Porters Five Forces

Michael Porter developed a framework, which identified 5 forces that act to either
increase or reduce the competitive force within an industry.

The Porter's Five Forces tool is a simple but powerful tool for understanding where
power lies in a business situation. This is useful, because it helps you understand both
the strength of your current competitive position, and the strength of a position you're
considering moving into.


Threat of New Entry: Competitive Rivalry:
>Time & Cost of New Entry >Customer Loyalty
>Specialist Knowledge >Switching costs
>Economies of Scale >Number of competition
>Cost advantages >Quality differences
>Technology protection >Other differences
>Barriers to entry >Costs of leaving market














Supplier Power: Buyer Power:
>Cost of changing >Price sensitivity
>Uniqueness of service >Number of customers
>Number of suppliers >Differences between
>Size of suppliers competitors
>Your ability to substitute >Size of each order
>Cost of changing
Threat of Substitution: >Ability to substitute
>Substitute performance
>Cost of change









Threat of
New Entry

Supplier
Power

Buyer
Power
Threat of
Substitution


Competitive
Rivalry

Porters five forces of PEPSICO
Threat of New Entry:
competition for shelf space
low investment in machinery
large capital investments on
advertising, promotion
market research and
bottler support
























Supplier Power:
commodities and easy
to purchase in the market
large number of suppliers
low switching cost of suppliers

Threat of Substitution:
many alternatives; Water,
Tea, Juice, Milk, Beer,
Distilled spirits & Energy Drink
different diet brands
customers switching costs are low




Threat of
New Entry

This industry
force is low


Supplier
Power

Low bargaining
power

Buyer
Power

Low bargaining
power

Threat of
Substitution

Ease of
substitution is
high





Competitive
Rivalry

Industry rivalry is
high

Buyer Power:
different options from the
Competitors
major buyers: Fast-food
Restaurants and bottlers
weaken the bottlers power
by having a franchise
agreement
weaken the fast-food
chains power by acquiring
them (e.g. Pizza Hut,Taco
Bell and KFC)

Competitive Rivalry:
Coca cola is the main
competitor
very similar product
low costs to exit
famous, international
brands
partnered with fast food
franchises as well
main strength from
advertising campaigns


References: http://www.mindtools.com/pages/article/newTMC_08.htm
http://www.scribd.com/doc/40330734/Pepsi-on-strategic-managment