Industry Analysis: Coca-Cola's Competitive Landscape and Adaptations

This report provides a comprehensive industry analysis of Coca-Cola, a leading soft-drink manufacturer, examining its position within the competitive landscape. It employs Porter's Five Forces model to assess external factors such as new entrants, supplier and customer bargaining power, the threat of substitutes, and competitive rivalry within the soft-drink industry. The report also utilizes the value chain model to dissect Coca-Cola's primary and support activities, highlighting areas for value addition and competitive advantage. Furthermore, it explores strategic adaptations that Coca-Cola managers can implement to address unfavorable external factors, focusing on product innovation, competitive strategies, and customer relationship management. The report concludes with an evaluation of the usefulness and limitations of Porter's Five Forces model in the context of Coca-Cola's business environment.

INDUSTRY ANALYSIS AND
POSSIBLE ADAPTATIONS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 5.1 ........................................................................................................................................1
(A) Porter five Force Model ..................................................................................................1
(B) Value Chain model ..........................................................................................................4
(c) strategy for external environment.....................................................................................6
(D) usefulness and limitation of porter five force model ......................................................7
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Industry analysis is framework which facilitates an organisation about its position among
companies which offer same kind of product and service to customer. Present report articulates
understanding of external factor with help Porter five Force Model. Report will also cover the
value chain model in order to know different primary and supportive activities which are used in
value addition. Coca- cola Manager's different stargies to tackle unfavourable external factors
also covers in study. Lastly, advantage and limitation of porter five force model will be given to
know where model should be use by manager. Coca- Cola is one of leading soft-drink
manufacture which render many product variant like Diet Coke, Diet Coke Caffeine-Free, Fever-
Tree Tonic Water etc.
TASK 5.1
(A) Porter five Force Model
This model help in examine level of competition faced by an organisation and industry.
Coca- Cola manager uses this framework developed by Michael E Porter for making strategic
decision (Eskandari and et al., 2015). Tool help to increase profitability, increased market share
and competitor advantage. External factor impacts Soft drink industry are given below:
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(1) New Entrance (Low to Moderate)
Some elements work as foster and barrier to make entrance decision in beverage industry.
Easy entrance, encourage people to establish more business. And, large players in same industry,
lowers the market share and increases competition. Coca- Cola has less threat for new entrance
as beverage industry required large invest in every business activity (Long, Looijen and Blok,
2018). Also, industry has moderate customer loyalty which means, new business has to wait long
to acquire loyal consumer.
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Illustration 1: Porter Five Force Model
(Sources: Porter’s Five Forces, 2012)

(2) Bargaining power of supplier (Low)
High bargaining power of supplier lead to high production cost ,that can lower the profit
margin. So business person prefer low supplier bargaining power so that they can set reasonable
price for product to customers and earn high sales. Coco- Cola can avail its raw material easily
because it has large supplier pool available in market thus, it companies enjoying low supplier
baring power. There low Switch cost for company as well which firm can move to one supplier
to another with no extra cost. Forward integration is a tough task for supplier.
(3) Bargaining power of customer (Moderate to high)
High customer bargaining power impact the pricing, quality and location decision. For
instance customer can easily move to one brand to another if they find higher price for same
product render by other brand. Organisation also has to maintain the quality of product for retain
the customer loyalty. Coca – Cola possess high customer bargain power even as there is low
switch cost of buyer (ÖZTOPÇU, 2017). Reason of high buyer bargain power is, buyer of Coca-
Cola product are price and quality sensitive.
(4) Threat of substitutes (High)
Coca- cola is at weaken side when it comes to substitute of product. Coca- Cola's
competitor like Pepsi, Dr Pepper Snapple and Red Bull offer same kind of product even with fine
quality. Cold drink now replaced by healthy fresh fruit juice due to health awareness and life
style diseases in UK. It can be pertain that company has high threat of substitute.
(5) Competitive Rivalry (Very high)
Many players in same industry with little product difference can create tough competition. High
competitor render low return. Competitor practice different product and marketing strategies to
grab customer from it competitors. Beverage industry is highly sensitive by competition as there
many strong leader available which give tough competition to Coca- Cola with similar product
(Steiber, 2018). Consumer think about price when same quality product is given by other brand
as well. This mind set of buyer makes battle tough for leading beverage.
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(B) Value Chain model
This framework provide insight about various business activities perform by business in
order to gain competition advantage and add value to product and service. Manager get to know
information about activities starts from procure raw material to sale the product to end customer,
to optimize the activities (Ghosh and Shah,2015). Following is the value chain model of Coca-
Cola which help brand to establish itself as most recognised
Primary activity
Inbound logistics -
Coca- Cola has very large supplier pool size which render it raw material, machinery,
packaging, ingredients as per set standard by company. Firm treat its supplier like its business
partners who help company to acquire uninterrupted supplies.
Operations
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Illustration 2: Value - Chain model Framework

