Essay About Threat Of Potential New Entrants And Cola Industry

Coca-Cola Case Study Analysis
Charmaine Regina Asril LeeCoca-Cola Case Study AnalysisBUAD 4971) The first force is the threat of potential new entrants. Although the threat is low, the case shows that there is no major risk of new entrants in the Cola industry for Coca-Cola and Pesi-Cola. The number of U.S soft drink consumers has significantly decreased from more than around 2000 in 1970. During that period of time, Americans were consuming only 23 gallons of CSDs annually, to lesser than 300 in 2004, with the industry topping in the United States. There are many barriers to entry for new entrants, because they have to compete with market share that Coca-Cola and Pepsi-Cola dominates, they also have a lot less income to distribute for advertising. Moving on to the second force— the threat of suppliers. Threat of suppliers remains pretty low but there is a huge amount of bargaining power within the dominant bottling companies behind Coca-Cola and Pepsi-Cola, which is Coca-Cola Enterprises and Pepsi Bottling Group respectively. Both company created their own independent bottlers that eventually caused reduction in the average total number of bottlers.The third force is the threat of buyers and consumer demand. When price increases, consumer sales and volume decreases,hence profits decreases.The fourth force is the threat of substitutes. Despite the strong brand loyalty for Coca-Cola, if it is too expensive, the consumer will look for other sodas to substitute. Substitutes include diet and non-carbonated drinks or bottled water. The fifth force is the threat of rivalry. The threat of rivalry within the industry now itself is high, but the threat of new rivalry in the CSD industry is at its least. But the threat of rivalry within the industry, between Coke and Pepsi, has definitely made both companies become major industry leaders, as the saying goes, “ the survival of the fittest”, both companies’ forces have increased barriers to entry for new companies to develop and sustain amongst the tight competition.2)One of the big reasons why the soft drink industry has been so profitable is because of the dramatic increase in available concentrate flavors that caused the increased desire for soft drinks. There is also an increased availability of channels to provide soft drinks like vending machines, fast food chains and markets. The increased advertising budget definitely contributes to the profitable soft drink industry as well.  3) Most of the changes in the soft drink industry today are a rise of non-cola beverages, bottled water drink, sport’s drink and even health drinks. Most smaller companies today either have been purchased by larger competitors such as Pepsi and Coke as a strategy for them to get rid of competition, while others have to face tough competition from the dominant Pepsi and Coke.