Porters Five Forces Model of Coca Cola

Porters five forces model is a framework for the industry analysis and development of business strategy. Three (3) of Porters five (5) forces refers to rivalry from external/outside sources such as micro environment, macro environment and rest are internal threats. It draws ahead Industrial Organization economics to develop five forces that conclude the competitive intensity and consequently attractiveness of a market place or industry. Attractiveness in this framework refers to the generally overall industry profitability. An "unattractiveness" in industry is one in which the mixture of these five forces proceed to constrain behind overall profitability. An extremely unattractive industry would be one moving toward "pure competition", in which existing profits for all companies are moving down to zero.

The threat of the entry of new competitors

Advertising and Marketing Soft drink industry needs huge amount of money to spend on advertisement and marketing. In 2000, Pepsi, Coke and their bottlers invested approximately $2.58 billion. In 2000, the average advertisement expenditure per point of market share was $8.3 million. This makes it exceptionally hard for a new competitor to struggle with the current market and expand visibility. Customer Loyalty/ Brand Image Pepsi and Coke have been investing huge amount on advertisement and marketing throughout their existence. This has resulted in higher brand equity and strong loyal customers base all over the globe. Therefore, it becomes nearly unfeasible for a new comer to counterpart this level in soft drink industry. Retail Distribution This industry provides significant margins to retailers. For example, some retailers get 15-20% while others enjoy 20-30% margins. These margins are reasonably enough for retailers to entertain the existing players. This makes it very difficult for new players to persuade retailers to carry their new products or substitute products for Coke and Pepsi. Fear of Retaliation It is very difficult to enter into a market place where already well-established players are present such as Coke and Pepsi in this industry. So these players will not allow any new entrants to easily enter the market. They will give tough time to new entrants which could result into price wars, new product line, etc in order to influences the new comers. Bottling Network In this industry manufacturers have franchise contracts with their presented bottlers that have privileges in a definite geographic area in eternity such as both Pepsi and Coke have contracts with their presented bottlers. These contracts forbid bottlers from taking on new competing brands for similar products. Latest consolidation between the bottlers and the backward integration with Coke buying considerable numbers of bottling firms, it makes very difficult for new player to contract with bottlers agreeable to distribute their brands. The alternative is that new entrances build their bottling plants, which will need intense capital and exertion. Because in 2000 new bottling plant needs capital of $80 million.

The intensity of competitive rivalry

The industry is almost dominated by the Coke and Pepsi. This industry is well known as a Duopoly with Coke and Pepsi as the companies competing. These both players have the majority of the market share and rest of the players have very low market share. Otherwise; competition is comparatively low to result any turmoil of industry structure. Coke and Pepsi primarily are competing on advertising and differentiation rather than on pricing. This resulted in higher profits and disallowed a decline in profits. Pricing war is nevertheless experienced in their global expansion strategies. Composition of Competitors Except the Coke and Pepsi other competitors are of unequal size especially in local markets. Coke and Pepsi both players have the majority of the market share and rest of the players have very low market share. Scope of Competition Scope of competition in this industry is generally global; Coke and Pepsi are approximately presents in 200 countries. Market Growth Rate The soft drinks business will not see growth in near future, with the smoothie and bottled water sectors mainly hit by a decline in 2008, and across all sectors volume declined by 1.1 percent. Fixed Storage Cost This industry needs huge manufacturing plants and contracts with bottling network companies. These contracts make sure that bottlers must have standard manufacturing plant; these plants need huge capital and exertion. Degree of differentiation Marketing and Product differentiation have become more significant. Coke and Pepsi mainly are competing on advertising and differentiation rather than on pricing. Coke has diverse advertisement campaigns according to conditions. Coca-Cola is recognized as the best-known brand name in the globe. More prominently, its consumers would not do without it, and have established a loyalty. Strategic Stake Cokes core operation is the manufacturing and distribution both for itself and beneath franchise, of non-alcoholic beverages and related products. Because of the strategic stake the main brand of the Coke has been around for a lot of years.

