Case Study of Csd Industry, Rte Industry and Specialty Coffee Industry
A Comparison of the Carbonated Soft Drink, Ready-to-Eat Breakfast Cereal and Specialty Coffee Industries Using Porters Five Forces Michael Porter’s framework describes an industry as being influenced by five forces: buyer power, supplier power, threat of substitutes, threat of new entrants and the degree of rivalry between existing firms within the industry. A strategic business manager can use Porter’s model to more clearly understand the industry environment in which its firm operates and to therefore develop a competitive edge over rival firms. After analyzing the carbonated soft drink, ready-to-eat breakfast cereal and specialty coffee industries using this framework, I found that the three industries were very similar in their degree of bargaining power among suppliers, threat of substitutes and most importantly, the degree of rivalry among existing firms. However, the three industries varied in their degree of buyer power and threat of new entrants. The bargaining power of the buyers in the soft drink industry differs from the power of the buyers in both the ready-to-eat cereal industry and the specialty coffee industry. Specifically, the power of the buyers in the cereal and coffee industries can be classified as low; whereas in the carbonated soft drink industry it is more moderate. In the ready-to-eat cereal industry, the three major cereal manufactures “accounted for 59 percent of 1993 ready-to-eat sales by volume” in the massive eight billion dollar industry. Because of the enormous amount of money in the industry and therefore the large amount of money that the three major firms brought in for grocery stores, grocery stores had no choice but to stock cereal on their shelves. Furthermore, due to factors such as brand loyalty, consumers were willing to pay a premium price for these branded cereals. For example, cereal prices rose 15.6 percent between 1990 and 1993 “compared to a 5.9 percent increase in overall food prices.” (Corts, 5). This