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Analysis of soft drink

             soft drink industry, based on the competitive forces model of Michael Porter.
            
             In the soft drink industry the entry of new competitors depends on the barriers to entry that are present, and also the reaction from existing competitors that the entrant can expect.
             I will now analyze the six major sources of barriers to entry the soft drink industry.
             Economies of scale: .
             Economies of scale deter entry by forcing the entrant to come in at large scale and risk strong reaction from existing firms or come in at a small scale and accept a cost disadvantage. If a company wants to decline its unit costs of their product, they will have to produce more to lower the cost. The more you produce, the lower the costs.
             Product differentiation:.
             In the soft drink industry establishing firms have brand identification and customer loyalties. The brand name can have differences. This is a high barrier to enter. Entrants are forced to spend a lot to overcome existing customer loyalties.
             Capital requirements:.
             The capital requirements within this industry are very high. Production, distribution and advertising are a must to compete with the industry leaders like coca cola and Pepsi. So if a new entrant wants to compete against the biggest competitors it will need a huge capital. This is also very risky because you are not sure if you will succeed competing against these leaders. This makes it a high barrier for new entrants.
             Switching costs:.
             Switching costs is also a barrier to entry this business. Switching costs by changing from one supplier to the other may happened. Also employee training, new equipment, testing new technology. This things are common in this industry. This are barriers for new entrants.
             Access to distribution channels:.
             The access to distribution channels is a high barrier because the most successful soft drink companies are aggressively spending their distribution channels and buying full ownership of bottling plants.


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