Porter's Five Forces

Porter’s Five Forces Analysis- Soft Drink Industry

Barriers to Entry

• Size is a crucial factor in this industry. It’s important to have a larger economies of scales so the cost of production per unit is minimizes.

• A large capital requirement in production and distribution system is necessary for them to be successful.

• The biggest hurdle when entering this industry is the brand loyalty. Taking business way from these establishes companies like Coca-Cola will be tough.

• The learning curve within this industry is relatively low compare to others. The industry technology and the manufacturing process system is not that complicated.

• Government regulation within this industry is moderate. Their biggest hurdle over the years is the approval of sweeteners by the government.

• The switching cost for customers (retailers) is high. (explain further in the Buyer Power section)

• It is critical to have an efficient distribution channel in this industry. New entries will have a hard time completing for shelves space during the beginning stages.

High

Rivalry

• This industry is dominated by two companies Coca-Cola and PepsiCo and with a distant third in Dr. Pepper.
• The soft drink industry has matured already, so the there is minimal growth. Their demand has actually decreased over the years due to substitutes.
• With the large capital requirement and their contractual agreement with the distributors, exiting the industry is really hard.
• Brand identification, fixed cost on the rise, and high switching cost for distributors.

Moderate – High

Supplier Power

• Most of the material needs to produce a soft drink are commodities, so it is readily available and less chance of being over price.

• Some suppliers is highly depend on the soft drink industry because they purchase a large portion of there sells. Companies like the plastic bottle industry are at the mercy of the soft drink industry.

Low

Buyer Power (Distributors or Retailers)

• A lot of retailers have a contractual agreement with certain soft drink companies, which might bind them to the company.

• Even thought there is a lot of a substitute out on the market. The switching cost is still relatively high. The legal cost to get out of a contractual agreement and the cost of searching for a new deal.

• Lager retail stores are at an advantage when they are able to purchase a large volume of soft drink at a discount. This power is lessens for small retail stores.

• The soft drink industry needs the retailers because they ultimately sell the product to the end consumers. So it is important to have a strong relationship with the retailers because they indirectly affect the company’s reputation.
  

• Brand loyalty minimizes product switching by the consumer.
  

Moderate

Threat of Substitutes

• This industry is more susceptible to product substitutes than any other industries.

• The list of substitutes is endless. Some example are tea, coffee, distill water, sport drink, juice, milk, healthy drinks, and etc.

• There is a trend in coffee (Starbucks) and toward healthy drinks, which has fewer calories and more nutrition.

High

Based on the analysis this industry is unattractive. There is too much product substitutes and barriers to entry.

Harley Davidson's Mission Statement

Harley Davidson’s Mission Statement

A mission statement may consist of four parts task, vision, values and goals. The function of a mission statement is to articulate the purpose of the company, the future of the company, and the method of achieving this future position. A company mission statement should be unique to its competitors. In constructing a mission statement, it should be motivational and inspiring.

Vision is the broad perspective of the company, while a goal is the short term outlook to its vision. Their goals should be realistic and attainable. It should be clearly stated and quantifiable. A well constructed goal should motivate and inspire the employee and management toward a common vision. If a goal is farfetched, a company could lose it credibility. Values are what the companies is committed to. One company may value customer services, while others may value efficiency. Company has to portray themselves to the public in a way that it would attract or inspire different customers. Company should avoid over exaggerating their values, they should only commit what they can offer.

We live in a dynamic environment; a company’s mission statement may become irreverent over time. For a mission statement to be successful it must be broad enough to meet the customer’s changing expectation. Common mistakes are limiting your mission statement to the company’s area of services and expertise. When writing a mission statement it should be free of jargons. It should be succinct and clear in stating the nature of the company. It should clearly state the target audience in it mission statement.

Mission Statement

“We fulfill dreams through the experience of motorcycling, by providing to motorcyclists and to the general public an expanding line of motorcycles and branded products and services in selected market segments.”

Value Statement

“These are our values. They are the heart of how we run our business. They guide our actions and serve as the framework for the decisions and contributions our employees make at every level of the Company.”

• Tell the Truth.
• Be Fair.
• Keep Your Promises.
• Respect the Individual.
• Encourage Intellectual Curiosity.

This mission statement by Harley Davidson is sound because it is concise and informative. It clearly stated their targeted audience and its task. It expresses their goal and vision of expanding the Harley Davidson experience. Based on the mission statement, the company is marketing their motorcycle as a luxury item to it customers. It is intended to motivate and inspire the individual to buy the motorcycle. Their value statement conveys the notion of a honest employee, whom the customer could trust.