Coke vs Pepsi 5-Forces Industry Analysis
Barriers to Entry – Medium
There are low capital requirements. This is because the concentrate producers outsource their bottling. Hereby they don’t need to build expensive plants or worry about economies of scale. “The CSDs manufacturing process involved relatively little capital investment in machinery, overhead, or labor.”
Consumers have no switching costs. They can easily switch to another brand without experiencing costs.
The CSDs manufactures are likely to invest heavily in advertising to gain brand loyalty and brand identification. “A concentrate producer’s most significant costs were for advertising, promotion, market research, and bottles support.”
For new competitors it’s hard to gain access to distribution channels. The competition for shelf space is fierce because of the intense competition in the CSD industry. “An ever-expanding array of products and packages created intense competition for shelf space.”
Power of Suppliers – Weak
The ingredients the concentrate producers use are cheap and easy to get. There are a lot of substitutes available if the supplier threatened to raise his price. “Concentrate producers required few inputs: the concentrate for most regular colas consisted of caramel coloring,”
Power of Buyers – Medium
The power of buyers depends over which distribution channel we are talking about. For example the mass merchandiser category had high buyer power because they also sold their own private-label CSD. The vending channel on the other hand leaves buyers with almost no power.
Threat of Substitutes – High
The threat of substitutes is high because the buyers switching costs to substitutes are low. There is also a high availability of direct and indirect substitutes. For example people can also drink water, coffee, … .
Incumbent Rivalry – Medium/High
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