Manning School of Business
Session06:
Porter 5 Forces
Industry Analysis
Dr. Mark H. Mortensen
66.490.211 and 212
Tues &Thurs 2:00 to 3:15
3:30 to 4:45
Mortensen Consulting Group
Today
1.
2.
3.
4.
Attendance
Discussion on Porter 5 Forces Industry Analysis
Group workshop – create a 5 Forces chart for the
industry that includes Starbucks, Dunkin Donuts
and McDonalds
For next class
Mortensen Consulting Group
Strategic Management Process:
Environmental Scanning
TOOLS
Assumptions
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Constraints
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Truisms
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PEST(EL) analysis
Porter 5-Forces model
Company positioning chart
Product positioning charts
BCG product matrix
GE product matrix
Core competency analysis
Value chain analysis
Bowman’s Strategy Clock
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Porter 5 Forces Analysis of an Industry
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Five forces analysis: Technique for
understanding an industry, by
examining the interactions among:
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Competitors in an industry
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Potential new entrants to the
industry
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Substitutes for the industry’s
offerings
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Suppliers to the industry

Industry’s buyers
Purpose of the analysis is to identify
how much profit potential exists in
an industry
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Porter 5 Forces
Analysis
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Soft Drinks – Porter 5 Forces [1]
Threat of New Entrants/Potential Competitors: Median Pressure
 Entry barriers are relatively low for beverage industry: there is
almost 0 consumer switching cost and very low capital requirement.
There are more and more new brands appearing in the market with
usually lower price than Coke products
 However Coca-Cola is seen not only as a beverage but also as a
brand. It has a very significant market share for a long time and loyal
customers are not very likely to try a new brand beverage.
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Soft Drinks – Porter 5 Forces [2]
Threat of Substitute Products: Median to high pressure
 There are many kinds of energy drink and soda products in the
market. Coca-cola doesn’t really have a special flavor. In a blind
taste test, people couldn’t tell the difference between Coca-Cola and
Pepsi
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Soft Drinks – Porter 5 Forces [3]
The Bargaining Power of Buyers: Low pressure
 The individual buyer has little to no pressure on Coca-Cola
 The main competitor, Pepsi is priced almost the same as Coca-Cola.
 Consumer could buy those new and less popular beverages with lower
price but the flavor is different and the quality is not guaranteed.
 Large retailers, like Wal-Mart, have bargaining power because of the large
order quantity, but the bargaining power is lessened because of the end
consumer brand loyalty.
 There are many kinds of energy drink and soda products in the market.
Coca-cola doesn’t really have a special flavor. In a blind taste test, people
couldn’t tell the difference between Coca-Cola and Pepsi.
 People are getting concerns of negative effects of carbonated beverages.
Increasing number of consumers begin to drink fruit juice, lemonade and tea
instead of soda products.
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Soft Drinks – Porter 5 Forces [4]
The Bargaining Power of Suppliers: Low pressure
 The main ingredients for soft drink include carbonated water,
phosphoric acid, sweetener, and caffeine. The suppliers are not
concentrated or differentiated.
 No supplier would want to lose a huge customer like Coca-Cola.
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Soft Drinks – Porter 5 Forces [5]
Rivalry Among Existing Firms: High Pressure
 Currently, the main competitor is Pepsi which also has a wide range
of beverage products under its brand. Both Coca-Cola and Pepsi
are the predominant carbonated beverages and commit heavily to
sponsoring outdoor festivals and activities. As Coca-Cola has a
longer history, it is advertised in a more classical approach while
Pepsi tried to attract younger generation by using pop stars as brand
ambassadors. Currently Coca-Cola slightly topped Pepsi as the
possessor of the most U.S market share.
 There are other soda brands in the market that become popular, like
Dr. Pepper, because of their unique flavors.
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Soft Drinks – Porter 5 Forces [6]
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So what do you think?
Should we compete with Coca-Cola as a new entrant?
As a Supplier going into their market?
As a buyer going into their market?
Medium
Low
High
Med/Hi
Low
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Discussion
Is there an aspect industry activity that the
five forces seems to leave out?
 Imagine that you are the president of
UMass Lowell. Which of the five forces
would be most important to you? Why?
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Mortensen Consulting Group
Today
1.
2.
3.
4.
Attendance
Discussion on Porter 5 Forces Industry Analysis
Group workshop – create a 5 Forces chart for the
industry that includes Starbucks, Dunkin Donuts
and McDonalds
For next class
Mortensen Consulting Group
Today
1.
2.
3.
4.
Attendance
Discussion on Porter 5 Forces Industry Analysis
Group workshop – create a 5 Forces chart for the
industry that includes Starbucks, Dunkin Donuts
and McDonalds
For next class:
 Read
chapter 3, section 3 on Porter 5 Forces
 Read Chapter 4, Section 4.5 on SWOT
 Familiarize yourself with SWOT hand out (see Wiki)
 #4 Duncan Donuts Case Study (Thursday)
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Assignment04
Read the assigned Dunkin’ Donuts Case Study (HBS 9-584-041 – Dunkin’
Donuts© Growth Strategy) and write a 2-5 page paper covering the following
topics:
 How did the Dunkin’ Donuts of 1979 differ from the Dunkin’ Donuts of 2012?
 Compare and contrast the franchise and the company-owned store
business models.
 The Dunkin’ Donuts management team decided to continue to follow the
franchise model. Evaluate that decision, given what we know in 2012.
ALSO
 Look up what happened in 2011-2012 involving Dunkin’ Donuts and Green
Mountain Coffee. Be prepared to discuss this.
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Strategic Management – Spring 2014