Industry Analysis Porter Five Forces

Threat of new Entrant (Low)

Determinants Defining Question Assess the power of Buyers
Circle one of the following.
1 = low, 5 = high, or N/A if it
doesn’t apply to your
industry.
Economies of Does successful entry require that 1 2 3 4 5
Scale and companies have significant N/A
experience economies of scale or experience

Brand Identity Do new companies need to spend 1 2 3 4 5

heavily on brand identification? N/A
Product Do new entrants need to differentiate 1 2 3 4 5
Differentiation by spending heavily on advertising, N/A
customer services or product
differences to over come existing
customer loyalty?
Switching Costs Does the buyer have to pay to switch 1 2 3 4 5
from one supplier product to N/A
another?

Capital Required Does the new company need to 1 2 3 4 5

invest large financial resources? N/A
Access to Does the new comer have access to 1 2 3 4 5
Distribution distribution channel for product or N/A
services?
Cost advantage Established companies have cost 1 2 3 4 5
advantages over new rivals. N/A

Government Government policies can help to 1 2 3 4 5

policies preserve or limit competition. N/A

(Threat of new Entrant of High)

 Intensity of Rivalry (High)
Determinants Defining Question Assess the power of
Buyers
Circle one of the
following.
1 = low, 5 = high, or N/A
if it doesn’t apply to your
industry.
Industry growth How slowly or quickly is the 1 2 3 4 5
industry growing? Intense fight N/A
among rivals for market share

Fixed Cost Does your business have a high 1 2 3 4 5

fixed cost? N/A
Product Is your product commodity? The 1 2 3 4 5
Differentiation closer the product is to being a N/A
commodity the higher intensity of
rivalry.

Switching Costs How costly is it for your buyer to 1 2 3 4 5

switch between providers? N/A

Intermittent Is your industry an important 1 2 3 4 5

Overcapacity customer the supplier group? N/A

Brand Identity Is branding critical for your 1 2 3 44 5

Rival’s success? Brand N/A
identification by buyer reduces
the threat of rivals.

Concentration and Are there a large number of firms 1 2 3 4 5

balance of equal size and power, all N/A
chasing after the same customer?

Diversity of Are there competitors with 1 2 3 4 5

competitors different strategies and frame of N/A
reference? When competitors are
diverse it is more difficult to
establish the rules of game
(Intensity of Rivalry are high)
 Bargaining power of Buyer (High)
Determinants Defining Question Assess the power of Buyers
Circle one of the following.
1 = low, 5 = high, or N/A if
it doesn’t apply to your
industry.
Concentration Buyer is fragmented because to 1 2 3 4 5
cosmetic covers all Demographic N/A
segments.

Product Cost Does your product buyer’s purchase 1 2 3 4 5

versus Total represent a significant fraction of the N/A
Purchases buyer’s cost? If so, buyer bargaining
power is typically high.

Product Product is standard and 1 2 3 4 5

Differentiation undifferentiated or differentiated N/A

Switching Costs Switching cost are high with related 1 2 3 4 5

to Brands or Low. N/A

Backward Can they make what you make 1 2 3 4 5

Integration themselves? N/A

Impact on Quality/ Is the product you offer important to 1 2 3 4 5

Performance the quality of the buyer’s product or N/A
services?

Buyers Does the buyer have complete 1 2 3 4 5

Information information on the product he may N/A
purchase?

( Bargaining power of Buyer is High)

 Bargaining power of Suppliers (High)
Determinants Defining Question Assess the power of
Buyers
Circle one of the
following.
1 = low, 5 = high, or N/A
if it doesn’t apply to your
industry.
Concentration Are you supplier are fragmented 1 2 3 4 5
or highly concentrated? N/A

Presences of Are there any substitutes for your 1 2 3 4 5

Substitute inputs supplier products? N/A
Product Product is standard and 1 2 3 4 5
Differentiation undifferentiated. N/A

Switching Costs How costly is it for you to switch 1 2 3 4 5

from suppliers product? N/A

Importance Is your industry an important 1 2 3 4 5

Relative to customer the supplier group? N/A
Customer.

