Porter S Forces Of Cocacola Essay

Submitted By robinzengjie
Words: 1050
Pages: 5

Threat of new entrants
In beverages industry, there are many big companies that hold majority of market shares. And also with the increasingly enterprise merger, the progress of monopoly is in acceleration. Coca-Cola is one of the giants in this industry, it not only just sells coke; but also has hundreds of other products, and has millions of loyal customers all over the world. It seems extremely hard for new entrants to struggle with the current market (MBA lectures, 2010). However, the differentiation is usually minor in beverages products; the capital investment needed for this industry is not heavy, and in general, there are no barriers of politic issues and technical problems for potential entrants. As a result, some new kinds of drinks companies joined the competition to seek profits and battle over market share. Nowadays, we can see a great diversity of drinks from varied companies in retail shops, restaurants and vending machines; customers have so many choices while buying drinks, such like the similar soft drinks with coke, sports drinks, tea drinks, fruit and vegetable blends and milk beverages. And there is almost no consumer switching cost, so there are more and more new brands appearing in the market with usually lower price than Coke products (TermPaperWarehouse, 2012).

The table indicated the leading liquid beverages consumption and market share from 2011 to 2012. We can see that Coke has the highest consumption volume, and the 14.4 percent market share also ranked in the first place, the products of Coca-Cola like Sprite and Dasani are also at very front in the list. Generally speaking, those famous brands and large companies possessed a great amount of proportion in beverages industry. Besides the market dominations of these companies, the table demonstrated that all other beverage trademarks accounted for 54.3 percent, which consists of a large part of the whole industry. This significant figure proves that there is a broad market space existing for new entrants to take some shares of the spoils. What is more, in the change tendency column, the traditional soft drinks (Coke and Sprite) of Coca-Cola had a negative growth from 2011-2012, whereas “all others” had increased 2.3 percent in sales volume. Therefore, to some extent, it reveals the other companies’ products can be able to constitute threats to Coca-Cola, and due to the relatively low thresholds, more and more potential competitors would seize the opportunity to enter the market for profits.

The bargaining power of suppliers
As a company with a long history, Coca Cola had its iconic products, and also formed mature systems and models of management, marketing and other practices. These successful factors brought a large quantity of customers and significant market share to the company. In our daily life, it is a very common thing to know someone who is addicted to Coke, and in fact, Coca-Cola sells millions of tons of gallons of its products and made $46,854 millions in 2013 (The Coca-Cola Company Annual Report, 2013). So this dominated power in drinks industry leads to the weakness of suppliers’ bargaining power, because any supplier would definitely be not willing to lose a huge customer like Coca-Cola. Another issue refers to the ingredients and raw materials of the products; the company holds the secret recipe for the Coca-Cola original syrup, which is one of the core competitiveness in the market (Gootenberg, 2004). Yet for the other ingredients, The Coca-Cola Company Annual Report 2013 stated that it included powders for purified water, sweeteners, caffeine, carbonated waters and flavored waters and other ordinary raw materials for different product lines. Hence, these ingredients except the secret one are very common and basic; as a result, the suppliers do not have any unique advantages in the bargain. To sum up, Coca-Cola is a large customer of any of these suppliers; the suppliers would not refuse such a great quantity of orders…