Coca Cola Case

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Words: 756

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Category: Business and Industry

Date Submitted: 09/10/2014 06:36 PM

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Threat of new entrants 

First of all, regarding entry barriers, the initial investment in entering this industry does not seem to be significant. However, specific skills are needed in order to compete with established firms (CPs and bottlers) as well as the need to assure an adequate distribution network. Secondly, while firms already established in the market can take advantage of economies of scale, new entrants cannot, and the cost saving and advertising costs achieved by the first can be difficult to face by the latter. 

Thirdly, the access to the distribution channel is another significant barrier: established firms have long-term relationships with distributors, creating loyalty with retailers and thus creating more beneficial contracts and opportunities that are hard to reach for new entrants. Therefore, due to vertical integration, a company should not enter the market, producing only concentrates or only distributing products, because the established firms are usually integrated or vertically-independent. Finally, the biggest entry barrier that can be foreseen here is the brand value, which has represented the major result for profitability and sustainable growth, over the years. Furthermore, brand awareness equals higher sales, preventing competitors from gaining market share. In fact, consumers are aware of the brands and these are actually among the most valued worldwide. 

Bargaining power of suppliers 

In the soft drink industry, suppliers can be identified as the sellers of raw materials for CPs and bottlers. The largest companies in the industry represent the biggest clients for these suppliers by buying significant amounts and making the suppliers own a very low bargaining power. We can also trace a parallel analysis to the suppliers of bottlers, for which the soft drink industry companies are the biggest clients. It then becomes clear that both CPs and bottlers would have a vast array of choice, so that they will make their decisions...