Porter's Five Forces in Pepsi

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),

An industry product can be substituted by a substitute product which has the same or similar function by a different means. A substitute can limit industry profitability and growth. Porter (2008) gives several key elements on determining the threat.

The threat that substitute products pose to an industry's profitability depends on the relative price-to-performance ratios of the different types of products or services to which customers can turn to satisfy the same basic need. The threat of

Threat of Substitute Products and Rivalry Among Competitors- these two forces are closely related. In marketing, the word “product” means more than a good, service or idea. Product is a broad concept that also encompasses the satisfaction of all consumer needs in relation to a good, service or idea. All planning strategies have the goal of creating a sustainable competitive advantage in which other companies simply cannot provide the same value to their customers that the firm does, no matter how hard they try. When a national chain retailer has a competitive advantage with a product, it must take steps to safe guard that product to stay different and unique in the marketplace. For example, Macy’s is the exclusive retailer for Martha Stewart home lines and is currently in a legal battle with JCPenney who announced that they will carry that line as well.

2. How Porter's Five Forces of Competition impact the company Porter set out his famous Five Forces model in chapter 1 of his 1980 Competitive Strategy: Techniques for Analyzing Industries and Competitors, which has now become the dominant paradigm for the "Structural Analysis of Industries." The model places supply chain forces on the horizontal access and market structure vertically above and below industry competition, which they all point to as the center of potential profitability (Hitt, Ireland and Hoskisson,

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

Porter’s Five Competitive Forces Analysis is a framework developed by Michael E. Porter of Harvard Business School for study of industry analysis by analyzing five competitive forces which define industry and its business strategy. These five competitive forces determine the competitive advantages, disadvantages and attractiveness or profitability of industry.

Porter’s Five-Forces Model of Industry Competition is the most widely utilized tool to evaluate the competitive environment (Dess, Lumpkin, Eisner, & McNamara, 2014). Dess, Lumpkin, Eisner & McNamara (2014) define Porter’s model

Porter’s Five Forces Model is one of the most used tools to analyze an industry and help to develop a business strategy. Michael E Porter introduced the model in 1979, and published by Harvard Business Review under the name “How Competitive Forces Shape Strategy”. The model uses five forces that have been identified to categorize an industry as intensely competitive or not competitive at all and this will then determine the attractiveness of the market. An attractive industry with high profits will have high barriers to entry, weak supplier and buyer bargaining power, few substitute products and low competition. An unattractive industry will have the mirror image. Usually there are not these two outcomes of a porters five forces analysis.

Successful use of the Porter Model Analysis includes identifying the sources of competition, the strength and likelihood of that competition existing, and strategic recommendations for the action a company should take to develop barriers to the various forms of competition (Prahalad and Gary, 1990). With the realization about intensity and power of competitive forces, organizations can develop options to influence them in a way that improves their own competitive position. The result could be a new strategic option, e.g. a new positioning; differentiation for competitive products of strategic partnerships.

Michael Porter 's five forces model is in light of the comprehension that a corporate philosophy should meet the opportunities and dangers in the affiliation 's external surroundings. Especially, forceful strategy should base on a cognizance of industry structures and the way they change.

There are some limitations to the Porter model. The five forces determine a company profitability, but at the heart of the industry are rivals and their strategies (http://www.coursework4you.co.uk). Additional limitations on the model in today's market environment as it supposes static market structures. The model was originally based on the eighties with strong competition and stable market structures, but it is not able to assume new business models and adaptability of the industries. Porter's model is not correct because if every company adopts these strategies, none would be able to have a competitive advantage. Some do not fully agree with Porter's theory emphasizing that it is attractive to management because it gives 'some illusion of control, legitimacy and security in the face uncertainty. The strength of may change trough time due to factors organizations cannot control. In such circumstances, it is crucial managers recognize opportunities and threats when

The second force is the threat of new entrants. Entry barriers reduce the threat of new entrants and firms will have less competition. Barriers of entry include government induced barriers, patents and proprietary knowledge, high investment costs, consumer switching costs, and economies of scale (Grant, 2013). These barriers of entry will protect the current firms and discourage new firms from entering the industry. The third force is the threat of substitutes. When there is a cheaper alternative product that satisfies the needs of the consumer, the consumer will likely purchase the substitute. The firms will have to compete with the substitutes in order to sell their products. However, by building brand loyalty and increasing product quality, companies can decrease the attractiveness of substitutes. Therefore, firms will not have to compete basely on price. The fourth force is the bargaining power of buyers. When the buyer power is high, such as bulk buyers or concentrated buyers, they are able to heavily influence the firms. If the firm does not follow the buyers’ wishes, then the buyer can easily switch to another firm and original firm loses profit. In addition, if the buyers can easily backward integrate, they can threaten to the firms to meet their prices. Therefore, the firms will have to compete to attract the buyers. The fifth and final force is the power of

The threat of substitutes: where it refers to substitute product as those that are available in other industry which can also fulfil the need and want of the consumers. It can affect competition in an industry by placing an invisible ceiling on prices which companies within the industry can charge, due to the fact that if the cost of substitute is low then the consumers will tend to purchase substitutes, therefore limiting the prices that a company can place on certain items to gain maximum profit. For example, lemonade can be substituted for a soft drink. Generally, competitive pressures arising from substitute products increase as the relative price of substitute products declines and as consumer 's switching costs decrease.

This is probably the most overlooked, and therefore most damaging, element of strategic decision making. It's imperative that business owners (us) not only look