Pepsi And Coca-Cola's Five Forces Analysis Of The Soft Drink Industry

By and large, the soft drink industry leaders post high profits every year. Concentrate producers realize higher profits than bottlers in the industry generally (Daft & Marcic, 2001; Wilkinson & Kannan, 2013). That comes off as odd given than the commodities they sell can be generated rather easily (Louis & Yazijian, 1980; Yoffie & Harvard University, 2002). The high profits can be best explained through a Five Forces appraisal, which shows how the varied forces affect the industry’s profitability. The forces are entry barriers, suppliers, rivalry, buyers, and substitute threats.

New players find it rather challenging to enter the market owing to the extant bottling network agreements, high advertisement costs, the brand images of Pepsi and

The new entrants are unable to gain considerable visibility (Enrico & Kornbluth, 1986; Kourdi, 2015; Louis & Yazijian, 1980). The long-running and heavy advertising expenditure defining Pepsi, Coca Cola and own bottlers have helped them cultivate marked brand equity and large bases of loyal customers that new entrants cannot match. The Pepsi and Coca Cola retailers enjoy marked

FIVE FORCES EXAMINATION OF THE COLA WARS 3 margins that new entrants may find challenging to afford them (Daft & Marcic, 2001; Wilkinson & Kannan, 2013).

Notably, most of the suppliers in the industry supply materials that are necessary in the production of concentrates (Daft & Marcic, 2001; Yoffie & Harvard University, 2002). The materials include elementary commodities such as packaging, additives such as caffeine, sugar, flavor, and color (Daft & Marcic, 2001). By and large, these commodities are elementary. That means that the suppliers have limited or even no power or influence over pricing. The suppliers are distinctively weak (Enrico & Kornbluth, 1986; Kourdi,

Coca Cola should focus on growing its supplies to food stores. As noted earlier, the food store buyers are considerably consolidated: with numerous supermarkets and chain stores. Given that they provide shelf spaces that are premium, they command depressed, or lower, prices. Coca should be more aggressive in investing in the production of substitutes such juices, coffee, and water in addition to its core products. It should continue challenging its main competitor, Pepsi, on the advertising and differentiation fronts as opposed to pricing