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coca cola - students copy.docx

coca cola - students copy.docx

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Published by Nicholas Jojy

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Published by: Nicholas Jojy on Mar 24, 2013
Copyright:Attribution Non-commercial


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CASE STUDY Analysis of Porters Five Force Model Coca Cola

Soft Drink industry needs huge amount of money to spend on advertisement and marketing. In 2010 Pepsi, Coke and their Bottlers invested approximately $2.58 billion. This has resulted in higher brand Equity and strong customer loyalty base all over the globe. The industry is well known as a duopoly with Coke and Pepsi as the companies competing. Both the players have a majority of the market share. However since the Switching costs of this industry is very low, consumers tend to shift easily. The industry is enriched with enormous statistics of substitutes such as water, tea, beer, juices, coffee etc presented to the end-consumers. But all the suppliers of these substitutes need massive advertising, brand equity and brand loyalty to make sure that the brand is effortlessly accessible to the consumers. Perceived price/value in this industry is very low because all products are comparatively the same and are only differentiated by promotional activities. The Industry is also known to providing significant margin to retailers. For Eg, some retailers enjoy a margin of 20-30%. These margins are reasonably enough for retailers to entertain the existing Players. Moreover in this industry, manufacturers have franchise contracts with their presented bottlers. These contracts forbid bottlers from taking new competing brands for similar products. The only alternative is that new entrances build their bottling plants, which will need intense capital and exertion. Most of the raw materials desirable to manufacture soft drinks are basic merchandise such as flavor,colour, caffeine,sugar,packaging etc. These raw materials being basic commodities are easily accessible to manufacturers. Switching costs to suppliers is very low. Threat of forward integration is very low in this industry because manufacturers of the soft drinks need huge manufacturing plants, bottling networks, strong distribution network and best shelf space


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