Coca- cola operation function comprise development of product and manage
administrative function of company. It is a global beverage brand which has its operational unit
at local level as well. Firm sale only base and secret syrups to local manufacturer (Bottlers),
which they use in making large beverage quantity (Gattorna,2017). Organisation does not control
the bottlers in their operation, but it ensures that, bottler maintain product standard by periodic
investigation. Outbound logistics
This function of coca-cola is fully carried out by its bottling partners and product
distributors. Bottling partners responsible to manufacture, package, distribute and merchandise to
vending people. Vending partners of company are street vendors, restaurants, move theatres,
grocery stores and amusement parks. These vendors' sales the final product to end customer.
Marketing and sales
Coca- cola is one the most recognised brand globally and it became possible only because
of its serious marketing efforts which comprise its logo, print media advertisement, digital
marketing, promotion via social media (Chalikias and Skordoulis, 2017). Company has changed
its marketing strategy like it now focuses on promote whole brand together, in place of advertise
product separately.
Support Activities
Human Resource Management:
Coca-cola Tries to use best HRM practice in organisation by hiring right people, Talent
management, fair performance evaluation, motivate personnel with reward and payment. Firm
also work for carrier growth of individual by promoting individual learning.
Technology:
Organisation attempts to bring product improvement and enhance customer satisfaction
with the latest technology. It has six research and development centres across the word. These
centre are connected with universities, partners and tech start-ups (Li and Li, 2016). Continuous
Innovation are made in product, packaging, logistic, supply chain and equipment.
Procurement:
Firm avail raw material from farmers and supplier. Also, it implies the latest technology
in Procurement process like RFID which gives real time information about movement of
material. It also provides essential training and guideline to its supplier so that company can get
desired raw material.
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Firm Infrastructure:
Company successfully manage large company infrastructure which contain different
department like financial, operational management, human resources, marketing, information
technology and research and development (Tang, 2018). Firm also take responsibility to educate
supplier to practice safety of buyers.
(c) strategy for external environment
Coca- cola manager analysed that company has to work upon its customer, product and
competitors because these dimensions has moderate to high risk. Manager can easily maintain
sustainability in these three factor by following some practical solutions which are as follows:
For product substitute
Manager should put more effort in analyse the customer need, preference and trend so
that they can make product which directly target and impress the buyer. Like Coca-cola should
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Illustration 3: Customer loyalty dimensions
(Sources: dimensions-of-Customer-Loyalty, 2019)

introduce more healthy and organic beverage because people now prefer health over taste. It
should also change its product packaging from plastic to disposable container because it helps
buyer to dispose waste in environment friendly manner (Hill and Alexander, 2017). Manager
should not only bring innovation in product but also communicate it with existing and potential
buyer. Like – we bring diabetic friendly cold drink for middle adults and eldary and fruit
smoothies for youngsters and children.
For competitive Rivalry
Coca- cola really have strong competitor which gives tough competition. Manager should
make more effort to earn customer loyalty by loyalty program such as offering them different
product, discounts, benefits, coupons etc. also customer should feel emotionally attached with
brand. Manager should also identify and target the untapped market segment. Like soft drink
industry still not able to cover old people.
For customer bargain power
Customer should be offered with different size packing and maintained quality of
product. Value addition put psychological impact on buyer mind, which should also be taken into
consideration. Effective Supply chain management not only helps in lower the cost for buyer but
also facilitate uniterpued final good supply. Manager should try to minimise the intermediary
line because large intermediary between manufacturer to end customer also enhance the cost and
lower the product quality (Ngo and Nguyen, 2016).
Existing customer should be taken care by CRM and other software. Product Innovation
and technology helps in increased customer satisfaction as they are able to fulfil the need of
buyer. Trend analyse can be done via accounting information interpretation and social media.
Apart from it personalisation and customer will render best result. For instance- customer should
be allow for put the ingredient as per their taste in basic syrup.
(D) usefulness and limitation of porter five force model
Porter's five force model is widely used tool to determine external factor related to
competition level in particular industry, Once managers successfully identifies these factor, they
make strategical and tactical policy accordingly, however it has both pros and cons, which are as
follows:
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 By using porter model managers get to know information like number and degree of
competition in industry. Managers tries to implement cost effectiveness, product
differentiation and innovation when there is high rivalry.
 It is such a simple tool that in evaluate the external environment. It does not need any
special technical skill to be use
 It renders information as strength of supplier and buyer to influence company cost,
pricing and profitability. Manager opts different strategy according to bragin power of
both. For instance managers uses their refine negotiation with strong suppliers, make
supplier, company's stargtic partner, reduces risk for supplier etc. on the side strong
buyers are managed by coca-cola manager by offering them product differentiation, value
to money, reasonable pricing (Huang and et al., 2015).
 Coca- cola use porter model for market expansion strategy like product diversification,
acquisition, merger, joint ventures and explore new market. Also, it helps is resources
planning to counter the unfavourable external factors.
 It gives more specific understanding of business environment than PESTLE and SWOT
because model is more industry oriented than general, moreover information obtain from
porters model can further use in VRIO, SWOT and PESTLE framework.
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Limitation of Porter five force model
 Strategies made upon porter analyse might not give the best result as it ignore other factor
that can change the outcome for managers policies. For instance governments if
government bring new rule for beverage industry than Coca- cola will not remain
untouched with this change.
 Model do not consider factors like globalisation and change in technology as these
elements were not present when framework was made.
 Model is highly industry oriented, however does not consider firm specific factor like
financial capability, HR, technical competency of business. These considerations are
more relevant than in daily business decision. Dynamic market changes are totally
ignored by Michael Porter (Mathooko and Ogutu, 2015).
 Manager sometimes miss the essential information because model is narrow in approach.
Also, it renders the best outcome in simple and small business structure. Coca- cola might
face issue as company has wide product line, many functional units and giant size.
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Illustration 4: Functional Beverages: Industry Analysis
(Functional Beverages: Industry Analysis,2012 )

 Only qualitative analyses can be done via porter model. Manager do not receive
quantitative impact of influence factor. It creates problem in making firm conclusion,
suggestion and recommendation. Like- it tells that, industry have high bargain power of
customer, but don't tell about “why so” and how manager can tackle the situation.
CONCLUSION
From the above study it has been concluded that industrial analysis render better
understanding of business environment and customer. There are so many model, framework and
tools are developed by business researcher which provide guideline to manager to conduct
business research. Porter five force greatly focuses only on competition only, so manager should
try to use combination of different model. Manager should adapt policy as per the information
received by study. Value chain analyse help manager to optimise activities to align with external
environment.
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