Porter’s Five Forces in Pepsi

1790 WordsMar 19, 20098 Pages
Introduction The model of the Five Competitive Forces was developed by Michael E. Porter in his book „Competitive Strategy: Techniques for Analyzing Industries and Competitors“ in 1980. Since that time it has become an important tool for analyzing an organizations industry structure in strategic processes. Porters model is based on the insight that a corporate strategy should meet the opportunities and threats in the organizations external environment. Especially, competitive strategy should base on and understanding of industry structures and the way they change. Porter has identified five competitive forces that shape every industry and every market. These forces determine the intensity of competition and hence the…show more content…
The consolidation of bottling networks by both the Coca-Cola Co. and PepsiCo has helped to reduce retail price competition; after several years of intense pressure, softdrink prices have risen steadily since mid-1999. While raw material costs appear more challenging than in recent years, most companies are not expecting substantial increases in their overall cost structure. Year to date the S&P Soft Drink Index fell 3.8% versus a 1.4% rise in the S&P 1500. During 2002, the industry index significantly outperformed the broader market with a decline of 8.0% versus a 22.5% decrease in the S&P 1500. Performances in recent months has been affected by volatility in the shares of Coca-Cola as investors question whether drink volumes and earnings will resume their historical growth patterns. Shares of PepsiCo have also experienced some weakness on concerns of slowing growth. We however expect the industry to outperform the market in the near term with rebounds in growth and margin trends. Sales and earnings for PepsiCo in 2003 are expected to show positive gains, benefiting from favorable material costs and retail pricing in the U.S Domestic unit sales. Volumes in 2003 should benefit from increased penetration into non-traditional distribution channels and growing consumer demand for non- alcoholic

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