Question # 01

Conduct an industry analysis using porters five forces model

and identify action implications in each for Coca-Cola India.
PORTERS FIVE FORCES MODEL
Threat of new entrants
Power of suppliers
Power of buyers
Product substitutes
Intensity of rivals.

TH!"T #$ %!& !%T"%T'(

Medium Pressure.
Threat of new entrants was not that much to Coca-Cola as both
Pepsi and Coca-Cola constituted a major entry barrier to the
entrants. It was very expensive to launch a new brand, create
an imae aainst the stron competitors and sustain it.
Thouh, there were few local brands established and they
developed and promoted their brands but still couldn!t made it
up to the level that Coca-Cola would et affected by it and
constituted around "# percent of the mar$et share.
The distribution system was another most solid barrier, as
reachin to every outlet and small cities weren!t an easy tas$.
The investment in bottles as well as other e%uipment as
chillers, vissicoolers was hih.
The transportation costs plus vehicles was also a turnoff for
new entrants.
Co$e and Pepsi have a lon history of heavy advertisin. This
ma$es them dominate with their stron brand name and loyal
customers all over the world. This ma$es it virtually impossible
for a new entrant to match this scale of share in this mar$et.
&ew entrants to an industry typically brin to it new capacity, a
desire to ain mar$et share, and substantial resources. They
are threats to an established corporation. The threat of entry
depends on the presence of entry barriers and the reaction that
can be expected from existin competitors. 'n entry barrier is
an obstruction that ma$es it difficult for a company to enter an
industry.
&ew entrants are not a stron competitive pressure for the soft
drin$ industry. Coca-Cola and PepsiCo dominate the soft drin$
industry with their stron brand name and reat distribution
channels. In addition, the soft-drin$ industry is fully saturated
and rowth is small. This ma$es it very difficult for new,
un$nown entrants to start competin aainst PepsiCo and
Coca-Cola. 'nother barrier to entry is the hih fixed costs for
warehouses, truc$s, and labor, and economies of scale. &ew
entrants cannot compete in price without economies of scale.
These hih capital re%uirements and mar$et saturation ma$e it
extremely difficult for companies to enter the soft drin$ industry.
(ne of the strateies that PepsiCo has utili)ed to counteract
the threat of new entrants is to devote sinificant funds toward
its mar$etin campains. In order to compete with PepsiCo a
new company would need lare amounts of capital to satisfy
the hih fixed costs and to invest in the necessary advertisin
campains that create brand awareness.
)#&! #$ '*))+I!'(
*ow pressure
The number of bottle manufacturer was ade%uate, but not enouh,
due to which the barainin power amon the suppliers varied a lot.
The supply of coolin e%uipments!
+uar was a vital item, so the supply of suar in bul$ and
loo$in for its delivery on time
,ater was a major problem as well as it focused on the %uality
and suppliers of mineral water plus the incurrin cost to it.
'dvertisin was one of the major competitive techni%ue and
was the major revenue earnin shares stratey for the
companies -both Coca-Cola and Pepsi., as it covered /# to 0#
percent of revenue.
1esearch aencies were also very important.
The barainin power of commodity inredients suppliers is
low.
Most of the raw materials needed to produce concentrate are
basic commodities li$e color, flavor, caffeine or additives, suar
etc.
's the producers of these products are enerally providin
thesame products, they have lower power over the pricin
propotions.
+uppliers to PepsiCo are bottlin e%uipment manufacturers and
secondary pac$ain suppliers. PepsiCo does its bottlin
throuh its subsidiary, the Pepsi 2ottlin 3roup. +ince PepsiCo
owns a majority interest in the Pepsi 2ottlin 3roup, this
particular supplier does not have much barainin power.
)#&! #$ ,*-!'(
*ow pressure
The buyers here were Institutional buyers and retail outlets.
Institutional buyers were the one who bouht and stoc$ed at
hotels and restaurants. The retail outlets stoc$ed for sale to
consumers -relatively small %uantities. and accounted for
around 4/5 of total business -power of buyers..
It built up very stron association with 'merican way of life. 6or
ma$in its brand imae stroner, it announced to re-introduce
its brand and chane its 77 years old brand of containin more
suar to less suar, which was actually not a ood idea for the
company and they bean to stic$ to Coca-Cola classic as it had
a stron firm imae.
)#.*CT '*,'TIT*T!'(
Medium to 8ih pressure
+ubstitute products are those products that appear to be
different but can satisfy the same need as another product.
+ubstitutes limit the potential returns of an industry by placin a
ceilin on the prices firms in the industry can profitably chare.
To the extent that switchin costs are low, substitutes may have
a stron effect on an industry.
The product substitutes to Coca-Cola were juices that could be
easily carried away with no brea$ae ris$ and healthier as
made from fresh fruits. (ne was 6rooti, assurin 9no water or
doubtful purity: plus safe, enjoyable, tasty and healthy. 'nother
was 9onjus:, no different from juices extracted from fresh fruits.
The important substitute for soft drin$s was 9bisleri: -mineral
water.. 'nother was 9bailey:.
I%T!%'IT- #$ I/"+-(
8ih Pressure
Currently, the main competitor is Pepsi which also has a wide rane
of beverae products under its brand. 2oth Coca-Cola and Pepsi are
the predominant carbonated beveraes and committed heavily to
sponsorin outdoor events and activities
The intense competition that Coca-Cola faced from is Pepsi. The
intensity of the competition has been very aressive every time
tryin to rab the hihest share in the mar$et.
The biest strenth Coca-Cola had aainst Pepsi was its array
of brands powerful in each sement, where Pepsi!s non-cola
brands were fairly wea$.
Pepsi chose to adapt to Indian needs and preferences.it
associated its brand with festivals, events, occasions etc. it
adopted an aressive campain taretin the youth and later
positioned itself as 9thins for the youth:, which as an anti-
