Coca-Cola and PepsiCo's development of bottled water illustrates the strength of what according to Porter?

The development of bottled water by Coca-Cola and PepsiCo highlights the strength of substitutes in the context of competitive strategy as outlined by Michael Porter. When companies that dominate a market, like Coca-Cola and PepsiCo in the soft drink industry, decide to enter the bottled water market, they are responding to the pressure exerted by substitutes.

In this case, bottled water can be seen as a substitute for sugary soft drinks. Consumers often seek healthier or more natural options, which leads to increased competition among beverage companies. By diversifying their product lines to include bottled water, these firms are strategically positioning themselves to retain existing customers and attract new ones who may prefer healthier beverage choices. This choice emphasizes the importance of recognizing and responding to substitute products in order to maintain competitive advantage in a rapidly evolving market.

Substitutes can limit the potential for profitability in an industry by increasing the number of options available to consumers. Therefore, the actions of Coca-Cola and PepsiCo reflect their understanding that a strong competitive environment includes the influence of substitutes, necessitating a proactive approach to product development and market offerings.