One of the external factors that have an effect on Coca-Cola is the newer technology. People know that Coca-Cola first provide their product in a form of a fountain drink. It has a fixed ingredient ready for people to get some ice and get Coke from their fountain. But with the advances in the technology today, Coke has invented a new Freestyle soda machine that allows people to create a custom beverage for themselves. Their new machine benefits Coca-Cola because it can shake up the market. It gets people to become curious and want to try it out the new machine. This is an opportunity that could boost the sales for coke and their other fountain drink products.
The carbonated soft drinks (CSD) industry in the United State is considered to be in its maturity phase and there is a high degree of competition within the industry . There are several producers of carbonated soft drinks; however, our focus is on the top three soft drink producers : Coca-Cola (NYSE:KO) and PepsiCo (NYSE:PEP) and Dr. Pepper Snapple Group (NYSE:DPS) as they account for 41.9 percent, 30.3 percent and 14.8 percent of CSDs market share respectively, according to IBISWorld (Graph 1). We will analyze aforementioned company 's revenue, net profit margin, current ratio, quick ratio to get a better understanding of the competitor’s capabilities within the industry. However, we should keep in mind that the companies operate different business segments within itself. Therefore, its is difficult to attain information specific to the carbonated soft drink industry are figures are based on estimates.
The primary industry Coca-Cola is in the Soft Drink Manufacturing market consisting of different types of soft drinks with its target being at mainly restaurants and grocery stores across the United States. Varieties of coke include serves different coke flavors such as original, vanilla, cherry, and caffeine free. Even though these different types of Coca-Cola products are sold as consumer products, they serve as a core component for other types of soft drink products, including non-carbonated and concentrated juices. The soft drink industry has been positioned Coca-Cola products of all kinds. Coca-Cola’s market for the original coke consists of consumers of all types who are looking for the original best tasting product ever existed in the history of soft drinks.
Recently, the Coca-Cola Company laid out its growth plan in its 2020 vision, and it plans to double its system revenue, increase its total servings to three billion per day, and raise its operation margins (Banks, 2016). The company has several reasons relating to its economies of scale and cost reductions that would make it realize its strategy. The Coca-Cola Company owns one of the world 's strongest nonalcoholic beverage brands, and its brand qualifies as a billion-dollar brand in nineteen countries across the world (Foster, 2014). Each of the Coca-Cola’s brands generated about fivehundred million to one billion dollars annually in revenue (Collier, 2014). Currently, the company holds the leadership position in the world 's soda industry with a market share of 41 percent (Banks, 2016). Besides, Coca-Cola enjoys a stable global distribution system in two-hundred countries and owns more vehicles than both FedEx and UPS combined (Elmore, 2016). The company, therefore, has a huge moat with significant economies of scale that none of its competitors can beat or copy.
The Coca-Cola Company is the world's largest beverage company, refreshing consumers with more than 500 sparkling and still brands.
Coca-Cola to increase their revenues they need to concentrate on the customer perspectives. The company can increase their revenues by making sure they retain their customers and increase customers that buy their product. The company can make sure that they increase their revenue and customers by analyzing the company’s sales prices, costs for materials and services, quality of products and services, product innovation, timing of delivery of products and services, and improvement in customer service.
Michael Porter's Five Forces analyze the external and internal environment of a company to increase the awareness of threats and structure of the industry that company competes within. Thus, the Five Forces is an ideal tool which can help companies to maintain their competitiveness with a higher profitability.
In order to fight with the upcoming competitors, the Coca Cola Company needs to keep up with the changes in consumers’ preferences and lifestyle. Coca Cola Company should focus on producing variety of beverages that can cater different groups of consumers, for example, those who are weary of sugar intake and those who drink for the taste and does not mind the sugary sweetener. Most people are actually not aware of the other beverage offered by the company and they can only relate the company to a high sugar soft drink. By introducing new beverage or pushing their other beverages to get more recognition, they can satisfy more consumers’ needs.
The existing concentrate business is largely controlled by Coca-Cola Company (Coca-Cola) and PepsiCo (Pepsi), together claiming a combined 72% of the U.S. carbonated soft drink (CSD) market sales volume in 2009. Refer to Exhibit 1 for an illustration of the CSD industry value chain. For more than a century, Coca-Cola and Pepsi have maintained growth and large market shares through mastering five competitive forces, shown in Exhibit 2, that drive profitability and shape the industry structure.
The soft drink industry in the United States is a highly profitably, but competitive market. In 2000, carbonated soft drink retail sales were estimated $60.3 billion, however, soft drink consumption growth has slowed in recent years. There are three major companies that hold the majority of sales in the carbonated soft drink industry in the U.S. They are the Coca Cola Company with 44.1% market share, The Pepsi-Cola Company with 31.4% market share, and Dr. Pepper/ Seven Up, Inc. with 14.7% market share. These three companies market the top ten brands account for 73% of soft drink sales in the U.S. Dr. Pepper/ Seven Up, Inc. owns two of the top ten brands: Dr.
Coca Cola’s Company competes in the nonalcoholic beverages segment of the commercial beverages industry. Based on internally available data and a variety of industry sources, we believe that, in 2005, worldwide sales of Company products accounted for approximately 10 percent of total worldwide sales of nonalcoholic beverage products. The nonalcoholic beverages segment of the commercial beverages industry is highly competitive, consisting of numerous firms.
Porter 's Five Forces Model is a critical instrument to break down an outer aggressive environment of the business. The model incorporates threat of entry, the threat of rivalry, the threat of suppliers, the threat of purchasers and threat of substitutes.
Soft drink industry is very profitable, more so for the concentrate producers than the bottler’s. This is surprising considering the fact that product sold is a commodity which can even be produced easily. There are several reasons for this, using the five forces analysis we can clearly demonstrate how each force contributes the profitability of the industry.
The economics of the concentrate business and bottling is different from each other in terms of number and size of rivals and cost structure etc. Concentrate business has few buyers and through its value chain compare to bottling business has many buyer and mid-way player in the soft drink industry. The concentrate manufacturing process involved a little capital investment in machinery, overhead, or labour to reduce the risks whereas bottlers involving high capital investment. Franchise agreements with soft drink industry allowed bottlers to handle the non-cola brand of other concentrate producers. It also allowed bottlers to choose whether to market new beverages introduced by a concentrate producer. Concentrate producers product cost structure is mostly based on variable costs such as advertising, promotion, market research, and bottler support however, bottler products cost constitution is mostly based on fixed costs and have higher cost leverage. Concentrate producers also took charge of negotiating customer development agreements with nationwide retailers such as Wal-Mart. Concentrate producers collaborated to make more profitable control with bottlers, for example, raw material negotiation with suppliers and sales price
The Coca Cola Company is a multinational company with more than 140,000 employees, the company is in beverage business and its flagship product Coca Cola is considered one of the best soft drink. Coca Cola soft drink is the real revenue generator of the Coca Cola Company. The company was found in 1892 and by 2010 it was reported that the company has the serving of 1.7 billion per day so the company has only grown since its inception. The company is serving its product in more than 200 countries, and the Coca Cola Company owns more than 500 brands, this shows that the graphs of the company is moving upwards and the Coca Cola Company is growing at an immense rate.