Essay: Five Competitive Forces for Coca-Cola Company

Sample Essay

Rivalry is the biggest challenge faced by the soft drink industry. Coca-Cola, Pepsi Co., and Cadbury Schweppes are competing at large within this industry and their global establishment is reinforcing the competition. Coca Cola, Diet Coke, Sprite and Fanta are under the Coca-Cola umbrella it was still recorded with lowest revenue in 2005 as compared to PepsiCo (Murray, 2006a). PepsiCo is aimed to be the toughest rival for Coca-Cola.

The new companies entering the industry are forcing the existing companies to develop new varieties of soft drinks. This is one of the ways they can retain their sales figures and attract new buyers (Murray, 2006). New companies are not a very viable pressure for the soft drink industry since brand name is a very strong retention strategy in this materialistic economy. Due to complete saturation in the industry there are lower chances of growth for the new entrants.  Another hurdle for new companies is the high fixed costs that they have to face and this includes costs of warehouses, transportation, workers and economies of scale. The last cost stops the new entrants from competing in price. However, in this recessionary and inflationary age, the new entrants can be a viable pressure if competitive strategies are overlooked.

Substitute products such as mineral bottled water, coffee and tea can be a big threat to the industry at different times, for example seasonal or mood changes. These are very likely to be consumed by health conscious people and those looking out for a change of taste. Caffeine stands out to be an ingredient present in soft drinks and tea and coffee at the same time, therefore these products tend to be viable competitors.  Coffee shops are posing a big threat to the soft drink industry (Data monitor, 2005).

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