Strategy Business Information and Analysis Essay

Strategy Business Information and Analysis - Essay Example Interesting fact is that, porter five force analyses is an integrated component of the "outside-in" approach hence discussing porter five forces for soft drink industry in the first two sections will create silhouette for the critical evaluation "outside-in" approach to strategy formulation for organizations with the help of existing literature. Part 1 According to Deichert et al (2006), global soft drink industry is dominated by Coke and Pepsi for years but these two giants have understood the importance of diversifying product portfolio into noncarbonated beverages in order to achieve sustainable growth rate. Soft drink industry can be analyzed with the help of cumulative growth rate, market size and overall profitability. According to Datamonitor (2008), market value of soft drink industry will touch a value of more than $500 billion by the year 2014. Soft drink industry contributes almost 50% of the non-alcoholic drink industry Datamonitor (2008). Currently, the industry is growi ng at pace of more than 5% and it is expected that the market volume will cross 500,000 million litres within next couple of years Deichert et al (2006). According to the research report of Datamonitor (2008), although global soft drink industry is growing at a steady pace but it will decelerate in near future due market saturation and stagnation of market price. In such context, five force analysis soft drink industries will help the study to identify forces such as substitute products, suppliers, buyers, rival sellers and intra firm competitiveness which are shaping the industry. Diagrammatic representation of five forces in soft drinks industry can be explained in the following manner. (Source: Wheelen and Hunger., 2000 and 2006) Force 1- Competitive Rivalry According to Deichert et al (2006), competitive threat is the strongest among all other forces in soft drink industry. The market is saturated due to presence of many players such as Coca-Cola, Cadbury Schweppes, Pepsi Co etc ; high degree of saturation in the industry has decreased scope for existing players to differentiate in the product portfolio hence they extensively focus on price competition in order to attract customers. Rivals in the industry such as Coca-Cola and PepsiCo are strong global presence and access to huge amount of both financial and non-final resources, which has further decreased the scope companies in the industry to achieve resource based advantages as mentioned by Rumelt (1986). Having top selling brands in the kitty doesn’t ensure competitive advantage in the industry, for example, Coca-Cola owns 80% of top selling brands such as Sprite, Coca-Cola, Fanta, Diet Coke but it had achieved lower sales revenue in comparison PepsiCo during 2004-05 in USA and UK market Deichert et al (2006). According to Deichert et al (2006), advertising and marketing strategy plays vital role in the industry. For example, in some cases, rivals use competitive advertisings in order to nullify relevance of other companies among customers. Force 2- Threat of New Entrant