...shape the soft drink industry is barriers to entry. The Coca Cola company says on its website it is facing strong competition from well-established global companies and many local participants. For this particular industry, the competitive forces are benign, (favorable). Most of the companies in the soft drink industry are profitable. The Coca Cola Company's main competitors are Dr.Pepper, Nestle and PepsiCo. These companies definitely have the advantage over there competitors. In porters 5 forces, Porter refers to supply-side economies of scale, where firms such as the CCC and PepsiCo can produce at large volumes enjoy lower costs per unit because they can spread fixed costs over more units, employ more efficient technology, or command better terms from suppliers. According to Porter's article, supply-side scale economies deter entry by forcing the aspiring entrant either to come in the industry on a large scale, which requires dislodging entrenched competitors. How does a newcomer circumvent the barriers to soft drink industry? Perhaps create new distribution channels of their own. Creating a niche market for their drink in the form of marketing to a certain segment in the soft drink industry Rivalry Among Existing Players * The industry is not growing rapidly. The growth rate for the industry is not rapid; it is in fact relatively small. This makes it very difficult for new entrants to compete with the already thriving firms in the industry. * The industry does not...
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...Industry Analysis: Soft Drinks Meghan Deichert, Meghan Ellenbecker, Emily Klehr, Leslie Pesarchick, & Kelly Ziegler Strategic Management in a Global Context February 22, 2006 Industry Analysis: Soft Drinks Barbara Murray (2006c) explained the soft drink industry by stating, “For years the story in the nonalcoholic sector centered on the power struggle between…Coke and Pepsi. But as the pop fight has topped out, the industry's giants have begun relying on new product flavors…and looking to noncarbonated beverages for growth.” In order to fully understand the soft drink industry, the following should be considered: the dominant economic factors, five competitive sources, industry trends, and the industry’s key factors. Based on the analyses of the industry, specific recommendations for competitors can then be created. Dominant Economic Factors Market size, growth rate and overall profitability are three economic indicators that can be used to evaluate the soft drink industry. The market size of this industry has been changing. Soft drink consumption has a market share of 46.8% within the non-alcoholic drink industry, illustrated in Table 1. Datamonitor (2005) also found that the total market value of soft drinks reached $307.2 billion in 2004 with a market value forecast of $367.1 billion in 2009. Further, the 2004 soft drink volume was 325,367.2 million liters (see Table 2). Clearly, the soft drink industry is lucrative with a potential for high profits, but there are several...
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...Industry Analysis: Soft Drinks Meghan Deichert, Meghan Ellenbecker, Emily Klehr, Leslie Pesarchick, & Kelly Ziegler Strategic Management in a Global Context February 22, 2006 Industry Analysis: Soft Drinks Barbara Murray (2006c) explained the soft drink industry by stating, “For years the story in the nonalcoholic sector centered on the power struggle between…Coke and Pepsi. But as the pop fight has topped out, the industry's giants have begun relying on new product flavors…and looking to noncarbonated beverages for growth.” In order to fully understand the soft drink industry, the following should be considered: the dominant economic factors, five competitive sources, industry trends, and the industry’s key factors. Based on the analyses of the industry, specific recommendations for competitors can then be created. Dominant Economic Factors Market size, growth rate and overall profitability are three economic indicators that can be used to evaluate the soft drink industry. The market size of this industry has been changing. Soft drink consumption has a market share of 46.8% within the non-alcoholic drink industry, illustrated in Table 1. Datamonitor (2005) also found that the total market value of soft drinks reached $307.2 billion in 2004 with a market value forecast of $367.1 billion in 2009. Further, the 2004 soft drink volume was 325,367.2 million liters (see Table 2). Clearly, the soft drink industry is lucrative with a potential for high profits, but there are several...
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...HABITS IN SOFT DRINKS INDUSTRY Research Proposal : Scope of introduction of a lemon-lime soft drink a local soft drink firm. The product would to be positioned as a “change of pace” soft drink to be consumed by all soft drink users, including heavy cola drinkers. Objective definition: The objectives of this research are: * We have to find out the perception and the expectations of the existing consumers from the soft-drink industry. * To analyze whatever the factors that will affect the introduction of this new soft drink in the market including the target audience , competitors etc. * To implement the research methodology and research design in order to gather and understand the data received. Research objective: The objective of the research is to understand the concept of the introducing the lemon-lime soft drink in the market by perceiving its idea of methodology, sampling plan, time and cost. Background of the soft drink industry: The 50-bn-rupee soft drink industry is growing now at 6 to 7% annually. In India, Coke and Pepsi have a combined market share of around 95% directly or through franchisees. Campa Cola has a 1% share, and the rest is divided among local players. There are two distinct segments of the market, cola and non-cola drinks. The cola segment claims a share of 62%, while the non-cola segment includes soda, clear lime, cloudy lime and drinks with orange and mango flavours. Soft and aerated drinks were considered...
