Analysis Soft Drink

Analysis Soft Drink

1 Analysis of the U.S. soft drink industry, based on the competitive forces model of Michael Porter.

Entry of new competitors:

In the soft drink industry the entry of new competitors depends on the barriers to entry that are present, and also the reaction from existing competitors that the entrant can expect.
I will now analyze the six major sources of barriers to entry the soft drink industry.

Economies of scale:
Economies of scale deter entry by forcing the entrant to come in at large scale and risk strong reaction from existing firms or come in at a small scale and accept a cost disadvantage. If a company wants to decline its unit costs of their product, they will have to produce more to lower the cost. The more you produce, the lower the costs.
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Product differentiation:
In the soft drink industry establishing firms have brand identification and customer loyalties. The brand name can have differences. This is a high barrier to enter. Entrants are forced to spend a lot to overcome existing customer loyalties.

Capital requirements:
The capital requirements within this industry are very high. Production, distribution and advertising are a must to compete with the industry leaders like coca cola and Pepsi. So if a new entrant

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