The threat of substitute products

This industry is enriched with enormous statistics of substitutes such as: water, tea, beer, juices, coffee, etc presented to the end-consumers. But all the suppliers of these substitutes need massive advertising, brand equity, brand loyalty and making sure that their brands are effortlessly accessible to the consumers. Most of the substitutes cannot counterpart the existing players offers or diversify business by offering new product lines of the substitute products to safeguard themselves from rivalry. Aggressiveness of substitute products in promotion Soft drink industry companies spend huge amount of money on advertisement and marketing to differentiate their products from others and also create brand equity, base of loyal customers and increase visibility. Switching Cost Switching cost of the substitute products is very low so consumers can easily shift towards the substitute products. Perceived price/ value Perceived price/value in this industry is very low because all products are comparatively same and are only differentiated by promotional activities.

The bargaining power of Customers (Buyers)

The most important buyers for the Soft Drink industry are fast food fountain, vending, convenience stores, food stores, restaurants, college canteens and others in the categorize of market share. The profitability/revenue in each of these segments obviously demonstrates the bargaining power of the buyers to pay different prices. Fast Food Fountain Pepsi and Coke mainly regard this segment as Paid Sampling due to small margins. This division of buyers is the slightest profitable because of the high bargaining power of the buyers. The bargaining power of the buyers is high because they purchase in bulks. Vending Machines Vending Machines provide products to the customers in a straight line with enormously no power with the buyer. Convenience Stores This segment is tremendously fragmented and has no bargaining power due to which it has to pay superior prices. Food Stores

This segment of buyers is fairly merged with few local supermarkets and numerous chain stores. Since this segment presents best shelf space it demands lower prices.

The bargaining power of Suppliers

Most of the raw materials desirable to manufacture soft drink are basic merchandise such as flavor, color, caffeine, sugar, and packaging etc. The suppliers of these commodities have no bargaining power over the pricing due to which the suppliers in soft drink industry are relatively weak. Number of important Suppliers Raw materials for soft drink are basic commodities which are easily available to every producer and have low cost which makes no difference for any supplier. Switching cost All the raw material ingredients are basic merchandize and easily accessible to manufacturers. Switching cost to the suppliers is very low; manufactures can easily shift towards the other suppliers. Availability of substitutes Soft drink products have standard raw material ingredients which could not have any alternatives or used instead of the actual ingredients. Threat of forward integration Threat of forward integration is very low in this industry because manufacturers of the soft drinks need huge manufacturing plants, bottling network, strong distribution network and best shelf space. Suppliers could not afford such kind of well-established network. Importance of buyer industry to suppliers Soft drink industry is very important to the suppliers because buyers purchase larger amount of raw material. This encourages suppliers to remain in good contact with buyers. Suppliers product an important input to the buyers Product of the suppliers is very important input for the manufacturers in this industry because these products do not have any substitute.

SWOT Analysis of Coca-Cola Company

Posted By mbalectures On October 30, 2010 @ 12:10 pm In SWOT Analysis | 8 Comments Coca-Cola is the worlds largest soft-drink company which manufactures and markets non-alcoholic beverage concentrates and syrups. Besides the well known Coca-Cola and Coke brands the company offers more than 500 brands in over 200 countries or territories and serves 1.6 billion servings each day. It is headquartered in Atlanta, Georgia.

Strengths

1. Coca-Cola is the worlds most valuable brand and has strong brand loyalty. 2. Wide variety of Coca-Cola products is sold in the restaurants, stores and vending machines over 200 countries. 3. Coke is the dominant market leader of the global soft-drink industry right through the 20th century. 4. Coke primarily competes on advertising and differentiation and has the high market share. 5. Coca-Cola has enormous distribution and production facilities of non-alcoholic beverages and related products. 6. Joint venture with Nestle has resulted in the formation of Beverage Partners Worldwide (BPW). 7. The company has strong financial position and profits throughout the history. Its average ROE (return on equity) for the past five years is 37.08% whereas its ROC (return on capital) is 33.6%. 8. Coca-Cola has the heavy advertising and promoting activities. 9. More than 70 percent of revenue comes from outside the United States. 10. Enormous number of loyal customers and brand equity all over the world.

