Porters 5 forces that was developed by Michael Porter in 1979 focuses on 5 main factors that can help the FMCG companies and determine the industry that a company wants to join or enter into. The Porters 5 forces will show if it is profitable for a company to enter the market based in the 5 criteria’s. Porter’s main plan was to understand the forces and the underlying causes that reveals the basis or foundation in an industry’s profitability while allowing to identify the current and the future incoming competition (Arline, 2015). According to Michael E. Porter the origin of profitability will not change regardless of the type of the industry that a company will operate in. But what will drive competition and the profit making ability will be structure of the industry, and not the fact that the industry is producing goods or services, is developing or matured in the market.
Porters 5 Forces Model Source: (Masonmyers.com, 2016) Applying the porter’s five forces into Fmcg companies.
Threat of new entrants.
Coca cola is a well-known beverage company that falls into the FMCG category. They aren’t just a company but also hold a very strong brand name. Coca cola faces a medium risk of new entrants. They reap economies of scale and thus enjoy very low average cost making it hard for new entrants to enter the beverage market. And also the fact that Coca cola has been operating in the market for a very long time, their products are popular around the world in almost every country. In addition they possess the power of having a very powerful distribution channel around the whole world. So they have a very strong consumer base who are loyal just to their brand name and so it doesn’t allow them to try a new brand. Also markets that usual FMCGs operate in will mostly be capital intensive due to the need to produce in mass production (Ahamed, 2016). Thus making things