Soft Drink Industry

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Submitted By oliviac
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Barriers to entry

One of the 5 forces that shape the soft drink industry is barriers to entry. The Coca Cola company says on its website it is facing strong competition from well-established global companies and many local participants. For this particular industry, the competitive forces are benign, (favorable). Most of the companies in the soft drink industry are profitable. The Coca Cola Company's main competitors are Dr.Pepper, Nestle and PepsiCo. These companies definitely have the advantage over there competitors. In porters 5 forces, Porter refers to supply-side economies of scale, where firms such as the CCC and PepsiCo can produce at large volumes enjoy lower costs per unit because they can spread fixed costs over more units, employ more efficient technology, or command better terms from suppliers. According to Porter's article, supply-side scale economies deter entry by forcing the aspiring entrant either to come in the industry on a large scale, which requires dislodging entrenched competitors. How does a newcomer circumvent the barriers to soft drink industry? Perhaps create new distribution channels of their own. Creating a niche market for their drink in the form of marketing to a certain segment in the soft drink industry

Rivalry Among Existing Players * The industry is not growing rapidly. The growth rate for the industry is not rapid; it is in fact relatively small. This makes it very difficult for new entrants to compete with the already thriving firms in the industry. * The industry does not necessarily have overcapacity at the moment. However, if a newcomer were to try and enter the industry, its current players would make it very challenging because of brand loyalty and recognition amongst customers. * The fixed costs are a high proportion of total costs for a firm in the soft drink industry. Fixed costs act as a firm…...

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