Coca Cola - Porter's 5 Force Model

Please Conduct a Porter’s 5 forces analysis for your current industry (or an industry you’d like to work in the future).

One of the biggest threats to a business that being either a startup or established, small or big, is the competition. The five forces model has a very powerful and important implication for strategy and competitive advantage. (Rothaermel, 2017). Competition is more than just creating an economic value. A company must also capture a share of the value it has created to sustain a competitive advantage. Most importantly one need to consider how are the action of their rivalries going affect their current situation or future planning.

Apparently, industry structure is what ultimately drives competition and profitability, not whether an industry produces a product or service, is emerging or mature, high tech or low-tech, regulated or unregulated. (Martin, 2017). In porter’s five forces model, competition is explained in a very detailed way, beyond the firm’s closest competitors. Porter has included understanding both the competitive forces and the overall industry structure as important for effective strategic decision-making. The five forces basically measure the competitiveness of the market deriving its attractiveness.

Coca-Cola is interesting company for analyzing the five forces model in a very specific way. Especially the Coca-Cola Company in relationship to its Coca-Cola brand.

1. Threat of New Entrants

Threat of new entry is the risk of potential competitors entering an industry. (Rothaermel, 2017). There has been slightly medium pressure with this one. This force examines how easily or difficult it is for the competitors to join the marketplace. The easier it is for the competitor to join the marketplace, the greater the risk of a business’s market share being depleted. (Martin, 2017). The main barriers for the competitors to enter a market would include cost advantages, access to inputs, economies of scale and well-known brands.

Well, the entry barriers are relatively low for the beverage industry, mainly because there would be no consumer switching cost and zero capital requirements. (“Porter’s Five Forces In Action: Sample Analysis of Coca-Cola”, n.d.). There has been increasing amount of new brands appearing in the market with similar prices that of Coke products or even in the lower price. Mostly, customers aren’t actually loyal to the products but loyal to the price of the product.

Although, in advantage of Coca-Cola, it is not only the beverage but it is the brand and it has been holding a very significant market share for a very long time and there are loyal customers who wouldn’t just switch to the new brand, because of the risk of trying.

2. Threat of substitute Products

Threat of substitute product must be the threat that’ll have or has a huge affect on an existing company. Substitute would usually mean the very similar product that will do the job just all right but with the lesser price. The substitute offers an attractive price-performance trade-off. (Rothaermel, 2017). Sometimes, in addition to that substitute might even offer higher value proposition at similar or even lower price. The threat of substitutes are encouraged by switching costs, both immediate and long-term, as well as buyer’s urge to change.

There have been many kinds of energy drinks or soda or juice or any kind of beverage products in the market, which means Coca-Cola doesn’t really have an entirely unique flavor. It can easily replace by the substitute products. There is a good example for that one, if customers are given both Coca-Cola and Pepsi to taste without telling them which one is which, they wouldn’t be able to tell a difference. Sometimes customer even chooses Pepsi over Coca Cola.

3. The Bargaining Power of Buyers

This force focuses on the power of the consumer to affect pricing and quality. Buyers are the customers of an industry. The power of buyers concerns the pressure an industry’s customers can put on the producer’s margins by demanding a lower price or the higher product quality. (Rothaermel, 2017). Buyer’s power usually comes off when there aren’t many of them but a lots of sellers, and also, when there is option for them to switch from one business’s products or services to another. In contrast, buying power is low, when consumers purchase product in small amounts and the seller’s product is very different from any of its