Typically, buyers have the ability to switch their tastes from one soft drink brand to the other.

Barrier to Entry: It is very difficult to enter the industry due to several factors:

First, a new firm will need to implement economic of scale to enjoy cost reduction and compete favourably within the industry. To establish economic of scale, a new firm will require huge capital investment ranging from several millions of dollar. Huge capital needed to enter the industry serves as a barrier for a new firm. More importantly, a new firm will need to overcome the tremendous marketing muscle to establish market presence within the industry, and entering into the industry requires substantial capital. Moreover, government regulation is another factor making entry into the industry very difficult. Regulations such as Soft Drink Inter-brand Competition Act are making the new entry nearly impossible in the U.S. market.

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