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Analysis of Cola Industry

In:

Submitted By blodge723
Words 925
Pages 4
To: Upper Management
From: Jimmy Blodgett
Subject: External Analysis of U.S. Cola Industry
Date: August 31, 2014

Purpose of the Report
Per your request, our team has spent the last month analyzing the competitive environment of the cola industry in the United States. Utilizing tools such as the Porter’s Five Forces Framework and PESTEL (political, economic, social, technological, ecological, legal factors) we were able to better create an external analysis of the industry. These tools are necessary in performing a successful external analysis. Throughout this memo we will apply these tools to the cola industry and we will highlight how these tools helped us to form a decision. Based off of our findings in the analysis, it is our recommendation that we should not launch a new product within the cola industry.
Threat of Entry Remains Low The Cola industry in the United States is dominated by two competitors, Coke and Pepsi. These two firms accounted for 72% of the U.S.’s CSD market sales volumes in 2009 (“Cola Wars Continue”, pg.2). There are many social factors that account for this advantage. Both Coke and Pepsi began operations in the late 1800’s and they have used their history to build strong customer loyalty. Coke has even focused their advertising around the use of their product being a typical part of the American lifestyle (“Cola” pg.6). With such strong customer loyalty it would be extremely challenging for any new product to enter the cola industry and gain significant market share.
In addition to these social factors, Coke and Pepsi have sophisticated distribution networks. Through various agreements with concentrate producers and bottle producers, these two firms have more control over their value chain. The firms have turned this into an advantage not only in the U.S., but internationally as well. Coke and

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