External Factors In The Food And Beverage Industry

Competitive environments are defined by the identity, track record, financial strength and market share of key competitors. Harvard Professor Michael Porter 's Five Forces model can be used to evaluate a company 's competitive position. These five forces are barriers to entry (the ability of new players to enter the market), buyer power (the ability of customers to influence price),

This results from the fact that it is a mature segment with many well established companies vying for market share. The industry is highly consolidated and very fragmented. To grow their businesses, companies rely heavily on mergers and acquisitions to capture additional market share. Historically, the grocery industry has been characterized by slow growth which results in strong price competition and the development of aggressive marketing campaigns between existing firms. Perceived product quality and strong brand recognition by consumers are the basis of competition among firms in the industry. The source of General Mills’ competitive advantage lies in its ability to develop innovative products and highly reputable brands. As a result, they hold cost leadership positions across a number of grocery categories. Exhibit 1 shows the top US companies according to their sale of packaged foods globally. Market leaders include Kraft Foods, PepsiCo, Nestle, Mars, Kellogg, and General Mills, however, neither company possess an overwhelming share of global sales. This is in part due to the large degree of product diversity throughout the industry and the strong brand rivalry of each competitor’s labels.

Due to globalization and this fast-growing business environment, firms struggle to earn above-average returns. They strive to establish a competitive advantage in order to earn higher returns. It is not enough for firms to establish a competitive advantage, they should also figure out ways to sustain it. There are several factors that can affect the competitiveness of a firm including customers, suppliers, existing rivals, new entrants, and substitutes. Firms should take into account these factors in order to sustain their competitive advantage. This paper analyzes Yoffie 's (2009) Cola War case, assesses concentrate producers, bottlers, and retailers in terms of Porter’s (2008) five forces of competition and provides recommendations to Coca-Cola.

• Discussing the two forces of competition, which are threat of new entrants and threat of substitutes, and identifying the most significant of those forces for McDonald’s Corporation.

The second force that I will use to analyze the Trader Joe’s company is the “the rivalry among established competitors”. Factors to consider when looking at the rivalries in the industry are industry demand, cost conditions, and exit barriers. Trader Joe’s competitors include The Kroger Co., Whole Foods Market, and Safewat Inc., and all super markets in general (Llopis, 2011). With that said, there seems to be a high demand for what Trader Joe’s offers, private labels. This means that the intensity in the industry is less compared to an industry with a flat demand. Trader Joe’s does not have to fight hard to sell their products because of the service they have created. Trader Joe’s brand can be considered “diversity on steroids” which has somewhat of a cult following among consumers (Llopis, 2011). Consumers that want unique experiences with their food are able to do exactly that at

The competitive forces that shape company strategy are very important to consider in any organization. However, they are especially important when an organization’s forces fall closer to the “intense” side on the scale between “intense forces” and “benign forces.” “Almost no company earns attractive returns on investment” when forces are intense, like those in industries that sell luxury goods. (Porter, 2008). Yet, Robert Mondavi’s wineries have leveraged the five forces (barriers to entry, bargaining power of suppliers/buyers, threat of substitutes, and competitive rivalry) in order to maintain consistent profits. The five forces are discussed in detail below with the level of importance increasing throughout the descriptions.

As we begin to strategically plan for our business, it is important for us to take a deep dive into our competitive environment to understand where we are strong competitively and where we are weak competitively. An analysis of the forces driving industry competition using M.E. Porter’s Five Forces Model will assist us in determining where the power lies in a business situation as we begin to plan. We must understand how they work in our industry and how they affect our particular situation. Whatever the collective strength of these forces is, our job as the strategists of the organization is to

Five Forces model for a closer look at Kroger and the industry. Competition is a big threat and

Besides that, another internal weakness of PepsiCo is overdependence on Wal-Mart. Wal-Mart is the largest warehouse and supermarket. Unfortunately, more than 13% of PepsiCo business revenues come from Wal-Mart store chain. Wal-Mart has a significant buyer power and can easily dictate prices over PepsiCo leaving it with very small margins. On top, PepsiCo would lose 13% of its revenue and competitive advantage if the company loses Wal-Mart. Therefore, it can be understand that PepsiCo depends too much on the US market. This is one of the weaknesses that PepsiCo needs to overcome as the external factors such as inflation can also affect the company if the company cannot be independent.

Competitive rivalry exists between companies with the same or similar products/services and similar markets. Factors to be considered include:

The industry in which the company operates can be characterized as monopolistic competition. This is because, since there are no barriers to entry in this industry, threats of entry by potential entrants has made the industry some-what competitive. But the brand loyalty gained by the firms through massive advertising has rendered the firms within

PepsiCo’s corporate strategy had diversified, in 2008, the company into salty and sweet snacks, soft drinks, orange juice, bottled water, and ready-to-eat drink teas and coffees, purified and functional waters, isotonic beverages, hot and ready-to-eat breakfast cereals, grain-based products, and breakfast condiments. Strategies that kept their brands at the top were tied to new product innovation, close relationships with distribution allies, international expansion, and strategic acquisitions. A new element of PepsiCo’s corporate strategy was product reformulations to make snack

Porter 's Five Forces model (PFF) is a powerful instrument that can be utilized by companies to investigate its situation and identify its industry 's competitors. Analyzing industry will help any business in determining the competitive strength and weaknesses. By using PFF model, investors can gain valuable information regarding what the actual factors that affect the organization 's profitability (Evans & Neu 2008). This paper will analyze the Cola Wars case study based on the PFF model, and the primary components of soft drink industry. At the end of this paper, some recommendations will be given to Coca-Cola company to enhance its position in the market.

In the case of PepsiCo, analyzing the non-alcoholic beverage industry using Porter’s Five Force Analysis allows for assessment and adjustment to the strategic plans implemented to sustain competitive advantage. Porter’s Five Forces model helps outline the competitiveness of the current market through analysis of the industry rivalry between companies, supplier power, buyer power, threat of substitution, and the threat of new entries (Strategic Planning Tools, 2009). All of these forces affect not only a company but an industry. To begin, competitive rivalry within an industry analyzes the current competition within that market. When a market is competitive it “encourages companies to innovate, utilize production capacity, reduce costs and

The focused Corporation of the subject strategic proposal is PepsiCo Beverages North America. This company was originally founded in 1898 by a North Carolina druggist. PepsiCo Beverages North America (herein referred to as the ‘Company’) sells several brands of consumer beverages in the United States and Canada. The various beverage products span through carbonated soft drinks, juices, readymade teas, isotonic sports drinks, bottled water, and enhanced waters. Several established brands include Diet Pepsi, Mountain Dew, Gatorade, Tropicana products, Aquafina Water, Sierra Mist, Mug, Propel, Sobe, and Dole. Refer to the Competitor Analysis section for in depth product information and listings.