COMPETITIVE ANALYSIS USING PORTERS FIVE FORCES MODEL
The soft industry is characterized by new competitors entering into the market while the existing firms decide to stay or leave the market depending with the existing conditions in the market. When new competitors enter the market, the existing firms must react so that they maintain their market share. The existing firms in the firm use different strategies to exist and prevent entry of new competitors into the market, therefore it is important for the firms to use Porters five forces model for firms to enter into the firm while the existing firms must use them to ensure that they maintain their market share.
2.0 PORTERS’FIVE FORCES MODEL
The Porter’s five forces consist of business strategies that determine the competitiveness of a firm. These forces refer to the microenvironment i.e. forces that are within a firm but affect its competitive advantage with the other competitors in the market. They affect the ability of a firm or business to serve its customers efficiently and ability y of the business to make profits or break even. These five forces are;
- The threats caused by the substitute products in the market.
- Threat caused by the entry of new competitors into the market.
- Competition rivalry in the market among the competitors.
- Purchasing power of the buyers.
- power of the suppliers to meet the market demands
3.0 THE PORTERS FIVE FORCES IN THE SOFT DRINKS INDUSTRY
The soft drinks industry has become one of the most competitive industries globally since the people are becoming more sensitive about their health and many are opting to consume the soft drinks. The Porter’s five forces are very essential for firms either existing in the market or entering into the market.
For a firm to be effectively increase its market share and be at a competitive advantage, it has to ensure that its customers remain loyal and is not diverted to the substitutes, this can be effected by ensuring that the product is differentiated from those of competitors. This strategy has been very successful to companies like Coca-Cola among others. The analysis of the supplier power is very crucial in shifting the cost of inputs. In such situation, firms either entering or those already in the market need to have several suppliers so that the changes in cost of an input does not affect the production since this will be eventually be reflected in the prices of the output and a firm may eventually loose some of its market share. The firms in the firm need to evaluate the purchasing power of the customers. If there few powerful clients, they can affect the prices of the soft drink while if there are many buyers they cannot easily affect the prices however, the firm must keep in mind each and every buyer is very important to the business. Firms in he market control the entry of competitors into the market by ensuring that they protect the technology they use in production. This has been a strategy which Coca-Cola has put in place as a patent and competitors have not been able to copy their technology and hence Coca-Cola has maintained it competitive advantage
The Porter’s five forces model are of paramount importance in the cost drinks industry where competition is very fierce. For a firm to compete effectively in the market, proper consideration of these forces need to be carried out to increase the market share by implementing strategies based on these forces.
Porter, M.E. (1979) how competitive forces shape strategy, Harvard, Harvard Business Review Publishers,
Porter's Five Forces, retrieved on 28th, September, 2008, available at http://www.mindtools.com/pages/article/newTMC_08.htm