3 pages/≈825 words
Business & Marketing
Cocacola's Porters Five Analysis (Essay Sample)
This research paper analyses the porters five model to explain why the leading syrup manufacturer, PepsiCo and Coca cola profitability is different from the bottlers.source..
Porters Five Analysis
Porters five analysis is a strategic management tool which determines whether products and services in an industry or organization are relevant to managerial profitability or not. In managerial economics and more so in economic theory, studies reveal that a cost minimizing firm is likely to maximize on returns or profits and shareholders welfare (Kubler & Carney, 2008,p.59). This research paper analyses the porters five model to explain why the leading syrup manufacturer, PepsiCo and Coca cola profitability is different from the bottlers. This is narrowed down to the analysed 81 operating profits as a percentage of sales going to the syrup manufacturers and 15 percent of operating profits as a percentage of sales to the bottlers.
Porters five model normally assumes five vital forces, which determine the competitive power within markets (Schwarzinger, 2012, p.14). These forces are supplier power, buying power, competitive power, and threat of substitution and barriers to entry.
Porters buying power the number of customers, the size of the orders in the market and the cost of changing line of business defines force. Research shows that Coca cola and PepsiCo products have a market everywhere in the world. Realistically, what the scattered customers all over the world demand is coca- cola and Pepsi Co product and not the bottles. It is clear that the number of bottles used to package the syrup manufacturer’s products is categorized as a cost of production. A profit-making firm has to keep checks, monitor, and control any rising cost in the production process so as to maximize profits and shareholders wealth. Therefore, the bottles cost is always minimized by the manufacturers to the lowest possible point such that profits are maintained at only 15 percent of the bottlers sales of which they do not have control. On the other hand, the syrup manufacturers enjoy the full benefits of high profits, which account to 81 percent computed as a percentage of sales
A general assessment of the number and size of suppliers in a market is carried out to determine output prices. Moreover, the uniqueness of the product or service creates an increased demand for the product in the market hence driving up the sales. This force in the market creates the whole difference between the Coca-Cola, PepsiCo, and the bottler’s profit margins. The syrup manufacturers major concern is create unique pr...
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