Weaknesses

1. New coke formula leading to a backlash which results in bad image of coke. 2. The company is facing high burden of external debts for the last few years. In 2002, long-term debt of the company was 2700 million dollars. 3. Product offering is restricted to beverages. 4. In November 2009, because of a dispute over wholesale prices of Coca-Cola goods, Costco blocked the replenishment of their shelves with Diet Coke and coke. 5. Coca-Cola has discontinued its many products after few years of launching such as New Coke, Coca-Cola with Lemon, Coca-Cola with Lime, Coca-Cola Blak, etc. which result in bad image of the brand. 6. Coke has taken less aggressive market standing in todays changing economic surroundings.

Opportunities

1. Bottled water drinking has increased 11 percent. 2. Consumers prefer to drink new smaller beverage products that are not sold on a mass scale. 3. One of the biggest opportunities is to diversify into the non-carbonated drinks such as coffee, water, juices, etc. 4. The company can offer the hygienic products due to increasing number of health conscious consumers. 5. European market and China show marvelous potential for growth. 6. The economic conditions are improving globally after economic meltdown 2007-10. 7. Diversify into complementary food products which will ultimately increase the drink consumption. 8. Coca cola should increase its partnership with fast food chains.

Threats

1. There is Low growth rate in the carbonated drinks market in North America which is the main market of Coca-Cola. 2. There is a problem with Coke to raise its prices by an edge that would permit it to keep pace with inflation. 3. Huge numbers of substitutes such as beer, water, juices, coffee etc are accessible to the end consumers. 4. Pepsi is the strong competitor which competes with advertising and differentiation. 5. Since the consumer lifestyle is changing rapidly and they are becoming more health conscious therefore there demand is shifting towards non-carbonated products such as juices, tea and bottled drinks. 6. Many smaller players are furious competitors which are also creating the competition severe. 7. The prices of raw material such as sugar and metals used in manufacturing of cans are increasing rapidly. 8. Carbonated drink revenues have been decreasing due to association of sugar to obesity and lofty fructose lump syrup to heart disease. 9. Pepsi has more diversified selling beverage and food products as compared to the Coca Cola. 10. Coca Cola is facing various regulations in respective countries around the globe.

Introduction Coca Cola markets nearly 2,400 beverages products in over 200 geographic locations. As a result development of a superior value system is imperative to their operations. Throughout this paper we will analyze their value system by using Michael Porters value chain analysis model. In an attempt to paint a current picture of the non-alcoholic beverage industry we will assess the market activity by using mergers, acquisitions and IPOS as our benchmarks to determine if the market is growing or contracting. Value Chain Analysis A value chain is a model used to disaggregate a firm into its strategically relevant value generating activities, in order to evaluate each activity's contribution to the firm's performance (Terms V 2006). Through the analysis of this model we can gain insight as to how a firm creates their competitive advantage and shareholder value. The value chain of the nonalcoholic beverage industry contains five main activities. These include inbound logistics (suppliers), operations, outbound logistics (buyers/ customers), marketing and sales, and service. Inbound Logistics (Suppliers) Some of Coca Colas most notable suppliers include Spherion, Jones Lang LaSalle, IBM, Ogilvy and Mather, IMI Cornelius, and Prudential. These companies provide Coca Cola with materials such as ingredients, packaging and machinery. In order to ensure that these materials are in satisfactory condition, Coca-cola has put certain standards in place which these suppliers must adhere to (The Supplier Guiding Principles). These include: compliance with laws and standards, laws and regulations, freedom of association and collective bargaining, forced and child labor, abuse of labor, discrimination, wages and benefits, work hours and overtime, health and safety, environment, and demonstration of compliance (Coca Cola 2006). See Appendix for additional information: From time to time, Coca-Cola uses third parties to assess their suppliers by having interviews with employers and contract workers. If a supplier has issues about the supplier guiding principles, they are usually given a certain amount of time to take corrective measures; if not, Coca-Cola has the right to terminate their contract with these suppliers. Operations Coca Colas core operations consist of Company-owned concentrate and syrup production (Coca Cola 2006). According to their website, some of the main environmental impacts of their business occur further along the value chain through system's bottling operations, distribution networks, and sales and

