COLA WARSCOURSE 2304
Erik Ingemansson (KTH), Karl Nielsen 40201, Henrik Engervall 20846
Contact: [email protected], [email protected], [email protected]
BARRIERS OF ENTRY 1. Supply side economies of scale = HIGH 2. Customer switching cost = LOW 3. Capital requirements =VERY HIGH 4. Unequal access to distribution = VERY
HIGH
EXPECTED RETALIATION 1. Incumbents have previously responded
vigorously to new entrants = HIGH 2. Incumbents possess substantial resources
to fight back = VERY HIGH
THREATS OF ENTRY
POWER OF SUPPLIERS
1. Many suppliers = LOW SWITCHING COSTS 2. Similar products = LOW
POWER OF BUYERS
Homogeneous products = LOW Many bottlers are already owned by the
concentrate companies = LOW Low margins thanks to high costs = LOW
THREAT OF SUBSTITUTES
The threat that people will choose another product = LOW
This could become a bigger threat due to increased general health concerns by the public
RIVALRY AMONG EXISTING COMPETITORS
Two big competitors and a lot of really small ones.
Industry growth are slow and most of the markets are capitalized.
QUESTION ONE:HOW ATTRACTIVE IS THE INDUSTRY?
Very attractive, if you are in it, otherwise not attractive at all.
Why? Hard to get into the market by outsiders The ones that are already in earns the big money
thanks to good margins Strong brands reassure the status quo. Big existing companies can use their economies
of scale
QUESTION 2, THE BOTTLERS
THREATS OF ENTRY
1. Customer switching cost = LOW 2. Capital requirements =VERY HIGH 3. Unequal access to distribution = VERY HIGH
EXPECTED RETALIATION 1. Incumbents have previously responded
vigorously to new entrants = LOW 2. Incumbents possess substantial resources
to fight back = MEDIUM
BARRIERS OF ENTRY
POWER OF SUPPLIERS
1. Sweetener suppliers & Packaging suppliers = LOW (easy switch)
2. Concentrate supplier = VERY HIGH (when big companies like Coke and Pepsi)
POWER OF BUYERS
The retailers have a lot of power = HIGH But retailers are also depended on the strong
brands = LOW If you have a fountain, you don’t need the
bottle = MEDIUM
THREAT OF SUBSTITUTES
More companies will start using fountains and won’t need bottles = MEDIUM
The emerge of soda streaming at home = MEDIUM
The risk that people in general will stop drinking from bottles = LOW
RIVALRY AMONG EXISTING COMPETITORS
Lots of competitors that is still left Simple product The concentrate companies have lately
bought a lot of bottling operations
QUESTION TWO:WHY IS PROFITABILITY FOR BOTTLING LOWER?
Because their margins are squeezed between suppliers and buyers bargaining powers.
Material costs are higher All our analysis point towards that it is more
attractive to be a player on the concentrate scene then to work with bottling.
QUESTION THREE:What challenges face these companies today?
Health trends Substitutes Increased power of retailers (e.g. Walmart) Matured market
How has competition between Coke and Pepsi affected the industry?
Lower margins Creation of own subcategory Made Coke and Pepsi bigger and stronger Increased barriers of entry
Reference list
http://hbr.org/hb/article_assets/hbr/0801/R0801E_A.gif Porter, M.E., "What is Strategy?", HBR, 1996. Porter, M.E., “The Five Competitive Forces that Shape Competitive
Strategy”, HBR, 2008. Case: Cola Wars Continue
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