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...entry: It is very common that the existing company in a industry will set the barrier to the new entrants. Because these new entrants might become the strong potential competitors in the future and take away large profit from the existing company. For these new entrants, they will carry out pretty attractive competition and use better financial strength to seize current and potential market. These moves will lower the benefits of existing business and the return of investment. To prevent this situation happen, Coca-Cola will set different barriers to discourage the potential entrants. I will discuss other enter barriers. Product differentiation One of the most important factors to determine whether a business can be successful is whether they have the compared advantages. It is very important to use the differentiation strategy to make your products known by the customers. Products that easy to remember and recognize by the customers are different from others. This difference can be the service of the company, the high quality, the name of brand. All of these characteristics will set up the customers loyalty in the market. Under the advantage of differentiation strategy, even though the new entrants maybe try their best to attract the customers with lower prices or other things, they may still suffer a loss in profit because the loyalty of the customers. Capital requirement Whenever and wherever people decide to entry a industry, he has to have enough capital recourses to support...
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...The soft drink industry is very profitable and it can be analyzed using Five Forces analysis. Each force contributes in different extent to the industry profitability. The supplier power is low. The input required by concentrate producers (CP) consisted of color, citric acid, natural flavors and caffeine; while bottlers mainly purchased packaging (including cans) and sweeteners. These inputs are all relatively standardized materials that can be easily found and bought from large amount of suppliers. CP like Coke and Pepsi are the metal can industry’s largest customers. The switching costs are low, if citric acid’s price is high and industry now prefers phosphoric; and the firms could switch easily to corn syrup when sugars (sweetener) are expensive. Hence suppliers have weak power and industry costs are low. Different retail channels have varied buyer powers. The major buyers are supermarkets, fountain outlets, vending machines. Generally, none of them have apparently high bargaining power on price, since consumers think soft drink are important (exhibit 1) and there are not many perfect alternatives. Supermarkets: there are so many supermarkets competing each others, so their power is not high. But they do have power on self-space controlling which the soft drink firms will fight for. However, another buyer category, mass merchandisers like Wal-Mart, have relatively more higher profits and power since their purchasing volume are so high that the industry will value them...
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...2. What is competition like in the alternative beverage industry? Which of the five competitive forces is strongest? Which is weakest? What competitive forces seem to have the greatest effect on industry attractiveness and the potential profitability of new entrants? Competition from substitutes is substantial. There were many substitutes to alternative beverages such as tea, soft drinks, fruit juices, bottled water and tap water. Even though substitute products had a bigger market share in the US, consumers had tended to buy more alternative beverages. This change in customer preference had weakened the competitive power of substitute beverages. Convenience store, grocery store, and wholesale club buyers had substantial leverage in negotiating pricing and slotting fees with alternative beverage producers because of their large purchases. New brands with low market shares were most vulnerable to buyer leverage since shelf space was limited while top brands such as Red Bull were almost always assured of shelf space. Coca-Cola and PepsiCo were least vulnerable since they offered a wide variety of beverages that convenience stores, grocery stores, and wholesale clubs wished to offer to consumers. As a result of this certain appeal, the two companies’ alternative beverage brands almost always found shelf space in retail stores. The bargaining power and leverage of suppliers was the weakest competitive force. Many suppliers for alternative beverage ingredients and they fight with...
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...Competition in the Soft Drink Industry: Case Study of Coca-Cola, Pepsi, and Dr. Pepper Krisadee Rungsatcha MBA 500: Essentials of Business Management June 23, 2013 Larry Frazier Abstract The beverage industry nowadays is very competitive. Each brand pushes all strategies to be the number one in the market and try to win more consumers and achieve their goals. The main competitors in these industries are Coca-Cola Company, PepsiCo, Inc., and Dr. Pepper Snapple Group. Coca-Cola is the largest beverage company in this market and provides the most market share that PepsiCo, Inc. PepsiCo is the second leading company, and Dr. Pepper Snapple Group is the third leading company in soft drink beverage industry. This paper presents three main competitors and focuses on competitive strategies, market strategies, and overall strength of the companies. Also, it discusses a recommendation to improve the Coca-Cola Company’s competitive position. Company Summaries Coca-Cola Company. The Coca-Cola Company is the largest beverage company in the world. The Coca-Cola Company is the leader in the market of nonalcoholic beverages and owns market shares than 500 beverage brands, including sparkling drinks, juice drinks, ready to drink, teas, coffees, and energy drinks, such as vitamin water and Powerade. The Coca-Cola Company also owns the leading brands of the diet and light beverage market, such as Diet Coke and the top five soft drinks: Fanta and...