marketing activities (Coca Cola 2006). Management of these operations across the business value chain tends to be more challenging outside of the core operations. According to Coca Cola, they continue to address this by working with their partners to reduce the effects at every level of the manufacturing process by enlarging their comprehension of the complete environmental impact of their business through the entire lifecycle of their products from ingredient procurement to production, delivery, sales and marketing, and post-consumer recycling (Coca Cola 2006). Please see Appendix for additional information. Outbound Logistics (Buyers/ Customers) The activities required to get finished products to customers include warehousing, order fulfillment, transportation, and distribution management. Coca Cola has the worlds largest distribution system. They own, lease, and operate in over 800 plants around the world (Coca Cola 2006). The 2,400 beverage products which they market reach consumers in more than 200 different geographic locations (Coca Cola 2006). Grocery stores such as Sobeys, fast food restaurants such as McDonalds (fountain sodas), and vending machines are just a few of the distribution units used to ultimately reach consumers. Coca Cola has over 300 bottling partners which range from publicly traded businesses to small family owned operations (Coca Cola 2006). They have implemented the Coca Cola System in which they work cohesively with their partners in order to develop strategies aimed to meet the needs of all their customers. Examples of their commitment to these strategies are seen in their plant in Indonesia, where boats are used to transport the products between hundreds of islands throughout the Amazon. This is often because waterways are often the main way to access these remote islands. In some of the higher elevations of in the Andes, Coca Cola products are sometimes transported by four-legged power. Across much of Africa, bottlers deliver to thousands of family-run kiosks and home-based stores. Marketing and Sales Out of approximately 2,400 products, Coca Cola markets four of the worlds top sales drink brands. Although the industry is relatively small and they only directly compete with two companies, creativity is a vital marketing strategy to Coca Cola. Coca Colas ultimate goal is to deepen their brands connection with consumers. As a result, they have to constantly reinvent their product (Coca Cola 2006). The marketing strategy they use is directly linked to the consumer; from advertising, to point of sale, to ultimately opening and consuming a Coca Cola beverage. Techniques which they have used to achieve this include developing new products and brands, changing the design of their packaging, and designing various new advertising campaigns (Coca Cola 2006). On October 19th, Coca Cola reported their earnings for the third quarter. Earnings per share are up

which results in higher benefits for shareholders. According to Neville Isdell, CEO of Coca Cola, they have experienced a growth in sales of five percent compared to the same quarter last year. This is as a result of balancing performance across their global markets and their product portfolio (Coca Cola 2006). Service Activities that maintain and enhance a products value include customer support, repair services, installation and training. Coca Colas customers range from large international retailers and restaurants to smaller independent businesses and vendors. As a result, they provide services tailored to meet their customers needs. Coca Cola also supports their customers by providing them with the training necessary to help their businesses become more effective and profitable. They have established Customer Development and Training Centers which are available to more ...

The simplified Coca Cola business model I like Coke as my favorite soft drink. If you see me drinking a soft drink it's usually that red can... (not the diet stuff). Let's take a hugely successful business that serves both tasteful and tasteless liquid for human consumption. The Coca Cola Company. Established in 1886, it provides 1.5 billion servings of its products per day with over 2800 different products. In a very competitive landscape it has managed to maintain demand of its most mature product "Coke" while constantly bringing newer beverages to market such as "Full Throttle." It is remarkable the beverage industry has convinced consumers to spend money buying bottled water which has become a huge industry.