Forward Can the supplier produce the 1 2 3 4 5

Integration product you make? N/A

Impact on Is your supplier product essential 1 2 3 4 5

Quality/ to the quality or performance of N/A
Performance your business?

( Bargaining power of Suppliers is Low )

 Threat of substitute (Low)

Determinants Defining Question Assess the power of

Buyers
Circle one of the
following.
1 = low, 5 = high, or N/A
if it doesn’t apply to your
industry.
Price performance Does the substitute offer a better 1 2 3 4 5
price performance? N/A
Switching Cost Is it costly for buyer to switch to 1 2 3 4 5
the substitute product? N/A

(Threat of substitute is High)

Industry analysis Porter Five forces

Threat of new Entrant (High Barrier)

Barrier is high to enter in this industry. Pepsi and coke are already have monopoly in the
market and are covering the max market and loyal customer. Coke and Pepsi have also
done agreement with their supplier and franchises which restricted them from. taking on
new competing brand for similar product. Another reason is that high investment is
required for Plant, R&D, Marketing which is not easy by new companies.

Intensity of Rivalry.( High)

Intensity of rival is very high in this industry. Competition is very high in beverage
industry and coke has to face many challenges and competitors in this industry. Coca-
Cola, PepsiCo. And Cadbury Schweppes are the largest competitors in this industry.
Brand name loyalty is another competitive pressure. Customer Loyalty Leaders Survey
shows the brands with the greatest customer loyalty in all industries. Diet Pepsi ranked
18th and Diet Coke ranked 47th as having the most loyal customers to their

Bargaining power of Buyer ( High)

The soft drinks companies distribute the beverages on are mainly large grocers, Discount
stores and restaurants. The bargaining power of the buyers is very evident and strong.
The interesting shift in buyer demand because of increased demand for healthy choices
has driven the market share of substitute drinks. Consumers are focusing more on healthy
choices and buying healthy drinks from "high end specialty stores. The bargaining power
of the buyers is very evident and strong. Large grocers and discount stores buy large
volumes of the soft drinks, allowing them to buy at lower prices. Restaurants have less
bargaining power because they do not order in large volume. However, with the number
of people drinking less soft drink, the bargaining power of buyers could start increasing
due to decreasing buyer demand.

Bargaining power of Suppliers ( low)

Supplier power is weak. Coca-Cola does not do any bottling, the company owns about 36
percent of Coca-Cola Enterprises. The rest of the Coca-Cola Enterprises is a publicly
traded company. This is the largest bottler in the world (The Coca Cola Company 2006).
Since Coca-Cola owns the majority of the bottler, it looks like that particular supplier
does not hold much bargaining power. Most of the raw material needed to use
concentrate are basic commodities like color, flavor, caffeine, sugar, packaging
essentially these are basic commodities. The producer of this product has no power over
the pricing hence the supplier power is low.

Threat of substitute ( High)

Large number of substitute is available for coke beer bottled water, sports drinks, Coffee
and tea. Etc. Due to the health awareness increasing and people are more conscious to
healthy drinks like bottled water and energy drinks, juices etc. These are advertised as
healthier than soft drinks. But instead of all this coke is also diversify his business by
offering the substitute as well in order to protect them self from their rivals.
SWOT analysis

Strength.
• Product line of 400 brands
• Global expansion over 200 countries.
• Brand recognition.
• Partnership with sports event organizers
• Strong leadership team.
• Joint venture of coca cola with Nestle.
• Average customer purchases increased by 18.54%
• Debt to total asset ratio decline

Weakness
• Product line is limited to beverages
• Failed in acquisition of Quaker Oats hinders long term growth.
• Inventory turnover decreased by 13.29%
• Return on equity down decreased
• Negative publicity in India.
• Lack of management willingness to place foreign products in to American market.

