Barrier to Entry: It is very difficult to enter the industry due to several factors:
First, a new firm will need to implement economic of scale to enjoy cost reduction and compete favourably within the industry. To establish economic of scale, a new firm will require huge capital investment ranging from several millions of dollar. Huge capital needed to enter the industry serves as a barrier for a new firm. More importantly, a new firm will need to overcome the tremendous marketing muscle to establish market presence within the industry, and entering into the industry requires substantial capital. Moreover, government regulation is another factor making entry into the industry very difficult. Regulations such as Soft Drink Inter-brand Competition Act are making the new entry nearly impossible in the U.S. market.
Assessment of the Industry
Overall assessment of the industry reveals that firms within industry have been able to record super normal profits yearly because of the difficulties a new firm will face to enter the industry. While buyers have ability to switch their brand loyalty from one firm to the other, substantial capital needed to enter the industry make firms in the industry to continue to record high profits yearly. While the industry is very profitable, the economic of scale and government regulations are making the new entry nearly impossible.
Part C: Competitor Analysis
Soft Drinks and Beverage industry is highly competitive. Top firms within the industry are Coca Cola, Pepsi Cola, Dr. Pepper, and Nestle. However, Coca Cola competes under the non-alcoholic beverage segment, and the beverages segment is highly competitive, consisting of several companies. Coca Cola competes in several geographical regions, and the company competes with local retailers and local companies. Thus, competitive factor has special impact on the Coca Cola business, which includes pricing, sales promotion programs and the introduction of new packaging. (Annual Report, 2010). As being revealed in Table 1, competitions have an impact on the revenues of Coca Cola. Companies such as Nestle and Pepsi Cola are ahead of Coca Cola with reference to the total revenues. Within the industry, Coca Cola is ranked second in market capitalization with $152.22 billions.
Table 1: Direct Competitor Comparison
The Coca-Cola Company
Dr Pepper Snapple Group Inc.
Nestle
Pepsi Cola Inc.
Industry (Soft Drinks / Beverages
Market Cap:
8.23B
Employees:
139,600
19,000
281,000
294,000
3.53K
Qtrly Rev Growth (yoy):
45.40%
4.90%
-5.00%
13.30%
14.30%
Revenue (ttm):
46.00B
5.85B
64.50B
1.54B
Gross Margin (ttm):
60.69%
58.40%
56.66%
53.25%
41.66%
EBITDA (ttm):
12.05B
1.23B
17.71B
12.73B
Operating...
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