The beverage "Coke" has been around for a long time yet consumers have not grown tired with its taste. In fact The Coca Cola Company in 1985 tried to change the taste and got a negative reaction from consumers. All companies want to retain their customers as well as acquire new customers. In other words grow. While "Coke" is a cash cow throughout the world (it does taste different in China), the Coca Cola Company has done a remarkable job of introducing newer products for growth. Just about every company with any longevity operates to sustain their core products while introducing new products to maintain and grow their revenue.

Just as investment banks make varying bets on different types of businesses. A venture capital investment carries a much higher risk and return than an investment bank who's advisory services guide an established business to divest, acquire, merge, etc.. A key part of strategy for any company is to be able to adapt the mix of established products with new products. You cannot starve off one for the other or your competition will take advantage. A plan that can absorb unanticipated changes, conditions and is willing to stay the course only draws investors appeal.

Our Strategy What will drive our success in the future? Not just growth, but sustainable growth -- meeting our shortterm commitments while investing to meet our long-term goals. And we have a vision and clear goals to guide our journey to achieve long-term growth -- the kind of long-term growth that allows careers to flourish.

We are building on our fundamental strengths in marketing and innovation, driving increased efficiency and effectiveness in interactions with our system and generating new energy through core brands that focus on health and wellness.

We are poised to capture the opportunity in so many ways. Here are just a few:

With the world's most recognized family of brands, we deliver more than 3,500 beverages to over 200 countries around the world -- not just soft drinks, but juice and juice drinks, sports drinks, water, even coffee and milk. And every day we explore new ways to create and share beverages to energize, relax, nourish, hydrate and enjoy. As the world's largest distributor of non-alcoholic beverages, we maintain a trusted local presence in every community we serve. We are constantly looking ahead to anticipate what our communities may need and gathering resources to support them. We've increased our annual marketing budget substantially, launched many new products, and developed a model to help our retail customers maximize their sales while we continue to plan for the next one, five and ten years in business. We need highly skilled, ambitious, experienced professionals who think entrepreneurially and thrive on teamwork.

INTRODUCTION TO FMCG INDUSTRY FMCG industry, alternatively called as CPG (Consumer packaged goods) industry primarilydeals with the production, distribution and marketing of consumer packaged goods. The FastMoving Consumer Goods (FMCG) are those consumables which are normally consumed by theconsumers at a regular interval. Some of the prime activities of FMCG industry are selling,marketing, financing, purchasing, etc. The industry also engaged in operations, supply chain, production and general management. FMCG industry economy

FMCG industry provides a wide range of consumables and accordingly the amount of moneycirculated against FMCG products is also very high. The competition among FMCGmanufacturers is also growing and as a result of this, investment in FMCG industry is alsoincreasing, specifically in India, where FMCG industry is regarded as the fourth largest sector with total market size of US$13.1 billion. FMCG Sector in India is estimated to grow 60% by2010. FMCG industry is regarded as the largest sector in New Zealand which accounts for 5% of Gross Domestic Product (GDP). Common FMCG products

Some common FMCG product categories include food and dairy products, glassware, paper products, pharmaceuticals, consumer electronics, packaged food products, plastic goods, printingand stationery, household products, photography, drinks etc. and some of the examples of FMCG products are coffee, tea, dry cells, greeting cards, gifts, detergents, tobacco and cigarettes,watches, soaps etc. Market potentiality of FMCG industry

Some of the merits of FMCG industry, which made this industry as a potential one are lowoperational cost, strong distribution networks, presence of renowned FMCG companies.Population growth is another factor which is responsible behind the success of this industry. L

eading FMCG companies Some of the well known FMCG companies are Sara Lee, Nestl, Reckitt Benckiser,Unilever, Procter & Gamble, Coca-Cola, Carlsberg, Kleenex, General Mills, Pepsi andMars etc. Job opportunities in FMCG industry

FMCG industry creates a wide range of job opportunities. This industry is a stable,diverse, challenging and high profile industry providing a wide range of job categorieslike sales, supply chain, finance, marketing, operations, purchasing, human resources,product development, general management.