Opportunities and Threats for Coca-Cola

Task:

Coca-Cola is the leading soft drink producer on the globe.  Despite major competition form Pepsi, they are the largest beverage brand in the market. Their brand is iconic and recognized everywhere.  One of the major problems that Coca-Cola is facing is the evolution of consumer’s preferences, shifting to healthier alternatives.

Opportunities and Threats

In order to identify the opportunities and threats Coca-Cola is presented with we must first begin with Porter’s Five Forces – Threats of New Entrants, Bargaining Power of Suppliers, Bargaining Power of Buyers, Threats from Substitute Products, and Rivalry among the existing players. 

Threats of New Entrants: Within the beverage industry, it takes a lot of time, resources, and investment to grow a brand name (Pratap, 2018).  Coca-Cola has acquired a tremendous customer base that has immense brand loyalty. It would be very difficult for any new beverage company to compete with Coca-Cola on a large scale.  There may be small threats of smaller companies competing on a small, local level but otherwise, this is a modest threat of new entrants who would have the opportunity to truly compete with Coca-Cola.

Bargaining Power of Suppliers: While it is possible for current suppliers to increase their pricing causing Coca-Cola’s margins to decrease, there are many suppliers of ingredients, machinery and packaging, and goods and services that they could take advantage of.  Coca-Cola has high standards for their suppliers including keeping within regulation for ethical and legal standards and have the opportunity to purchase supplies from minority- and women- owned businesses (Staff, 2019).  There are many suppliers and it would be easy for Coca-Cola to switch but it would not be easy for a supplier to switch from Coca-Cola (Pratap, 2018).  This makes the bargaining power of suppliers fairly weak.

Bargaining Power of Buyers: The buyers of beverages range from individual buyers to large corporations.  Coca-Cola has established a many large partnerships with corporate buyers such international restaurants and fast-food.  They have also taken advantage of reaching buyers through other means such as vending machines and convenience stores world-wide (Staf, 2019).  Because big businesses are constantly looking for ways to lower costs to increase profits, provide quality products, and supply diverse products, the bargaining power of larger organizations is higher than the bargaining power of individuals, which is fairly low.  Because of this, the bargaining power of buyers is Moderate. 

Threats from Substitute Products: Coca-Cola has a high threat from substitute products.  There are many beverage options on the market and several that are very comparable to Coca-Cola like Pepsi.  The cost to switch is very low and easy to adopt.  Another threat is the increasing importance of being health conscience.  Consumers are no just making the switch to zero calorie sodas, but forgoing them altogether choosing options such as water, iced tea, and other beverages without sweeteners (artificial sweeteners included) (Rushton, 2014).  There have even been battles to ban supersized sugary drinks in cities such as New York (Rushton, 2014). 

Rivalry amongst existing players: The obvious competition is within the infamous “Cola Wars”, Pepsi.  Pepsi makes a product that is almost impossible to differentiate from Coca-Cola and they are about the same size.  Other rivals, on a much smaller scale, are Red Bull, Gatorade, Lipton, Nescafe, and Tropicana but, at this time, they do not pose a strong threat (Bhasin, 2019).