Pepsi Porter's Five Forces Essay

Porter has identified five (5) competitive forces that shape every industry and every market. The forces determine the intensity of competition and hence the profitability and attractiveness of an industry. Based on the information derived from this analysis, management can decide how to influence or to exploit particular characteristics of this industry.

Essentially, all risk in price fluctuations in the raw materials market is transferred and paid for by the bottling business. Supplier power of the concentrate business is also exerted over the bottling business by the threat of acquisition and vertical integration – the concentrate business supports its bottling business through providing suggestions for operational improvement. While this support can be viewed positively, both Coca-Cola and Pepsi have acquired its bottling franchises due to their dissatisfaction over the operational effectiveness of its bottling business. Through the last few decades, Coca-Cola and Pepsi have oscillated between acquiring and re-franchising its partner bottling businesses.

This analysis is conducted on the Porters Five Forces theory that is crucial for effective strategic decision-making, the five forces that shape industry competition are:

2. How Porter's Five Forces of Competition impact the company Porter set out his famous Five Forces model in chapter 1 of his 1980 Competitive Strategy: Techniques for Analyzing Industries and Competitors, which has now become the dominant paradigm for the "Structural Analysis of Industries." The model places supply chain forces on the horizontal access and market structure vertically above and below industry competition, which they all point to as the center of potential profitability (Hitt, Ireland and Hoskisson,

According to Porter’s competitive forces model, exist five major forces, which managers should analyze, and strategies developed for the company to increase their competitive edge. They are the threat of entry of new competitors and of substitute products or services, the bargaining power of suppliers and customers (buyers), and the rivalry among existing firms in the industry.

As we begin to strategically plan for our business, it is important for us to take a deep dive into our competitive environment to understand where we are strong competitively and where we are weak competitively. An analysis of the forces driving industry competition using M.E. Porter’s Five Forces Model will assist us in determining where the power lies in a business situation as we begin to plan. We must understand how they work in our industry and how they affect our particular situation. Whatever the collective strength of these forces is, our job as the strategists of the organization is to

The political situation of a country affects its economic settings and economic environment affect the business performances. Coca-Cola sales are impacted by a set of economic factors that beyond are beyond the company’s control. These factors include the level of economic growth in the country and in the industry, tax rates and currency exchange rates, interest rates, labor costs and others. The global economic and financial crisis of 2007 – 2009 is a relevant example of an economic factor that greatly impacted the majority of businesses around the globe. However, the crisis has impacted Coca-Cola to a lesser extent compared to many other businesses. Its’ operating margin remained at industry-front 22% despite the crisis, although dividend yield was reduced to 2.6 % Quarts. (Timmons, H. (2014). Economic factors relate to goods, services, and money. Despite directly affecting businesses, these variables refer to financial state of the economy on a greater level –whether it be local or global, inflation increases cost of production. Consequently, Coca-Cola had to face the uncontrollable problem of increasing their pricing. With this increase they risk losing customers who cannot afford their products because it is a desired product not a necessity. Due to inflation in 11 years the price of an identical bottle of Coca Cola has doubled in price. Alternatively, Coca Cola could be forced to lower their prices to facilitate an increase in consumption

Porter’s Five Competitive Forces Analysis is a framework developed by Michael E. Porter of Harvard Business School for study of industry analysis by analyzing five competitive forces which define industry and its business strategy. These five competitive forces determine the competitive advantages, disadvantages and attractiveness or profitability of industry.

Porter’s Five-Forces Model of Industry Competition is the most widely utilized tool to evaluate the competitive environment (Dess, Lumpkin, Eisner, & McNamara, 2014). Dess, Lumpkin, Eisner & McNamara (2014) define Porter’s model

Coca-Cola is the number one non-alcoholic beverage in the world and is also the golden standard in the beverage industry. Over the pass decade carbonated beverage sales has decrease which has lead Coca-Cola to seek for new opportunity and investor. Contribution of US soda sales in Coca-Cola’s revenue could decline to less than 15% by 2020. By the end of 2017 Coca-Cola is looking to refranchise two-thirds of its bottling territories in North America. The outcome of Coca-Cola refranchise two-third of its bottling territories will reduce the revenue to Coca-Cola sales of its products, however the operating margin will increase. Also, this could reduce the percentage contribution by the U.S to Coca-Cola overall revenue.

Porter's Five Forces can be applied to particular companies, market segments and industries with the step-by-step analysis of market structure and competitive situation. First of all, when implementing this module in organizations, it is necessary to determine the scope of the market to be analyzed. Following, all relevant forces for this market analyzed and key forces are identified (Gerry and Kevan, P.117). Actually some organizational strategy and the longer-term goals are mainly based on or consistent with the key forces. Hence, it is not necessary to analyze all elements of all competitive forces with the same depth. Moreover, the key forces in the competitive environment will vary in different industry. Different forces take on prominence in shaping competition in each industry (Porter,

This article summarizes the key ideas and gives an overview of how this concepts works. Describes, how this five competitive forces shape every organization and every market. Summarizes how these forces will define the power of profitability, competitiveness, and attractiveness of the industry. Depending on the facts which is derived from the five forces analysis, the management of organizations will decide how to effect or abuse specific features of their industries.

Using the Porter Five Forces Model an idea of how competitive and attractive an industry is can be deduced. The model focuses

Porter’s five forces analysis not only provides the ideas to create the strategic plan but also assesses the attractiveness of an industry.

The global beverages industry is currently a low-growth market, with an expected compound annual growth rate of 5.7% between 2017 and 2025 (Grand View Research 2017). Additionally, the industry is quite saturated with firms that offer increasingly differentiated products. However, due to this low growth rate, companies have been engaging in price competition to gain competitive advantage and increase their market share. Nevertheless, Coca Cola is a dominant force in this market, controlling 40% of the industry, and is therefore at a low risk of losing its position.