Porter Five Forces Essay Example

merchandisers. While not impossible to enter the industry, the existing rivalry was overwhelming, especially financially.

Financial investments typically cost at least $25-50 million to build a plant.

Although expensive, one plant’s operations could serve the entire United States; it was advertisement and marketing costs that would bury new entrants. …and also the industry structure of the bottlers Among the five Porter forces, substitutes pose the highest threat. Previously arranged contracts and agreements secure business, but cultural differences ensure the continuing sale of various forms of beverages: water, Gatorade, etc. Industry Rivalry

Competitors include Cocal-Cola Enterprises (CCE) and Pepsi Bottling Group (PBG).

Coke established its own bottling network in 1990 and Pepsi followed in 2000. Suppliers

Bottlers purchase inputs including packaging and sweeteners. Packaging ranges from cans to plastic and glass bottles while sweeteners are provided in syrup, sugar, and artificial forms.

Metal cans were the popular choice by concentrate producers due to easy handling and lightweight. This caused a larger competition among manufactures in single contracts ultimately giving CSD companies more options and power in choosing. Buyers Franchise agreements had varying costs and benefits; previous contracts with Coca-Cola determined fixed costs while current ones established a formula so each company could profit. To match competitors and provide bottlers with incentives, Pepsi and Coke provided investments to support bottling networks; this was a positive and inexpensive marketing and advertising benefit to bottlers. Substitutes

Different market cultures and substitutes for CDS. More common substitutes include sports drinks, coffee, tea, water, etc. Potential Entrants Individually, Coke and Pepsi utilized about 100 bottling plants nationwide. Lines cost $4-10 million dollars while the

plants cost near $40 million (sometimes higher).

“The bottling process was capital-intensive and involved high-speed production lines that were interchangeable only for products of similar type and packages of similar size. ”

Franchised bottlers owned geographic territory; they also have agreements where directly competing firms cannot utilize their services. Which one is more attractive? (Concentrate producers versus bottlers)

After comparing each porter force analysis of concentrate producers and bottlers, the bottling industry is more attractive due to expenses, contracts, and easiness in market entry. Industry Structure of Bottlers.

While original costs are intensive, entry to the industry is more enticing and promising; Coke and Pepsi each required 100 plants.

Also, if contracts are arrange properly, there will be a smaller budget needed for advertisement and marketing since companies previously provide investments for bottling networks. Finally, bottling network contracts make it highly difficult for new firms to find bottling companies that can find a willing distributer. In conclusion, both industries competitiveness rises.

Even though the number of bottler rivals has decreased over years, the remaining continue to establish long-term contracts with producers such as Coke and Pepsi. These firms dominate the producer industry both nationally, and globally making it almost impossible to create an entire new firm/entity with expectations to be immediate leading market shareholders.