WRITING
1. Porter’s five forces
Threat of new entrance: low
From our opinion, there are many difficulties for any new entrants to enter the soft drink market.
• Huge business capital: Starting a new business in beverage industry is not an easy issue. A new entrance needs a big amount of starting money.
- High advertising cost: The advertising and marketing spend (Case Exhibit 5 & 6) in the industry is in 2000 was around $ 2.6 billion (0.40 per case * 6.6 billion cases) mainly by Coke, Pepsi and their bottler’s. The average advertisement spending per point of market share in 2000 was 8.3 million (Exhibit 2). This makes it extremely difficult for an entrant to compete with the incumbents and gain any visibility.
• Brand Image and Loyalty: Coca-Cola has a long history of advertising campaign and this has brought for them a huge amount of brand equity and loyal customer’s all over the world. This makes it virtually impossible for a new entrant to match this scale in this market place.
• Price war: To enter into a market with entrenched rival behemoths like Pepsi and Coke is not easy as it could lead to price wars which affect the new comer. Sometimes, new entrances have to suffer loss so that they can gain customers and also build their branch name.
1.1. Power of suppliers: low
• Coca- Cola’s suppliers are diversified: Because of a particularity of production material, Coca- Cola cooperates with many different suppliers for purchasing material. For instance, Vietnamese Coca-Cola Beverage Company gets quality bottle from Dynaplast Packing Company Ltd, Coca leaf is purchased from Stepan Company and premium paper carton box for storage and domestic consumption is bought from Bien Hoa Company. Hence, suppliers can not have chance to control the material price.
• Coca-Cola producing ingredient is basic commodity: Most of the raw materials needed to produce concentrate are commodities like Color, flavor, caffeine or additives, sugar, packaging. Essentially these
Threat of new entrance: low
From our opinion, there are many difficulties for any new entrants to enter the soft drink market.
• Huge business capital: Starting a new business in beverage industry is not an easy issue. A new entrance needs a big amount of starting money.
- High advertising cost: The advertising and marketing spend (Case Exhibit 5 & 6) in the industry is in 2000 was around $ 2.6 billion (0.40 per case * 6.6 billion cases) mainly by Coke, Pepsi and their bottler’s. The average advertisement spending per point of market share in 2000 was 8.3 million (Exhibit 2). This makes it extremely difficult for an entrant to compete with the incumbents and gain any visibility.
• Brand Image and Loyalty: Coca-Cola has a long history of advertising campaign and this has brought for them a huge amount of brand equity and loyal customer’s all over the world. This makes it virtually impossible for a new entrant to match this scale in this market place.
• Price war: To enter into a market with entrenched rival behemoths like Pepsi and Coke is not easy as it could lead to price wars which affect the new comer. Sometimes, new entrances have to suffer loss so that they can gain customers and also build their branch name.
1.1. Power of suppliers: low
• Coca- Cola’s suppliers are diversified: Because of a particularity of production material, Coca- Cola cooperates with many different suppliers for purchasing material. For instance, Vietnamese Coca-Cola Beverage Company gets quality bottle from Dynaplast Packing Company Ltd, Coca leaf is purchased from Stepan Company and premium paper carton box for storage and domestic consumption is bought from Bien Hoa Company. Hence, suppliers can not have chance to control the material price.
• Coca-Cola producing ingredient is basic commodity: Most of the raw materials needed to produce concentrate are commodities like Color, flavor, caffeine or additives, sugar, packaging. Essentially these