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...INDEX Contents | Page Number | * Executive Summary * Problem Definition * Case Issue * Industry Analysis * Environmental Trends * Macro Factors * Competition and Competitors * Industry Trends * Customer Analysis * SWOT Analysis * Recommendations * Implementation Plan | 2334557881011 | EXECUTIVE SUMMARY: History: The company was started in 1783 in London as the world’s first soft drink maker. In 1880s Schweppes expanded worldwide and in 1960s the company diversified into food products. In 1969 Schweppes merged with Cadbury which was a cocoa making business started in England in the 1830s. Year | Acquisition | 1986 | Canada Dry soft drink brands | 1989 | Certain soft drink brands and purchased Gini brand of Belgium. | 1989 | Crush brand from Procter & Gamble for $220 million. | Cadbury Beverages, Inc., a beverage division of Cadbury Schweppes PLC acquired the Procter & Gamble brands namely Crush, Hires and Sun-drop in the year 1989. They had to re launch those brands into the market because those products were paced out by their competitors. This case especially deals with the Crush brand(an orange drink). Kim Feil who joined the division in 1989 as a Senior Product Manager for managing the re launch of Crush soft drink brand. There had been a lot of discussions regarding the crush brand. After making a thorough industry review, competitors positioning and the image which Crush has on its customers mind the senior marketing...
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...oca Cola War Case Study Cola Wars Continue: Coke and Pepsi Case Analysis 1. Soft Drink Industry (SDI) overview The industry considered in this analysis is Soft Drink Industry (SDI). SDI serves customer needs for refreshing and cold non-alcoholic beverages, with main industry sectors being: carbonated drinks, fruit punches, and bottled water sectors. There are three dominant companies in the industry, namely: Coca-Cola, Pepsi, and Schweppes. The soft-drink industry includes the following four major types of participating companies: • Producers of syrups and concentrates, • Bottlers, • Retail channels, and • Suppliers. 2. Porter’s Five Forces Analysis of the Soft Drink Industry (SDI): Soft Drink industry’s Carbonated Drink sector is 66 billion industry in US alone. Soft Drink industry remains very profitable, with pre-tax profits of 30% and 9% for concentrate producers and bottlers respectively. The following five forces analysis will attempt to show factors contributing to the profitability in the industry. Risk of entry by Potential Competitors: It is difficult for new entrants to enter the market because of few factors: First, in order to produce soft drinks a new company would have to have bottling or some other kind of packaging capacities or contracts with bottlers or packagers. To build a new bottling plant is very capital intensive and to enter in a contract with existing bottlers is difficult if not prohibited by the Coca-Cola and Pepsi’s agreements with existing...
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...explains the economics of the soft drink industry and its relation with profits, taking into account all stages of the value chain of the soft drink industry. By focusing on the war between Coca-Cola and PepsiCo as market leaders in this industry – with a 90% market share in carbonated beverages – the study analyses the different stages of the value chain (concentrate producers, bottlers, retail channels, suppliers) and the impact of the modern times and globalisation on competition and interaction in the industry. Throughout this analysis, I will assess how the strategic interaction between the two players allowed the creation of a “healthy" competition, where both companies need each other in order to remain competitive. Afterwards, I will go on to analyse the way that pricing and output decisions have affected the industry’s profits. Finally, I will discuss how Coca-Cola and PepsiCo could sustain their leadership in a market increasingly dominated by non-carbonated drinks. WHY IS THE SOFT DRINK INDUSTRY SO PROFITABLE? The soft drink industry refers to all drinks which do not contain alcohol. However, the original definition referred to carbonated and non-carbonated drinks made from concentrate. In this case discussion, I will take into consideration the US market, where the three major players – PepsiCo, Coca-Cola and Cadbury Schweppes – represent 90% of the market, with PepsiCo and Coca-Cola holding the largest share. In the soft drink industry, the distribution and production...