Opportunity
• Bottled water consumption are increasing
• Catering to Health Consciousness of People
• Acquisitions of smaller players
• Energy drinks sale are increasing
• Entering into snacks business
• Strong financial and assets support available worldwide to take
• financing for expansion
• Expansion by taking over Cadbury division or product line

Threats
• The rising cost of raw material and fuel/ Electricity
• Low vale of Dollar
• Government policies may hurdle in expansion
• Pepsi is more diversified offering beverages and product offerings
• Hurting products containing sugar & sugar-substitute based drinks
• Government policies - for disclosure of health warning
• Ban in public schools due to obesity issues
• Availability of purified water
• Lack in snacks business
 IFE Matrix

Strength: Weight Rating Weight Score

1. Product line of 400 brands 0.09 4 0.36

2. Global expansion over 200 0.09 4 0.36
countries.
3. Brand recognition. 0.05 4 0.20
4. Partnership with sports event 0.09 4 0.36
organizers and MacDonald
5. Strong leadership team. 0.05 4 0.20
6. Joint venture of coca cola with 0.05 4 0.20
Nestle.
7. Average customer 0.09 4 0.36
purchases increased by
18.54%
0.05 3 0.15
8. Debt to total asset ratio
decline
0.05 4 0.20
Locations in the world

Weakness: Weight Rating Weight Score

10. Product line is limited to 0.09 2 0.18
beverages 0.05 2 0.10
11. Loss in acquisition of
Quaker Oats hinders long term
growth. 0.05 2 0.10
12. Inventory turnover
decreased by 13.29% 0.05 1 0.05
13. Return on equity 0.05 2 0.10
decreased
0.05 2 0.10
14. Negative publicity in
India.
15. Lack of 0.05 1 0.05
management willingness
to place foreign products
in to American market.
16. Website

Total 1.00 3.07

 EFE Matrix

Opportunity: Weight Rating Weight Score

1. Bottled water consumption are 0.06 4 0.24

increasing
2. Catering to Health 0.10 3 0.30
Consciousness of People
3. Acquisitions with smaller 0.03 2 0.06
players
4. Energy drinks sale are 0.06 3 0.18
increasing
5. Entering into snacks business. 0.03 3 0.09
6. Strong financial and assets 0.04 3 0.12
support available worldwide to
take financing for expansion
0.04 4 0.16
7. Expansion by taking over
Cadbury division or product
line

Threats: Weight Rating Weight Score

9. The rising cost of raw material 0.10 3 0.30
and fuel/ Electricity 0.05 2 0.10
10. Low vale of Dollar
11. Government policies may 0.06 2 0.12
hurdle in expansion 0.10 3 0.30
12. Pepsi is more diversified
offering beverages and product
offerings
13. Hurting products containing
sugar & sugar-substitute based 0.10 4 0.40
drinks
14. Government policies - for
0.06 3 0.18
disclosure of health warning.
15. Ban in public schools due to 0.05 1 0.05
obesity issues 0.08 3 0.24
16. Availability of purified water
17. Lack in snacks business 0.04 3 0.12

Total 1.00 2.96

 CPM

Coca cola Pepsi Cadbury

Critical Success Weight Rating Score Rating Score Rating Score
Factor

Marketing 0.10 3 0.3 3 0.3 3 0.3

Market Share
0.10 4 0.4 3 0.3 2 0.2
Global Expansion
0.15 4 0.6 4 0.6 2 0.3
Customer Loyalty
0.15 4 0.6 4 0.6 3 0.45
Financial Position
0.12 4 0.48 4 0.48 3 0.36
Product Quality
0.10 3 0.3 3 0.3 3 0.3
Price
Competition
0.12 3 0.36 3 0.36 3 0.36
Management
0.11 3 0.33 3 0.33 3 0.33
Distribution
0.05 4 0.2 3 0.15 2 0.1
Total 1 3.57 3.42 2.7