• Existing companies have a cost and performance advantage in this industry. This is because existing businesses have already made large capital expenditures and have economies of scale. They also have direct supply and distribution channels. • Soft drinks are not proprietary products because anyone can produce them. The only ownership is over patented flavors and brands. • Most soft drinks have well-known brand identities, with the exception of generic brands. Brand identities define the flavors of soft drinks (e.g. Sprite means lemon-lime or Coca-Cola means cola) • There are no significant costs in switching suppliers. The soft drink industry is very competitive, so prices fluctuate only slightly depending on geographic location (transportation) or short-term sales discounts. • To enter this industry requires a lot of capital because there are large capital costs required for production. Bottling, distribution and storage could be contracted out, but this would likely increase costs in the long run and weaken the supply chain. A newcomer to the industry would face difficulty in evaluating distribution channels. Big brands already control major distribution channels, such as large supermarkets, gas stations and restaurants. They have low costs, competitive prices and strong business relationships. • Expertise in this area helps companies reduce costs and improve performance. Major brands operate on economies of scale and have experienced the ups and downs of the industry and have overcome them. New entrants can learn from the history of early entrants but do not have first-hand experience. • There are licensing, insurance and other difficult qualifications required in this industry. Companies must obtain FDA approval… middle of paper… names are an important competitive advantage among new businesses. • It would actually be difficult to close the business due to loss of money from fixed costs and advertising, as well as binding contracts with certain distribution channels. • Customers should not incur high costs when switching from one player to another. The most they could bear would be a few cents because prices in the industry don't fluctuate much between companies. • Since the products in this industry are simple carbonated drinks, significant interaction between customer and manufacturer is not necessary because customers purchase the product based primarily on taste. • Market shares in the industry are not more or less equally distributed among competitors. This is evident because there are three major companies that own approximately 90% of the industry, but there are over 100 companies in the industry.