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...ginger ale as a general soft drink for all occasions, After obtaining initial clearance to explore the concept further. Johnson spent considerable time perfecting the product ingredients and conducting laboratory field test. 1989 – Cadbury Schweppes Public limited company was one of the largest British owned confectionery and soft drink companies with marketing operations in more than 100 countries around the world. 1990 - The product was fully developed. In the soft drink industry, general soft drinks constituted the bulk of the market. Colas dominated by coca cola or PepsiCo brands therefore, most major benefits had exclusive agreements with either Coca cola or Pepsi Co to market their colas as the primary product line 1991 – Once decision was made Johnson would have to convince the bottlers to adopt the product and obtain their commitment to make it available in retail outlets by January 1991 Central Problem How would Schweppes make their product known not as adult soft drink but a soft drink for all Ages. Viewpoint: Sam Johnson – Associate Product Manager Strength * The relative consumption of the product for these two purposes varied in different regions of the united states. In the northeast, ginger ale was equally mixer with alcohol. Because the sales of both Schweppes and Canada dry were heavily concentrated in the northeast. A very large proportion of the total ginger ale marketed by the two divisions was consumed as a soft drink. Ginger ale is popular in...
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...1. Why is the soft drink industry so profitable? An industry analysis through Porter’s Five Forces reveals that market forces are favorable for profitability. Defining the industry: Both concentrate producers (CP) and bottlers are profitable. These two parts of the industry are extremely interdependent, sharing costs in procurement, production, marketing and distribution. Many of their functions overlap; for instance, CPs do some bottling, and bottlers conduct many promotional activities. The industry is already vertically integrated to some extent. They also deal with similar suppliers and buyers. Entry into the industry would involve developing operations in either or both disciplines. Beverage substitutes would threaten both CPs and their associated bottlers. Because of operational overlap and similarities in their market environment, we can include both CPs and bottlers in our definition of the soft drink industry. In 1993, CPs earned 29% pretax profits on their sales, while bottlers earned 9% profits on their sales, for a total industry profitability of 14% (Exhibit 1). This industry as a whole generates positive economic profits. Rivalry: Revenues are extremely concentrated in this industry, with Coke and Pepsi, together with their associated bottlers, commanding 73% of the case market in 1994. Adding in the next tier of soft drink companies, the top six controlled 89% of the market. In fact, one could characterize the soft drink market as an oligopoly, or even a duopoly...
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...FINANCIAL INFORMATION ANALYSIS Business Policy Analysis Application Exercises Question 3 One of the fastest growing industries is the memory chip industry, which supplies memory chips for personal computers and other electronic devices. Yet the average profitability has been very low. Using the industry analysis framework, list all the potential factors that might explain this apparent contradiction. Concentration and Balance of Competitors • The concentration of the memory chip market is relatively low; • There are many players competing on a global basis, none of which has a dominant share of the market; ← Frequent price wars as individual firms lower prices to gain market share; Degree of differentiation and Switching Costs • In general, memory chips are a commodity product characterized by little product differentiation; • While some product differentiation occurs as chip makers squeeze more memory on a single chip or design specific memory chips to meet manufacturers’ specific power and/or size requirements, these differences are typically short-lived and have not significantly reduced the level of competition within the industry; • Because memory chips are typically interchangeable, switching costs for users of memory chips are very low, encouraging buyers to look for the lowest price for memory chips; Scale/Learning Economies and the Ratio of Fixed to Variable Costs • Scale and learning economies are both important to the...
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...FINANCIAL INFORMATION ANALYSIS Business Policy Analysis Application Exercises Question 3 One of the fastest growing industries is the memory chip industry, which supplies memory chips for personal computers and other electronic devices. Yet the average profitability has been very low. Using the industry analysis framework, list all the potential factors that might explain this apparent contradiction. Concentration and Balance of Competitors • The concentration of the memory chip market is relatively low; • There are many players competing on a global basis, none of which has a dominant share of the market; ==> Frequent price wars as individual firms lower prices to gain market share; Degree of differentiation and Switching Costs • In general, memory chips are a commodity product characterized by little product differentiation; • While some product differentiation occurs as chip makers squeeze more memory on a single chip or design specific memory chips to meet manufacturers’ specific power and/or size requirements, these differences are typically short-lived and have not significantly reduced the level of competition within the industry; • Because memory chips are typically interchangeable, switching costs for users of memory chips are very low, encouraging buyers to look for the lowest price for memory chips; Scale/Learning Economies and the Ratio of Fixed to Variable Costs • Scale and learning economies are both important to the memory chip market; ...
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