Porter 's Five Forces Model Essay

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.

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.

Question 1: Using Porter's 'five forces' framework, discuss the competitiveness of the global automobile market.

In an industry dominated by two heavyweight contenders, Coke and Pepsi, in fact, between 1996 and 2004 per capita consumption of carbonated soft drinks (CSD) remained between 52 to 54 gallons per year. Consumption grew by an average of 3% per year over the next three decades. Fueling this growth were the increasing availability of CSD, the introduction of diet and flavored varieties, and brand extensions. There is couple of reasons why the industry is so profitable such as market share, availability and diversity and brand name and world class marketing.

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.

The primary focus of this article and analysis is to provide detailed analysis using Porter’s Five Force Analysis to scale the United States largest manufacturers of automobiles. The creativity and dynamics of the industry overall make it one of the most interesting industries in the country. The competiveness of rival corporations, the sizes of the manufacturers and the innovation that is constantly changing make the industry all the more interesting. Throughout this assignment the discussion and analysis provide an in-depth look into the history and background of the American automotive industry, its characteristics, and the focus of its structure and framework using Porter’s Fiver Force’s Model. The research will aid in providing

Porter’s five forces is an effective tool used to analyse competitive markets. Porter’s five forces looks at different aspects which the business interacts with daily such as the supplier Power, Buyer power, competitive rivalry , the threat of substitute products and services and the threat of new entrants. These aspects reside in the macro-environment; therefore the business has no control over these aspects. However, KFC and Nando’s may influence these aspects and these aspects also influence the business. Problems experienced in the macro environment can contribute to the success of the business. This tool was developed by Michael Porter for analysing the industry within which the business operates. This tool is very useful as it looks at the industry within which the business is operating as a whole.

A model of pure competition implies that risk adjusted rates of return should be constant across all the firms and industries. However there are various economic studies have affirmed that different industries can sustain different levels of profitability part of this difference is explained by industry structure.

In the United States, The Soft Drink Manufacturing and carbonated beverages market is dominated by three major companies. They are Coca-Cola, PepsiCo, and the Dr. Pepper Snapple Group. These companies account for 66% of the total market shares Coca-Cola (28.6%), Pepsi Co Inc (26.8%), and the Dr. Pepper Snapple Group (8.6%). The carbonated soft drinks account for 65%, and noncarbonated beverages account for 35% of the industry market. The demand for soft drinks is driven by consumer tastes preferences and demographics. The United States soft drink manufacturing sector has 250 companies that have revenue combined with $40 billion dollars according to recent reports. The carbonated soft drinks global sales are equal to an estimate of $350 billion dollars per year. The global sales revenue includes nonalcoholic beverage industry as well as ice tea and bottled water.

This Michael Porter 's five force analysis of Starbucks coffee shows the intensity of the five strengths of the firm, and the bases of these powers. Starbucks coffee 's prosperity shows its viability in tending to these outside elements in its industrial surroundings. However, this five forces investigation highlights current industry conditions that force present and developing concerns significant to Starbucks Coffee 's business. Following are the five forces of Michael Porter 's model. These five forces have different intensities or powers on the basis of the market position of Starbucks.

The change in the consumers' taste is another key trend in the industry. Many substitutes to carbonated soft drinks gained more popularity among consumers. Exhibit 5 shows an increase in the consumption of bottled water from 11.8 in 1998 to 13.2 gallons/capita in 2000, and that of juices from 10 to 10.4 gallons/capita at the expense of

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

Then, in the late 1800s, the popular soft drink brands “…Root Beer, Dr. Pepper, Coca-Cola and Pepsi-Cola…” have emerged and competed against one another. By the time the development of modern life began to increase at a fast pace, manufactures had to change the formula for creating soft drinks. They began turning soft drinks into “…alternatives to alcohol and/or as stimulants.” rather than therapeutic medical drinks. “After World War II, the soft-drink industry became a leader in television advertising, the use of celebrity endorsements, catchy slogans, tie-ins with Hollywood movies, and other forms of mass marketing, particularly focusing on young consumers and emphasizing youth-oriented themes.” At that point, the soft drink industries started to gain huge attraction towards its consumers and tried to find new ways to raise the customer’s demand further. Such as providing healthy options like “…sugar-free and low-calorie diet sodas, beginning in the 1960s, and later, caffeine-free colas…” and they also began providing larger bottles at a low price. Such as the time when “…Pepsi challenged the industry leader by offering a twelve-ounce bottle for the same five-cent price as Coke 's standard

To further examine the failure of GM in Korea from industrial perspective, four dimensions of the Porter’s five forces model, which are the threat of new entrants, the threat of substitute products or services, the bargaining power of buyers and the rivalry among the existing competitors, are utilised to evaluate the failure of the case from the industry aspect. (Porter 2008).

The carbonated soft drink industry is highly competitive in all countries with Coca-Cola and Pepsi having almost 70% market share of the world. The quickly developing nature of the Chinese carbonated soft drinks market has given the aggressive scene a significant help. All areas developed somewhere around 1999 and 2003, and despite the fact that development in a few segments is backing off, especially in the carbonates area, there are a considerable measure of chances for organizations to help their pieces of the pie by spreading into developing areas. The five force competition model enables us to analyze the competition faced by the industry in a market.