Coca Cola Porter's Five Forces Analysis

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In assessing the carbonated soft drinks industry with Porter’s Five Forces, the new entry aspect is low and the rivalry aspect is high, indicating an oligopoly market. Oligopoly markets boast unique features that make them more profitable markets for established participants than other market structures. To maintain an oligopoly market structure, it is crucial to establish high barriers to entry. For the carbonated soft drink (CSD) industry there are several barriers to entry that have been established throughout the ongoing Cola Wars. Chief among the barriers is the capital investment costs. A concentrate manufacturing plant to service the entire US, alone would cost over $50 million. A bottling plant alone is estimated at $120 million. …show more content…

These CDAs make shelf space availability the last barrier for new entrants. In addition to CDAs, Coca-Cola and Pepsi offer more than 20 major brands and more than 30 packaging types, which limits space availability on shelves for other products. With space allocated for CDAs, retail channels use the remaining space to sell private label brands and generic offerings, which diminishes available shelf space for new entrants. Since 2000 on average Coca-Cola, PepsiCo, and DPS maintained 90% of the market share, leaving other companies to vie for remaining 10%. In review of the barriers to entry it is understandable that there are no new entrants as 10% market share would not yield profits and why the CSD industry is such a successful oligopoly market. Non-CSD markets consists of Packaged Water, Juice & Juice drinks, Sports drinks, Ready-to-drinks tea, and Energy drinks. Hence, it’s difficult to compare Non-CSD market as a whole to the CSD market and therefore, each type of Non-CSD industry is compared to that of the CSD …show more content…

Red Bull and Monster captures more than 80% of the US market. Along with these, Rockstar is also one of the competitors in the Energy drink industry. Similar to CSD industry, firms entering into the energy drinks industry has to spend lots of money on advertising, marketing and on high fixed costs. Also, Pricing and Output choice of one firm will affect the rivals pricing and output in this industry. Sports drinks and energy drinks are usually chosen for immediate, single-serve consumption and hence, they commanded premium prices and promised better margins than CSDs. Yet, volumes for sports drinks and energy drinks are low in comparsion with the CSD

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