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Business Environment Analysis: PDF

   

Added on  2020-12-10

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Business Environment
Business Environment Analysis: PDF_1
Table of ContentsINTRODUCTION...........................................................................................................................1Main Body.......................................................................................................................................1(a) Identification and Analysis of Porter's 5 Forces Model on the Soft Drinks Sector within theUK economy...............................................................................................................................1(b) Value Chain Model for the analysis of internal business environment.................................3C .Adaptations that a firm could undertake in response to external business environmentalforces...........................................................................................................................................1D. Usefulness and limitations of porter's five model in the business environment....................2CONCLUSION ...............................................................................................................................4REFERENCES................................................................................................................................5
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INTRODUCTIONThe present study focusses on Porter's 5 Forces Model and it analyses its currentenvironmental influences on soft drink sub sector within the UK economy. It will also describethe value chain model for the analysis of internal business environment of the firm named EvocaCola. Evoca Cola is a carbonated soft drink of cola flavour produced and sold in UK. The studywill further explain appropriate adaptions Evoca Cola should undertake in response to theexternal business environmental forces. It also highlights the usefulness and potential limitationsof the Porter's 5 Forces Model in understanding the business environment.Main BodyA. Identification and Analysis of Porter's 5 Forces Model on the Soft Drinks Sector within theUK economyMichael Porter's 5 Forces Model is used to identify and analyse the 5 significantcompetitive forces that impact and shape any industry. The model determines thecompetitiveness and attractiveness of a respective market (Aithal, 2016). The impact of Porter's5 Forces on the soft drink sector within the UK economy can be explained as :Threat of new entrants or potential competitors :Entry of new entrants is a threat to any industry. Entry barriers in soft drink sector isrelatively low in UK as the potential entrants have to enter into licensing deals, insurances andother stated qualifications before establishing their brand in the market. A company requires ahuge capital investment before establishing its presence in the soft drink sector. Availability ofchannels of distribution is also a challenge for any new entrant. The other big players in the softdrink industry has enhanced goodwill and loyal customers which are not likely to try a newbrand. In present, consumers are switching more towards healthier options, the soft drink sectorfaces threat of emerging health drink sectors. Experienced players run on economies of scale,thus incur lower costs and improved performance (Bhardwaj, 2016). Threat of substitute products :There are many types of energy drinks, juices and sodas available in the market. Theconsumers could also satisfy their wants by drinking beverages, freshly made juices or smoothiesinstead of bottled pack soft drinks. For example, consumers may switch to coffee instead of softdrinks. This is proved true as there is growth in sales of Starbucks in UK over the years. People
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in UK love drinking coffee with right flavourings. Though customers will not switch tosubstitutes if they incur additional costs. Customers are not likely to go for substitutes if thebrand loyalty is strong(Burns and Dewhurst, 2016). The bargaining power of suppliers :This is a significant competitive force. The main ingredients in soft drink manufacturinginclude carbonated water, sweetener, phosphoric acid and caffeine. Its suppliers are notconcentrated. The supplier of commodities have the power to control the prices of ingredients.External environment fluctuations and demand supply cycles results in price variation over time.Natural disasters and calamities also regulate the price of commodities. Soft drink sectorcompanies can minimize the effect of these regulations by entering into contracts for supply ofraw material. Suppliers for soft drinks sector do not hold much competitive pressure and can beswitched easily by the manufactures (Carraher, 2018).The bargaining power of buyers An individual buyer of soft drink may possess a minimal level or does not possess anybargaining power. The retailers with large order quantity inhabit bargaining power. Soft drinksector companies do not directly sell to the end users, instead it deals with the channels ofdistribution for the sale of their products. The distribution channels includes wholesalers,retailers, fast food chain companies, vending machines companies and institutional campuses.The giant buyers with large quantities possess the power to buy the products at discounts. SoftDrinks companies sell its product to distribution channels at lower prices, that the distributionnetwork can sell it to end user with a profit. Buyers are highly sensitive to the price of soft drinksand are willing to switch the brand if if one becomes much more expensive. Rivalry among existing firms : The brands of soft drink sector in UK provide similar level of offerings and similaringredients in their products. This effects the buying behaviour of customers and results in cutthroat competition. The soft drink players in UK such as Evoca Cola, Virgin Cola, Tango, etc.faces tough rivalries among themselves. The brand identities provide competitive edge to theexisting players. The soft drink sector industry does not have rapid growth rate which makes itdifficult for the new entrants to compete with existing evolved businesses. Cut throat competitionin soft drink sector effects the pricing structure of soft drink companies. The slightest change in
Business Environment Analysis: PDF_4

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