Porter's Five Forces Analysis of Coco Cola India

Coco Cola India
Porter FIVE Forces Analysis
Michael E Porter
Porter's Five Forces of Competitive Position Analysis were developed in 1979 by Michael E
Porter.
Porter's Five Forces is a model that identifies and analyzes five competitive forces that shape
every industry and helps determine an industry's weaknesses and strengths. Five Forces
analysis is frequently used to identify an industry's structure to determine corporate strategy.
Porter’s Five Forces Analysis of Coco Cola India:

Porter’s Five Forces analysis is frequently used to identify an industry's structure to
determine corporate strategy. Porter's model can be applied to any segment of the economy to
understand the level of competition within the industry and enhance a company's long-term
profitability.
1. Bargaining power of suppliers:

The bargaining power of suppliers of Coca Cola is weak. It is so because the number of
suppliers is high and the switching costs for Coca Cola low. While Coca Cola can easily
switch from one supplier to another, it is not possible for any supplier to switch away from
Coca Cola as easily. Even if there are no substitutes for raw materials like sugar, the number
of suppliers is still high. So, the main factors that have come to light regarding the bargaining
power of suppliers are:
 Large number of suppliers.
 Small to moderately large size of individual suppliers.
 Forward integration difficult for the suppliers.
 Switching costs for Coca Cola not so high.
2. Bargaining power of buyers/customers:

The bargaining power of individual customers in case of Coca Cola is low. Individual
customers generally buy small volumes and they are not concentrated in specific markets
either. However, the level of differentiation between Pepsi and Coca cola is low. Mostly they
sell similar flavors. If a retailer acquires some bargaining power, then it is only because it
buys in large volumes. Still, overall, the customers’ bargaining power is weak.
Porter's Five Forces Analysis is an important tool for understanding the forces that shape
competition within an industry. It is also useful for helping you to adjust your strategy to suit
your competitive environment, and to improve your potential profit.
3. Threat of new entrants:

In the beverages industry there are several factors that discourage new brands from entering.
Growing a brand overnight is impossible. There are significant investments to be made. From
operations to marketing every part requires a large investment. Some local brands may start it
at smaller scale and still marketing and hiring qualified staff requires generous investment.
while new entrants can compete with brands like Coca Cola at a smaller or local level, to
build a brand as big is a mammoth task requiring both capital and skilled human resources.
4.Threat of substitutes:
Main substitutes of Coca Cola products are the beverages made by Pepsi, fruit juices, and
other hot and cold beverages. The number of substitutes of Coca Cola products is high.
There are several juices and other kinds of hot and cold beverages in the market. The
switching costs are low for the customers. Apart from it, the quality of the substitute products
is also generally good. So, based on these factors the threat from substitutes is strong.
5.Competitive Rivalry between the existing players:

There are two major players in the soda industry and they are Coca Cola and Pepsi. There is
intense rivalry between the two major players. There are a few smaller players too but they
do not pose a major competitive threat. The two main players are nearly of the same size and
they have similar products and strategies. People have already heard of the Cola wars. So, the
level of competitive rivalry between the existing firms is a strong force.
Pros and Cons of the Five Forces Model:
Pros:
1. The model helps to understand how value is shared among actors, and provides insight into
redistribution of profits.
2. The model takes a broader view on competition than only a firm’s existing competing
firms.
3. The business unit level provides a context beyond a single product or range of products.
4. Porter’s model emphasizes an outside analysis of the organization’s environment over an
internal focus.
Cons:
1. The model assumes a given state of affairs, and does not apply well to industries in
turmoil.
2. The analysis is reactive and does not include other perspectives such as the resource based
view in which organizations can reshape an industry based on existing core competences and
intrinsic will power.
3. The analysis is based on the assumption that firms strive only for a competitive advantage
over their rivals and exclude other motivations.
4. The analysis is based on the assumption that firms strive only for a competitive advantage
over their rivals and exclude other motivations

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Coco Cola India

Porter FIVE Forces Analysis

Porter’s Five Forces Analysis of Coco Cola India:

1. Bargaining power of suppliers:

2. Bargaining power of buyers/customers:

3. Threat of new entrants:

5.Competitive Rivalry between the existing players:

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