Published on: 16 Jun 2017
“Smoothie drinks” have become very fashionable over recent years.
Smoothies are drinks made out of crushed fruit and are seen as a healthy alternative to carbonated drinks such as Coke or Pepsi.
Perhaps the most famous smoothie manufacturer in the UK is Innocent Smoothies. The business was set up in 1999 by three friends who famously gave up their jobs to start the business after they invested £500 on fruit and turned it into smoothies and sold them at a music festival. The business has grown since then and been a true success story.
The brand has a “quirky, playful” image as well as promoting itself to be ethically aware (it donates 10% of its profits to charity).
So, what has Coca-Cola got to do with all of this? Porter’s 5 Forces strategy model is well known to students of professional exams. See our free ExPress notes for more details but one of the forces concerns “substitute products”.
If a 5 forces analysis is done on for example the traditional Coca-Cola carbonated drink then a substitute product would be a smoothie. There is a general trend in a lot of countries towards healthier living and the threat of a substitute product such as a smoothie could be seen as a threat.
In 2009 Coca-Cola bought an 18% stake in Innocent for £30 million and then in the following year increased its shareholding to 58% for a reported £65 million. They then increased their shareholding to over 90% for an undisclosed sum. From a Porter’s 5 forces point of view this is a good move as it means that one of the substitute products is now within the Coke family.
There has been a fair amount of discussion since the aquisition about whether Innocent is still the ethical likeable “under dog” that it was given that it is now part of one of the biggest companies in the world.
One thing is for sure though and whilst it was certainly an Innocent transaction it was also definitely a well thought out strategic acquisition.
Published on: 28 Apr 2010
3G technology provides users with the ability to download content such as music and internet pages at higher speeds.
There has been a dramatic increase in the number of mobile phones in India over recent years with the number of phones sold increasing from 35 million five years ago to 130 million last year.
This is going to be an interesting auction but what exactly will they be bidding on?
Most people will say that they are trying to buy a 3G mobile license but students of Porter’s 5 forces will argue that they are in fact buying a barrier to entry. One of Porter’s 5 forces is “Potential Entrants”. A key element in connection with this force is the concept of barriers to entry. As the name suggests these are barriers that can either prevent or make it difficult for new entrants to enter a particular market.
The 3G licenses are great examples of barriers to entry as without the license it is simply not possible to enter the 3G mobile market. The license is the ultimate barrier.
In summary therefore, surely the headline should be “Companies in bids for barrier to entry”?