official aspiration for youth ended up to be a hue success.
Coca-Cola outclassed itself in terms of %uality aainst Pepsi
and other soft drin$s.
The above mentioned points clearly show the cut-throat, nec$ to nec$
competition and intensity amon the rivals.
;uestion <=
>evelope a set of recommendations for Coca-Cola India.
". Coca cola should always maintain it?s uality standards.
@. Invest more in research and developement.
A. 'dopt more locally responsive flavors of drin$.
<. 'ssume control of more bottlin subsidiaries.
/. Bncompromisin commitment to product safety and %uality in India
and everywhere they offer their beveraes around the world.
0. ,e support the adoption of strinent, science-based rules by the
Indian overnment reardin levels of contamination in soft drin$s.
The rules should be based on sound and validated testin
methodoloies. ,e continue to wor$ with relevant overnment
bodies, industry associations, non overnment orani)ations -&3(s.
and the scientific community to develop and finali)e criteria and
associated testin methods for contamination in soft drin$s.
4. Co$e is a mature product, so your tas$ is to penetration into new
mar$ets.
My stratey recommendations for Coca Cola subsidiary are
constrained by limited $nowlede. In order to develop a winnin
stratey in India, the main objective is to establish the brand name.
The best stratey places product of uniform %uality in every corner of
India. Conditionally, Coca-Cola must accept the costs and loistical
challenes of distributin to every conceivable mar$et. +ellin costs
may be hiher in remote reions, but the %uality product must be
available, and it must be reasonably priced. 'dditionally, Co$e can
loo$ to the competition for clues as to what products they should
phase out, so that they can utili)e plant capacities for stron sellers
and new innovative offerins. That said, I thin$ that the best
differentiation stratey is brand reconition, which re%uires promotionC
therefore, the sponsorship of local, reional, and national events
should continue. +imilarly, the sponsorship of sports teams is
effective in India, and product endorsement by well-$nown athletes is
yet another way to strenthen the connection between the product
and the consumer. In conclusion, the Indian economy presents the
best possible scenario for producers iven that the people enjoy
increasin personal wealth. Therefore, the best stratey employs a
promotional stratey that leads people to believe that Co$e products
are simply better.
D. &owadays, environmental chane is rapid. Coca -Cola should be
sensitive of any new trend and position itself as a uni%ue brand in
order to $eep its competitive advantae.
7. Coca- Cola should provide industry leadership in the health and
wellness area. It should produce different $inds of products for
different sements of the mar$et. In baby boomers! mar$et, Coca-
Cola should focus on mar$etin tea and water beverae which
contain less sodium and suar. In youner eneration mar$et,
besides sport drin$ and enery drin$, Coca -Cola can produce
oranic beveraes for youner people.
"#. Coca-Cola!s should maintain its production techni%ues so well
developed that it costs a fraction of the sellin price to manufacture
their product, resultin in hih profit marins.
"". ,ith consumers more focused on %uality, includin caloric
content and allerens Coca Cola will have to reformulate many of
their products to increase nutritional value or eliminate undesirable
inredients. >oin this while maintainin existin product attributes
for flavor and price can be a formulation challene.
"@. Create more formula aility.
"A. ' djust formulation to maintain consistency in their final products.
*i$ewise, disruptions caused by weather and eopolitical issues are
not new. ,hat!s different today is the business context. Consumers
and retailers have hiher expectations for product %uality, availability,
and price performance. The onus is on the 6E2 company to create
formulas that better mitiate the issues of inredient variability and
availability based on seasonality and unpredicted disruptions.
6ormulas also have to address the need for products to maintain their
nutrition and taste over a loner shelf life.
"<. Continually drive down costs. ,ith the upward trends of beverae
commodity, production, and distribution costs and the downward
pressure on pricin from retailers, Coca Cola can turn to formulation
to produce reater efficiency and lower costs.
"/. Minimi)e environment impact. More intellient formulation has a
role to play in complyin with the rowin focus on food safety as well
as the need to comply with environmental reulations li$e minimi)in
water usae and dischare.
"0. 2y means of a combined policy of heavy pull throuh massive
advertisin and heavy push throuh a well-trained sales force and
throuh partners in the distribution system who were rewarded with
hih consumer demand and restricted by contracts from pushin
competin products, Coca-Cola had created a brand.
"4. The company should move in a vertically interated manner.
Coca Cola did captain a vertical system that shepherded the product
to the consumer and that $ept other products away from that
consumer. If fountain opera- tors had Coca-Cola dispensers on their
counters, they were supposed to sell only Coca-Cola throuh them. If
bottlers had Coca-Cola franchises, they were prohibited from bottlin
any other cola.
"D. Coca-Cola should have the resources and the determination to
$eep the site evolvin as it tests what components wor$ best for its
audience.
"7. Coca Cola should maintain it?s international presence. ,hen it
comes to international presence, Coca-Cola easily trumps Pepsi.
Coca-Cola?s impressive lobal footprint puts it in a better position to
benefit from stron rowth across the lobe, particularly in the
developin world. 6urthermore, because Co$e enerates so much of
its revenue abroad, it stands to benefit reatly from the continuin
wea$enin of the dollar as sales denominated in forein currencies
are suddenly worth more dollars bac$ home.
@#. Coca Cola should try to build hih brand e%uity to let the company
enjoy a number of advantaes i.e. reduce mar$etin costs because of
hih level of consumer brand awareness and loyalty.