Assignment on

Porter’s five forces model

Of
Soft drink (Coca-cola)

Submitted by
Manos biswas(17-1-12-0073)

Arjun barua(17-1-12-0059)

Hadisur Rahaman(17-1-12-0076)

Foyez uddin Swadhin(17-1-12-0066)

MD Abu kayum(17-1-12-0065)

Submitted To
Wahida Shahan Tinne
Senior Lecturer, Department of Business Administration

ASA UNIVERSITY BANGLADESH

Introduction
Porter's Five Forces is a business analysis model that helps to explain
why various industries are able to sustain different levels of profitability.
It is one of the most recognized framework for the analysis of business
strategy. Porter's Five Forces is a simple but powerful tool for
understanding the competitiveness of your business environment, and
for identifying your strategy's potential profitability.

This is useful, because, when you understand the forces in your

environment or industry that can affect your profitability, you'll be able
to adjust your strategy accordingly.

Porter used theoretical framework derived from Industrial Organization

economics to derive five forces which determine the competitive
intensity and therefore attractiveness of a market.
Porter’s five forces model

1. Competitive Rivalry: This looks at the number and strength of

your competitors. How many rivals do you have? Who are they,
and how does the quality of their products and services compare
with yours?

Where rivalry is intense, companies can attract customers with

aggressive price cuts and high-impact marketing campaigns. Also,
in markets with lots of rivals, your suppliers and buyers can go
elsewhere if they feel that they're not getting a good deal from you.

On the other hand, where competitive rivalry is minimal, and no

one else is doing what you do, then you'll likely have tremendous
strength and healthy profits.

2. Supplier Power: This is determined by how easy it is for your

suppliers to increase their prices. How many potential suppliers do
you have? How unique is the product or service that they provide,
and how expensive would it be to switch from one supplier to
another?

The more you have to choose from, the easier it will be to switch
to a cheaper alternative. But the fewer suppliers there are, and the
more you need their help, the stronger their position and their
ability to charge you more. That can impact your profit.
3. Buyer Power: Here, you ask yourself how easy it is for buyers to
drive your prices down. How many buyers are there, and how big
are their orders? How much would it cost them to switch from your
products and services to those of a rival? Are your buyers strong
enough to dictate terms to you?

When you deal with only a few savvy customers, they have more
power, but your power increases if you have many customers.

4. Threat of Substitution: This refers to the likelihood of your

customers finding a different way of doing what you do. For
example, if you supply a unique software product that automates
an important process, people may substitute it by doing the process
manually or by outsourcing it. A substitution that is easy and cheap
to make can weaken your position and threaten your profitability.

5. Threat of New Entry: Your position can be affected by people's

ability to enter your market. So, think about how easily this could
be done. How easy is it to get a foothold in your industry or
market? How much would it cost, and how tightly is your sector
regulated?

If it takes little money and effort to enter your market and compete
effectively, or if you have little protection for your key
technologies, then rivals can quickly enter your market and weaken
your position. If you have strong and durable barriers to entry, then
you can preserve a favorable position and take fair advantage of it.
Evaluation of Coca-Cola
For generations, the simple pleasure of drinking Coca-Cola has been
associated with special times, special places and timeless moments but
also with the satisfying experience of everyday life. That is the magic of
Coke.
Coca-Cola, the brand, is the heart of our company. It has always been
and always will be. Coca-Cola, Fanta and Sprite create the magic to
provide consumers with special moments. Consumers of all ages want
great tasting beverages that also provide nutrients for healthy growth and
to make them feel their best. Coca-Cola compliments and shares the best
moments of all consumers!

AM Beverage Limited is the authorized bottler of Coca-Cola, Fanta and

Sprite. The bottling operation started after acquiring the plant of K.
Rahman & Company in 1982. In 1987 the company made an aggressive
move to expand the market by establishing a new bottling plant of 450
bottles per minute (BPM) capacity in Comilla. With this move the
company immediately gained the market leadership position from the
competitors. Strategic planning in further capacity building, investment
in logistics and support services as well as aggressive marketing
approach rewarded the enterprise with dividends in better market share
and product availability across the territory.

In 1990 the company was awarded the President’s Turtle Award by the
President of The Coca-Cola Company in recognition of its contribution
to positioning the brand. This is the most prestigious reward for bottlers
by Coca-Cola.

In 1997 the company established another bottling plant at Chittagong.

This state of the art bottling plant of 650 BPM capacities is the most
modern plant in the country, equipped with straight-line technology
from Germany. This plant was established to expand the market further
and to deliver products at every consumer’s doorstep, even to the most
remote areas of Bangladesh.

