> <strong>Composition of Competitors <&sol;strong><&sol;p>&NewLine;<p> Except the Coke and Pepsi other competitors are of unequal size especially in local markets&period;&&num;160&semi; Coke and Pepsi both players have the majority of the market share and rest of the players have very low market share&period; &NewLine;<&excl;-- WP QUADS Content Ad Plugin v&period; 2&period;0&period;95 -->&NewLine;<div class&equals;"quads-location quads-ad3" id&equals;"quads-ad3" style&equals;"float&colon;none&semi;margin&colon;0px&semi;">&NewLine;&NewLine;<&sol;div>&NewLine;&NewLine;