Porter Five Forces Coke And Pepsi

Submitted By Michael-Jonathan
Words: 507
Pages: 3
Open Document
To: Upper Management
From: Michael Serbin
Date: September 2, 2014
Subject: Coke Industry: Porter Five Forces and PESTAL

Threat of Entry
The threat of entry is low in the Cola industry. Coke and Pepsi hold the substantial market share and have established themselves as the market leaders. Scaling a new company to their size is not possible as they combat new entrants with contracts with providers and capital expenditures. Although not much is different between cola products Pepsi and Coke have established brand recognition and consumer preferences. There are no legal restrictions for entering this market, however Coke and Pepsi hold the majority of power and have formed somewhat of an oligopoly.

Supplier Power
Coke and Pepsi have made it a priority to establish a relationship with their suppliers. They have contracts with them providing a maximum price of inputs to keep cost low. The two giants have extreme power over their suppliers through contract agreements they have entered. However, both Coke and Pepsi have made large expenditures for marketing of their suppliers in order to keep them happy. Even with the contract agreements the input prices have risen at a higher rate than adjusted inflation.

Buyer Power
The market for this product is huge. It’s consumed globally and does not discriminate by wealth. The size of the market compared to the two overarching powers in this industry limit the buyer power. There is little to distinguish the products from each other and switching cost from one brand to another is very low. The margins on this product are extremely high and the awareness of the cost structure by the buyer is very low. Overall consumers have very little power in this industry.

Competitive Rivalry
There are not many competing companies outside Coke and Pepsi. The third player in this industry is very far behind both in terms of revenue and market share. The industry experiences steady growth due to global expansion, however Coke and Pepsi have already made the move into these markets. The main consideration of
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