[Submission Date]
Intensity of Each Industry Force
Bargaining power of buyers is low to medium because not only consumers have various alternatives in the CSD industry to select from but both the Pepsi and Coke offered multiple offerings to beverage lovers.
The power of suppliers is very high in the cola industry. The number of soft drink bottlers in the United States has greatly reduced from two thousand in 1970 to three hundred by the end of the year 2009. The industry is still dominated by Pepsi and Coca-Cola. These bottlers helped the national beverage brands secure shelf spaces and customer attention. Since there are fewer suppliers in the cola industry of the United States, the bargaining power of national brands is low but that of suppliers is very high. Both the Pepsi and Coke supplied beverages to their retail channels where discount retailers and supermarkets have low bargaining power. Pepsi and Coke have high bargaining power as suppliers because these two companies were able to market their products from different channels of distribution such as retail outlets, discount stores, supermarkets and restaurants etc .
For the cola industry, the threat of substitutes has really been very high from 1990 to 2009 due to which the cola segment in the CSF category lost is the market share of seventy-seven percent in 1990 to fifty-five percent in 2009. This is because there were many alternatives to cola consumption such as bottled water, coffee, milk, tap water, distilled spirits, sports drinks, powdered drinks, tea and juices etc.
The threat of new entrants is also of high intensity in the cola industry because there has been little investment required in concentrate manufacturing process ($50 to $100 million) for building machinery.
This makes the intensity of threat of new competition medium. This is because even though the cost of entry was little from the 1970s to 2009, but the dominance of Pepsi and Coke and their multiple offerings gave deeply penetrated the cola segment of CSD industry.
Level of Rivalry depending upon Industry Forces and their Strengths
For the cola industry in the United States observed from the 1970s to 2009, it is found that the threat of new competitors entering the market is high because of lower machinery and overhead costs. Despite this, the threat of new offers from existing rivalry in the cola sector is of medium intensity since the cola industry is largely dominated by Pepsi and Coke all around the globe. However, it is also observed that the cola segment faces intense competition/rivalry from different alternatives in the soft drinks industry of which the competition is of high intensity. Such alternatives are already outlined in the previous section. Overall, the level of rivalry in the cola industry is of low to medium intensity.
Dynamic Changes in One of the Five Porter’s Forces
It is already discussed that of the five forces of Porter’s Model, it is the power of suppliers that has undergone dramatic changes from 1990 to 2009. In the beverage industry (particularly the cola segment), the beverage companies or national brands have little bargaining power since the number of suppliers (bottlers) and marketers declined drastically over a twenty year period. In other words, the beverage industry is highly dependent on its bottlers who also supply or market their products in stores and supermarkets.
References
Yoffie, D. B., & Kim, R. (2010, December 9). Cola Wars Continue: Coke and Pepsi in 2010. Harvard Business Review , 1-22.
