Case Study of Csd Industry, Rte Industry and Specialty...

A Comparison of the Carbonated Soft Drink, Ready-to-Eat Breakfast Cereal and Specialty Coffee Industries Using Porters Five Forces Michael Porter’s framework describes an industry as being influenced by five forces: buyer power, supplier power, threat of substitutes, threat of new entrants and the degree of rivalry between existing firms within the industry. A strategic business manager can use Porter’s model to more clearly understand the industry environment in which its firm operates and to therefore develop a competitive edge over rival firms. After analyzing the carbonated soft drink, ready-to-eat breakfast cereal and specialty coffee industries using this framework, I found that the three industries were very similar in their†¦show more content†¦According to the Cola Wars case, a bottling plant could cost as much as 75 million dollars and â€Å"Coke and Pepsi each required close to 100 plants to provide effective nationwide distribution.† (Yoffie , 3). Additionally, Coke and Pepsi have deals with many distribution channels; such as cooperative merchandising agreements and franchise agreements with their bottlers that forbids the bottlers from carrying â€Å"directly competing brands.† (Yoffie, 3). These agreements limited the ability of new entrants to utilize the distribution channels that would make them successful in the industry. Lastly, Coke, Pepsi and Cadburry Schwepps claimed about 89.3 percent of the soft drink industry, with Coke and Pepsi accounting for the majority. The ability of a new entrant to wedge itself between these highly established branded firms and their loyal consumers is nearly impossible. Likewise, brand loyalty to the major firms in the ready-to-eat cereal industry was strong as these companies alone accounted for 59% percent of the industries’ sales by volume in 1993 and for about 86 percent of market shares in the industry. (Corts, 2). Also similar to the carbonated soft drink industry are the rest of the major barriers to entry in the ready-to-eat cereal industry: capital requirements, access to distribution channels