Porter’s 5 Force Analysis for Bottler industry
Force 1:- Threat of new entrant.
1. Low operating margins. * Exhibit 4
2. Highly Capital intensive industry.- high initial investment.
3. Bottlers enjoyed exclusive territorial franchise rights.
4. Low distribution channels.
There were high barriers for entry, hence LOW threat of new entrant.
Force 2:- Bargaining Power of Suppliers.
1. Huge demand for Metal cans (commodity).
2. CSD companies-largest customers of metal can industry.
3. CP producers regularly raised prices. * Exhibit 4
4. Only 2 or 3 manufacturers competed for single contract.
5. Forward Integration-was possible.
Hence, the Suppliers had a very HIGH bargaining Power.
Force 3:- Bargaining Power of Buyers.
1. All super stores (baring standard Walmart stores)- very high bargaining power due to bulk order sizes.
2. Retail Super stores Channel contributed to max annual sales.
3. Competition for Shelf space- due to increased product type, packaging…etc.
4. Coke and Pepsi appeared lower in ranking of list of brands important to retailers. * Exhibit 9.
5. Hence, retailers had a very high bargaining power w.r.t to CSD brands.
6. The industry had high switching costs.
Hence, the industry enjoyed diminished profitability because of HIGHER buyer’s bargaining power.
Force 4:- Threat of Substitute Products
1. Bottling industries(Metal, glass)–very few substitutes.
Hence, the Threat of Subs.-LOW
Force 5:- Rivalry among existing firms
1. The CSD industry operates in a duopoly between Coke and Pepsi, which dominate the market. However, since the
share of CSD consumption in U.S market was declining* Exhibit 1, there was increasing rivalry between the industry for
consumers.
2. Even though it was an industry with low margin and AGR, exit barriers were high.
Hence, the rivalry among existing firms- HIGH.
Analysis of Bottler industry
1.Threat of New Entrant LOW
2.Bargaining of Power of Suppliers HIGH
3. Bargaining of Power of Buyers HIGH
4.Threat of Substitute Product LOW
5.Rivarly among existing firms HIGH
