Conduct an industry analysis using porters five forces model
and identify action implications in each for Coca-Cola India. PORTERS FIVE FORCES MODEL Threat of new entrants Power of suppliers Power of buyers Product substitutes Intensity of rivals.
TH!"T #$ %!& !%T"%T'(
Medium Pressure. Threat of new entrants was not that much to Coca-Cola as both Pepsi and Coca-Cola constituted a major entry barrier to the entrants. It was very expensive to launch a new brand, create an imae aainst the stron competitors and sustain it. Thouh, there were few local brands established and they developed and promoted their brands but still couldn!t made it up to the level that Coca-Cola would et affected by it and constituted around "# percent of the mar$et share. The distribution system was another most solid barrier, as reachin to every outlet and small cities weren!t an easy tas$. The investment in bottles as well as other e%uipment as chillers, vissicoolers was hih. The transportation costs plus vehicles was also a turnoff for new entrants. Co$e and Pepsi have a lon history of heavy advertisin. This ma$es them dominate with their stron brand name and loyal customers all over the world. This ma$es it virtually impossible for a new entrant to match this scale of share in this mar$et. &ew entrants to an industry typically brin to it new capacity, a desire to ain mar$et share, and substantial resources. They are threats to an established corporation. The threat of entry depends on the presence of entry barriers and the reaction that can be expected from existin competitors. 'n entry barrier is an obstruction that ma$es it difficult for a company to enter an industry. &ew entrants are not a stron competitive pressure for the soft drin$ industry. Coca-Cola and PepsiCo dominate the soft drin$ industry with their stron brand name and reat distribution channels. In addition, the soft-drin$ industry is fully saturated and rowth is small. This ma$es it very difficult for new, un$nown entrants to start competin aainst PepsiCo and Coca-Cola. 'nother barrier to entry is the hih fixed costs for warehouses, truc$s, and labor, and economies of scale. &ew entrants cannot compete in price without economies of scale. These hih capital re%uirements and mar$et saturation ma$e it extremely difficult for companies to enter the soft drin$ industry. (ne of the strateies that PepsiCo has utili)ed to counteract the threat of new entrants is to devote sinificant funds toward its mar$etin campains. In order to compete with PepsiCo a new company would need lare amounts of capital to satisfy the hih fixed costs and to invest in the necessary advertisin campains that create brand awareness. )#&! #$ '*))+I!'( *ow pressure The number of bottle manufacturer was ade%uate, but not enouh, due to which the barainin power amon the suppliers varied a lot. The supply of coolin e%uipments! +uar was a vital item, so the supply of suar in bul$ and loo$in for its delivery on time ,ater was a major problem as well as it focused on the %uality and suppliers of mineral water plus the incurrin cost to it. 'dvertisin was one of the major competitive techni%ue and was the major revenue earnin shares stratey for the companies -both Coca-Cola and Pepsi., as it covered /# to 0# percent of revenue. 1esearch aencies were also very important. The barainin power of commodity inredients suppliers is low. Most of the raw materials needed to produce concentrate are basic commodities li$e color, flavor, caffeine or additives, suar etc. 's the producers of these products are enerally providin thesame products, they have lower power over the pricin propotions. +uppliers to PepsiCo are bottlin e%uipment manufacturers and secondary pac$ain suppliers. PepsiCo does its bottlin throuh its subsidiary, the Pepsi 2ottlin 3roup. +ince PepsiCo owns a majority interest in the Pepsi 2ottlin 3roup, this particular supplier does not have much barainin power. )#&! #$ ,*-!'( *ow pressure The buyers here were Institutional buyers and retail outlets. Institutional buyers were the one who bouht and stoc$ed at hotels and restaurants. The retail outlets stoc$ed for sale to consumers -relatively small %uantities. and accounted for around 4/5 of total business -power of buyers.. It built up very stron association with 'merican way of life. 6or ma$in its brand imae stroner, it announced to re-introduce its brand and chane its 77 years old brand of containin more suar to less suar, which was actually not a ood idea for the company and they bean to stic$ to Coca-Cola classic as it had a stron firm imae. )#.*CT '*,'TIT*T!'( Medium to 8ih pressure +ubstitute products are those products that appear to be different but can satisfy the same need as another product. +ubstitutes limit the potential returns of an industry by placin a ceilin on the prices firms in the industry can profitably chare. To the extent that switchin costs are low, substitutes may have a stron effect on an industry. The product substitutes to Coca-Cola were juices that could be easily carried away with no brea$ae ris$ and healthier as made from fresh fruits. (ne was 6rooti, assurin 9no water or doubtful purity: plus safe, enjoyable, tasty and healthy. 'nother was 9onjus:, no different from juices extracted from fresh fruits. The important substitute for soft drin$s was 9bisleri: -mineral water.. 'nother was 9bailey:. I%T!%'IT- #$ I/"+-( 8ih Pressure Currently, the main competitor is Pepsi which also has a wide rane of beverae products under its brand. 2oth Coca-Cola and Pepsi are the predominant carbonated beveraes and committed heavily to sponsorin outdoor events and activities The intense competition that Coca-Cola faced from is Pepsi. The intensity of the competition has been very aressive every time tryin to rab the hihest share in the mar$et. The biest strenth Coca-Cola had aainst Pepsi was its array of brands powerful in each sement, where Pepsi!s non-cola brands were fairly wea$. Pepsi chose to adapt to Indian needs and preferences.it associated its brand with festivals, events, occasions etc. it adopted an aressive campain taretin the youth and later positioned itself as 9thins for the youth:, which as an anti- official aspiration for youth ended up to be a hue success. Coca-Cola outclassed itself in terms of %uality aainst Pepsi and other soft drin$s. The above mentioned points clearly show the cut-throat, nec$ to nec$ competition and intensity amon the rivals. ;uestion <= >evelope a set of recommendations for Coca-Cola India. ". Coca cola should always maintain it?s uality standards. @. Invest more in research and developement. A. 