LO3 Applying Porter’s Five Forces model evaluate the competitive forces of a given market

sector for an organization.

Need to apply Porter’s Five Forces for your selected company make sure that you need to classified
each force (high or low then explain why ).then according to results need to Devise/ innovate
appropriate strategies to improve competitive edge and market position for company e.g. (cost
leadership, Differentiation, focus strategies)

Porter’s Five Forces Analysis of Coca Cola

Porter’s five forces model, named after its developer Michael E Porter, is a strategic
analysis tool that helps to analyze some critical forces affecting the level of competition in
an industry. This model has acquired great popularity and fame over time and is used
widely across the business world for evaluating the profitability and attractiveness of
various industries. The five forces that this model evaluates are a part of every industry
and every market. Managers can form strategies based on an analysis of these forces to
increase the profitability of their business.

This is a Five Forces analysis of the soda giant Coca-Cola. Coca-Cola is the leading brand in
the beverages sector and has a global presence. Its only major competitor is Pepsi.

1. The entry of New Entrants: (low)

New entrants in Beverages - Soft Drinks brings innovation, new ways of doing things and put
pressure on The Coca-Cola Company through lower pricing strategy, reducing costs, and
providing new value propositions to the customers. The Coca-Cola Company has to manage
all these challenges and build effective barriers to safeguard its competitive edge.

The entry of newcomers to the market represents low competition due to the strength of
Coca-Cola and its acquisition of 48% of the beverage market in addition to its possession of
high capital and due to its distinguished products and diversification in products.

2. Bargaining power of buyers: (low)

The bargaining power of individual customers in the case of Coca-Cola is (low). Individual
customers generally buy small volumes and they are not concentrated in specific markets
either. However, the level of differentiation between Pepsi and Coca-Cola is low. Mostly they
sell similar flavors. Switching costs are not high for customers and still, the two brands enjoy
high brand loyalty. The customers of Coca-Cola are not priced sensitive. Backward
integration is not a possibility for the customers whether it is an individual customer or a
large retailer. If a retailer acquires some bargaining power then it is only because it buys in
large volumes. Still, overall the customers’ bargaining power is weak.

3. Bargaining power of suppliers: (low)

The bargaining power of suppliers of Coca-Cola is weak. It is so because the number of

suppliers is high and the switching costs for Coca Cola (low). While Coca-Cola can easily
switch from one supplier to another, it is not possible for any supplier to switch away from
 Coca-Cola as easily. That can lead to losses for any of the suppliers. While there are several
suppliers, the size of individual suppliers is small or moderately large. Moreover, forward
integration is a distant possibility for most of its suppliers. Even if there are no substitutes
for raw materials like sugar, the number of suppliers is still high. So, the main factors that
have come to light regarding the bargaining power of suppliers are:

-A large number of suppliers.

-Small to the moderately large size of individual suppliers.
-Forward integration difficult for the suppliers.
-Switching costs for Coca Cola not so high.

4. The threat of substitutes: (High)

The threat of substitutes:

The main substitutes of Coca-Cola products are the beverages made by Pepsi, fruit juices,
and other hot and cold beverages. The number of substitutes for Coca-Cola products is
(high). There are several juices and other kinds of hot and cold beverages in the market. The
switching costs are low for the customers. Apart from it, the quality of the substitute
products is also generally good. So, based on these factors the threat from substitutes is
strong.

5. The force of rivalry among competitors: (High)

There are two major players in the soda industry and they are Coca-Cola and Pepsi. There is
intense rivalry between the two major players. There are a few smaller players too but they
do not pose a major competitive threat. The two main players are near the same size and
they have similar products and strategies. The level of differentiation between the two
brands is also low and therefore the price competition is intense. People have already heard
of the cola wars. So, the level of competitive rivalry between the existing firms is a strong
force.

Apply balance-score card for selected company that achieved strategic objectives and
provide quality with fewer resources.

Goals Measure indicators Action

Financial cards -Increase -Increase profitability -Financial -Promotion partnership
profitability by 10% Statements with new shareholders.
-Increase value of -By end of 2021 -Balance sheet
stokes
Customer cards -Increase -Increase rate of daily visits -Count of -Develop new services
customer of customers by 20% customers and products
satisfaction , -Increases market share by -Sales promotions
develop new 25%
 products of -Survey for customers
services , ideas
responding to
customer
complaints,
improving service
or selling
Internal process -Use of -Start within 2 months. -Projects reports -Connect with software
information Customer service company to develop
technology report. company system.
-Use new system
update for
website.
Growth & learning -To have -Replace 30% of salesperson -Contracts of -Training and
professional sales employees Development
forces -Hire some of sales
with master degree

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