Question

explain five portors forces of coca-cola

give me reference to it

Answer 1

Question:Explain five porter's forces of Coca-cola.

Answer:

The Porter’s Five Forces model can be used to analyse the industry in which The Coca Cola Company operates, in terms of attractiveness through inherent profit potential. The information analysed using the model can be used by strategic planners for The Coca Cola Company to make strategic decisions.

Porter’s five forces applicable to Coca Cola Company are as follows:

1) Threat of New Entrants:

The economies of scale is fairly difficult to achieve in the industry in which The Coca Cola Company operates. This makes it easier for those producing large capacities to have a cost advantage. It also makes production costlier for new entrants. This makes the threats of new entrants a weaker force.The product differentiation is strong within the industry, where firms in the industry sell differentiated products rather a standardized product. Customers also look for differentiated products. There is a strong emphasis on advertising and customer services as well. All of these factors make the threat of new entrants a weak force within this industry.The capital requirements within the industry are high, therefore, making it difficult for new entrants to set up businesses as high expenditures need to be incurred. Capital expenditure is also high because of high Research and Development costs. All of these factors make the threat of new entrants a weaker force within this industry.

How to face the Threat of New Entrants?

The Coca Cola Company can take advantage of the economies of scale it has within the industry, fighting off new entrants through its cost advantage.Also. focus on innovation to differentiate its products from that of new entrants. It can spend on marketing to build strong brand identification.This will help it retain its customers rather than losing them to new entrants.

2) Bargaining Power of Suppliers:

The number of suppliers in the industry in which The Coca Cola Company operates is a lot compared to the buyers. This means that the suppliers have less control over prices and this makes the bargaining power of suppliers a weak force.The product that these suppliers provide are fairly standardized, less differentiated and have low switching costs. This makes it easier for buyers like The Coca Cola Company to switch suppliers. This makes the bargaining power of suppliers a weaker force.The suppliers do not contend with other products within this industry. This means that there are no other substitutes for the product other than the ones that the suppliers provide.This makes the bargaining power of suppliers a stronger force within the industry.

How to face the Bargaining Power of Suppliers?

The Coca Cola Company can purchase raw materials from its suppliers at a low cost. If the costs or products are not suitable for The Coca Cola Company, it can then switch its suppliers because switching costs are low.It can have multiple suppliers within its supply chain. For example, The Coca Cola Company can have different suppliers for its different geographic locations.This way it can ensure efficiency within its supply chain.

3) Bargaining Power of Buyers:

The number of suppliers in the industry in which The Coca Cola Company operates is a lot more than the number of firms producing the products. This means that the buyers have a few firms to choose from, and therefore, do not have much control over prices. This makes the bargaining power of buyers a weaker force within the industry.The product differentiation within the industry is high, which means that the buyers are not able to find alternative firms producing a particular product. This difficulty in switching makes the bargaining power of buyers a weaker force within the industry.The income of the buyers within the industry is low.This means that there is pressure to purchase at low prices, making the buyers more price sensitive.This makes the buying power of buyers a weaker force within the industry.

How to face the Bargaining Power of Buyers?

The Coca Cola Company can focus on innovation and differentiation to attract more buyers. Product differentiation and quality of products are important to buyers within the industry, and The Coca Cola Company can attract a large number of customers by focusing on these.Also, needs to build a large customer base, as the bargaining power of buyers is weak. It can do this through marketing efforts aimed at building brand loyalty.

4) Threat of Substitute Products or Services:

There are very few substitutes available for the products that are produced in the industry in which The Coca Cola Company operates. The very few substitutes that are available are also produced by low profit earning industries. This means that there is no ceiling on the maximum profit that firms can earn in the industry in which The Coca Cola Company operates.All of these factors make the threat of substitute products a weaker force within the industry.The very few substitutes available are of high quality but are way more expensive. Comparatively, firms producing within the industry in which The Coca Cola Company operates sell at a lower price than substitutes, with adequate quality. This means that buyers are less likely to switch to substitute products.This means that the threat of substitute products is weak within the industry.

How to face the Threat of Substitute Products?

The Coca Cola Company can focus on providing greater quality in its products. As a result, buyers would choose its products, which provide greater quality at a lower price as compared to substitute products that provide greater quality but at a higher price.Also, focus on differentiating its products. This will ensure that buyers see its products as unique and do not shift easily to substitute products that do not provide these unique benefits. It can provide such unique benefits to its customers by better understanding their needs through market research, and providing what the customer wants.

5) Rivalry Among Existing Firms:

The number of competitors in the industry in which The Coca Cola Company operates are very few. Most of these are also large in size.This means that firms in the industry will not make moves without being unnoticed. This makes the rivalry among existing firms a weaker force within the industry.The very few competitors have a large market share.This means that these will engage in competitive actions to gain position and become market leaders. This makes the rivalry among existing firms a stronger force within the industry.The industry in which The Coca Cola Company is growing every year and is expected to continue to do this for a few years ahead. A positive Industry growth means that competitors are less likely to engage in competitive actions because they do not need to capture market share from each other. This makes the rivalry among existing firms a weaker force within the industry.

How to face the Rivalry Among Existing Firms?

The Coca Cola Company needs to focus on differentiating its products so that the actions of competitors will have less effect on its customers that seek its unique products.Also,As the industry is growing, focus on new customers rather than winning the ones from existing companies.Also, conduct market research to understand the supply-demand situation within the industry and prevent overproduction.

Conclusion:

By using the information in The Coca Cola Company five forces analysis, strategic planners will be able to understand how different factors under each of the five forces affect the profitability of the industry. A stronger force means lower profitability, and a weaker force means greater profitability. Based on this a judgement of the industry's profitability can be made and used in strategic planning.