Coca-Cola is a giant in the soft-drink industry. It is an autonomous company that traces are foundation from 1886. Coca-Cola came to existence after a pharmacist called Dr. John S Pemberton from Atlanta came up with a refreshing drink that was sold at soda fountains. Later, Frank M. Robinson named the refreshing drink ‘Coca-Cola.’ In 1992, Coca-Cola produced PowerAde as the official refreshment drink in the Olympic Games. By 2007, Coca-Cola ventured in the production of energy drink and vitamin water has made the company profile improve significantly. Despite the challenges that are experienced in the industry, Coca-Cola company is known to excel.
Porter’s 5 forces analysis
Porter’s five forces analysis is very important in understanding the market operation in a very competitive industry. The market is dictated by a mixture of factors that cannot be taken for granting.This outlines advanced by Michael Porter as a suitable model for analyzing industries. It is centered on five forces that control industrial operations. The five forces are discussed below.
Bargaining Power of Buyers
Coca-Cola Company understands the bargaining power of its customers.
The company has understood the bargaining power of its customers by understanding the consumers’ bargaining leverage, buyer volume, buyer information, threat of backward integration, buyers’ price sensitivity and the brand identity. Since these products are used mainly in the sports, the collective bargaining of the buyers influences the company prices. For instance, when the products are used as a refreshment during sports, the consumers are several, and they together act to influence the price at which the company sells its product.
Bargaining Power of Suppliers
Coca-Cola Company has also understood the suppliers’ bargaining power especially on their influence on raw materials, labor, components and other important supplies.These factors usually create strong mutual buyer-supplier relations that lead to the success of the industry.
Competitive Rivalry in the Industry
The existence of strong competitors to Coca-Cola in the energy soft drink industry such as PepsiCo, Monster Beverages and Red Bull that compete Coca-Cola in the production and marketing of soft drinks, and vitamin and mineral water.
Threats of New Entrants
The soft drinks, energy drinks and vitamin industry is an open industry for the entry of more firms. The entry of new firms may negatively affect the operations of the industry. Coca-Cola is a company that believes in the provision of quality drinks. Entrance of new firms into the industry does not significantly impose negatively on Coca-Cola company.
Threat of Substitutes
Substitute products refer to similar products that are produced and marketed by the competitor of Coca-Cola. Products from Pepsi, Red Bull among others have the potential to satisfy the consumers’ needs instead of the product in question. Usually, when the demand of the industry’s products is affected by a change in prices of the substitute goods, then this is a warning. In case a very close substitute product is available in the market, for example the PepsiCo products then the price elasticity of the Coca-Cola products goods affected
Since Coca-Cola is new in the provision of functional drinks compared to its competitors, the company needs to embrace a policy that that put strategies to develop unique brands that will compete effectively the field of energy.
Besides, the company should establish mechanisms to address the health concerns that are associated with excessive use of carbon dioxide in the preservation.
The company should identify areas where their products have not been known in order to establish effective control.
Evidently, a great competition is posed onto Coca-Cola by the PepsiCo and the Red Bull in the provision of energy drinks. The industry is very competitive in line with the provision of energy drinks (Porter, Competitive Strategy, 1980). Coca-Cola, therefore, needs to carry out brand exposure and recognition of its brands in order to introduce to the consumers. By doing this, the company will be able to still enjoy the lion's share in the industry.
Considering the prevailing situation in the production and marketing of energy soft drinks, sports drinks and vitamin aided water; Coca-Cola is faced with manifold challenges of competition. The porters five model analysis indicate that Coca-Cola Company is strong in the industry and is still on the lead. Looking at these logistics, it is very likely that Coca-Cola will still be at the top in the future.
Comparing the performance between 2012 and 2011, there is a remarkable increase in the company’s profits. Coca-Cola Company had US$28964 as the gross profit. This value escalated in the following year to US$30720. This was a big boost to the company’s profile in the provision of energy drinks, sports drinks as well as vitamin aided water drinks. Since Coca-Cola Company began the provision of energy drinks services in 2007, the gross profit on an annual basis especially after 2009 rose immensely. This steady profit increases recorded in the competitive beverage industry by Coca-Cola Company is a manifestation of a stable growth of the company. Analysis of Coca-Cola Company financial status depicts the picture of a growing enterprise despite the stiff competition existing in the industry.
Porter, M. ( March 1979). How Competetitive Forces Shape Strategy. Harvard Business Review, 12-16.
Porter, M. (1980). Competitive Strategy. New York: The Free Press .
Porter, M. (1985). Competitive Advantage. New York: The Free Press.
QuickMBA. (2010, September). Porter's Five Forces: A Model for Industry Analysis. Retrieved February 17, 2014, from Internet Center For Management and Business Administration Inc.: http://www.quickmba.com/strategy/porter.shtml