'dopt more locally responsive flavors of drin$. <. 'ssume control of more bottlin subsidiaries. /. Bncompromisin commitment to product safety and %uality in India and everywhere they offer their beveraes around the world. 0. ,e support the adoption of strinent, science-based rules by the Indian overnment reardin levels of contamination in soft drin$s. The rules should be based on sound and validated testin methodoloies. ,e continue to wor$ with relevant overnment bodies, industry associations, non overnment orani)ations -&3(s. and the scientific community to develop and finali)e criteria and associated testin methods for contamination in soft drin$s. 4. Co$e is a mature product, so your tas$ is to penetration into new mar$ets. My stratey recommendations for Coca Cola subsidiary are constrained by limited $nowlede. In order to develop a winnin stratey in India, the main objective is to establish the brand name. The best stratey places product of uniform %uality in every corner of India. Conditionally, Coca-Cola must accept the costs and loistical challenes of distributin to every conceivable mar$et. +ellin costs may be hiher in remote reions, but the %uality product must be available, and it must be reasonably priced. 'dditionally, Co$e can loo$ to the competition for clues as to what products they should phase out, so that they can utili)e plant capacities for stron sellers and new innovative offerins. That said, I thin$ that the best differentiation stratey is brand reconition, which re%uires promotionC therefore, the sponsorship of local, reional, and national events should continue. +imilarly, the sponsorship of sports teams is effective in India, and product endorsement by well-$nown athletes is yet another way to strenthen the connection between the product and the consumer. In conclusion, the Indian economy presents the best possible scenario for producers iven that the people enjoy increasin personal wealth. Therefore, the best stratey employs a promotional stratey that leads people to believe that Co$e products are simply better. D. &owadays, environmental chane is rapid. Coca -Cola should be sensitive of any new trend and position itself as a uni%ue brand in order to $eep its competitive advantae. 7. Coca- Cola should provide industry leadership in the health and wellness area. It should produce different $inds of products for different sements of the mar$et. In baby boomers! mar$et, Coca- Cola should focus on mar$etin tea and water beverae which contain less sodium and suar. In youner eneration mar$et, besides sport drin$ and enery drin$, Coca -Cola can produce oranic beveraes for youner people. "#. Coca-Cola!s should maintain its production techni%ues so well developed that it costs a fraction of the sellin price to manufacture their product, resultin in hih profit marins. "". ,ith consumers more focused on %uality, includin caloric content and allerens Coca Cola will have to reformulate many of their products to increase nutritional value or eliminate undesirable inredients. >oin this while maintainin existin product attributes for flavor and price can be a formulation challene. "@. Create more formula aility. "A. ' djust formulation to maintain consistency in their final products. *i$ewise, disruptions caused by weather and eopolitical issues are not new. ,hat!s different today is the business context. Consumers and retailers have hiher expectations for product %uality, availability, and price performance. The onus is on the 6E2 company to create formulas that better mitiate the issues of inredient variability and availability based on seasonality and unpredicted disruptions. 6ormulas also have to address the need for products to maintain their nutrition and taste over a loner shelf life. "<. Continually drive down costs. ,ith the upward trends of beverae commodity, production, and distribution costs and the downward pressure on pricin from retailers, Coca Cola can turn to formulation to produce reater efficiency and lower costs. "/. Minimi)e environment impact. More intellient formulation has a role to play in complyin with the rowin focus on food safety as well as the need to comply with environmental reulations li$e minimi)in water usae and dischare. "0. 2y means of a combined policy of heavy pull throuh massive advertisin and heavy push throuh a well-trained sales force and throuh partners in the distribution system who were rewarded with hih consumer demand and restricted by contracts from pushin competin products, Coca-Cola had created a brand. "4. The company should move in a vertically interated manner. Coca Cola did captain a vertical system that shepherded the product to the consumer and that $ept other products away from that consumer. If fountain opera- tors had Coca-Cola dispensers on their counters, they were supposed to sell only Coca-Cola throuh them. If bottlers had Coca-Cola franchises, they were prohibited from bottlin any other cola. "D. Coca-Cola should have the resources and the determination to $eep the site evolvin as it tests what components wor$ best for its audience. "7. Coca Cola should maintain it?s international presence. ,hen it comes to international presence, Coca-Cola easily trumps Pepsi. Coca-Cola?s impressive lobal footprint puts it in a better position to benefit from stron rowth across the lobe, particularly in the developin world. 6urthermore, because Co$e enerates so much of its revenue abroad, it stands to benefit reatly from the continuin wea$enin of the dollar as sales denominated in forein currencies are suddenly worth more dollars bac$ home. @#. Coca Cola should try to build hih brand e%uity to let the company enjoy a number of advantaes i.e. reduce mar$etin costs because of hih level of consumer brand awareness and loyalty.