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The Level Of Competition In The Soft Drinks Industry

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The level of competition in an industry determines the number of profits made by players in the industry. An industry with a high level of profits is likely to attract many players which erode the profits made by firms gradually. A firm seeking to venture into a new industry should evaluate the level of profits in an industry as well as how intense competition is in the industry before making a move. Porter’s five forces model provides a comprehensive framework that can be used to evaluate how intense the competition is in the industry. The soft drinks industry is an industry that is very profitable but also exhibits cut throat competition. Coca-Cola and Pepsi companies are the players with much dominance in the soft drinks industry. This paper explores the competition between Coca-Cola and Pepsi companies dubbed cola wars in the context of Porter’s five forces model. Threat of New Entrants (Low) This force analyzes the ease or difficulty of a new player entering an industry. Industries that are profitable but have minimal barriers to entry attract many players who make the profits to plummet. Profits decrease when a large number of firms compete for a limited market share (Hill & Jones, 2010). Therefore, existing players, particularly in a profitable industry, should create extensive barriers to entry to deter new firms from entering the industry. Coca-Cola and Pepsi companies are the dominant players in the soft drinks industry (Yoffie, 2011). The two companies

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