Apart from glass bottles (RGB) Coke, Fanta and Sprite is also available
in PET and cans also.
Major Rivals
The rivals for the beverage unit of AML range from the rivals producing
other carbonated beverages as well as from the producers of other
beverages such as Fruit Juices, Flavored Milk, Synthetic Drinks and
Pure Drinking Water. Notably, the major rivals of AML are:

Rival Carbonated Beverage Producers

 Transcom Beverage (Pepsi Cola, 7up, Mirinda)

 Pertex Group (RC Cola, RC Lemon)

 AMCL – PRAN (Pran Cola, Pran Up)

 Globe Beverage (Uro Cola, Uro Lemon)

 Akij Food and Beverage Limited, AFBL (Lemu, Mojo, Spa)

 AMCL – Pran (Pran Fruit Juice)

 Acme Pharmaceuticals (Acme Juice)

 AMCL – Pran (Synthetic Lychi Drink)

 Milk Vita (Flavored Milk)

Porter’s Five Forces Analysis of Coca Cola
Porter’s five forces model, named after its developer Michael E Porter,
is a strategic analysis tool that helps to analyze some critical forces
affecting the level of competition in an industry. This model has
acquired great popularity and fame over time and is used widely across
the business world for evaluating the profitability and attractiveness of
various industries.  The five forces that this model evaluates are a part of
every industry and every market. Managers can form strategies based on
an analysis of these forces to increase the profitability of their business.
This is a Five Forces analysis of the soda giant Coca Cola. Coca Cola is
the leading brand in beverages sector and has a global presence.  Its only
major competitor is Pepsi.

1. Bargaining power of suppliers

The bargaining power of suppliers of Coca Cola is weak. It is so because
the number of suppliers is high and the switching costs for Coca Cola
low. While Coca Cola can easily switch from one supplier to another, it
is not possible for any supplier to switch away from Coca Cola as easily.
That can lead to losses for any of the suppliers. While there are several
suppliers, the size of individual suppliers is small or moderately large.
Moreover, forward integration is a distant possibility for most of its
suppliers.  Even if there are no substitutes for raw materials like sugar,
the number of suppliers is still high. So, the main factors that have come
to light regarding the bargaining power of suppliers are:

 Large number of suppliers

 Small to moderately large size of individual suppliers.
 Forward integration difficult for the suppliers.
 Switching costs for Coca Cola not so high

2.Bargaining power of buyers/customers

The bargaining power of individual customers in case of Coca Cola is
low. Individual customers generally buy small volumes and they are not
concentrated in specific markets either. However, the level of
differentiation between Pepsi and Coca cola is low. Mostly they sell
similar flavors. Switching costs are not high for customers and still the
two brands enjoy high brand loyalty. The customers of coca cola are not
price sensitive.  Backward integration is not a possibility for the
customers whether it is an individual customer or a large retailer. If a
retailer acquires some bargaining power then it is only because it buys in
large volumes. Still, overall the customers’ bargaining power is weak.

3.Threat of new entrants

In the beverages industry there are several factors that discourage new
brands from entering. Growing a brand overnight is impossible. There
are significant investments to be made. From operations to marketing
every part requires a large investment. Some local brands may start it at
smaller scale and still marketing and hiring qualified staff requires
generous investment. The level of customer loyalty in the industry is
moderate and for any brand to build customer loyalty it will take some
time. So, while new entrants can compete with brands like Coca Cola at
a smaller or local level, to build a brand as big is a mammoth task
requiring both capital and skilled human resources.

4.Threat of substitutes
Main substitutes of Coca Cola products are the beverages made by
Pepsi, fruit juices, and other hot and cold beverages.  The number of
substitutes of Coca Cola products is high. There are several juices and
other kinds of hot and cold beverages in the market. The switching costs
are low for the customers. Apart from it, the quality of the substitute
products is also generally good. So, based on these factors the threat
from substitutes is strong.

5.Competitive Rivalry between the existing

players
There are two major players in the soda industry and they are Coca Cola
and Pepsi. There is intense rivalry between the two major players. There
are a few smaller players too but they do not pose a major competitive
threat.  The two main players are nearly of the same size and they have
similar products and strategies. The level of differentiation between the
two brands is also low and therefore the price competition is intense.
People have already heard of the Cola wars. So, the level of competitive
rivalry between the existing firms is a strong force.

Conclusion
Porter's Five Forces is a simple but powerful tool for understanding the
competitiveness of business environment, and for identifying strategy's
potential profitability.