Market
structure (Industry): Duopoly
Purpose:
Beverages (Carbonated soft drinks)
Problems:
·
Flattening .falling Domestic sales
·
Revenue streams
·
External Environment (competition)
Competition:
Milk, Coffee, Bottled water, Juices, Tea, Powdered drinks, Sports Drinks
To understand the problem in an industry, we first
need to understand the value chain of this industry, which is as given below:
Concentrate
producersàBottlersàRetail
ChannelsàSuppliers (Restaurant, Offices,
Fountain-machines)àConsumers
We then use The Porter's
Five Forces tool for understanding where power lies in this value chain in
the industry.Five Forces Analysis assumes that there are five
important forces that determine competitive power in a business situation. They
are:
1. Barrier
to entries
2. Substitutes
3. Bargaining
power of buyer
4. Bargaining
power of suppliers
5. Rivalry
We will now analyze each element in the value chain
of this industry through Porters Five Forces.
With respect to Concentrated producers(CP):
1. Barriers
to entry: Very high, as these players are deeply rooted,
difficult to start a new cola company and high on investment.
2. Substitutes:
Substitutability in terms of economics and use is almost perfect.
3. Bargaining
Power of supplier: Very high, as they are the producers
of major ingredients , directly deals with Bottlers and control the supply
chain. They also carry out major chunk of advertising , promotion and market
research
4. Bargaining
power of buyer: Low because Tied closely to CP’s, Consolidation of bottlers.
5. Rivalry:
Low as there is no scope for REAL differentiation. Only Fancy/apparent
differentiation happens.
With respect to Bottlers:
1. Barriers
to entry: High, as high investment is involved(specialized
plants for specific CP, Major CP being COKE), only few independent bottlers
left.
2. Substitutes:
Moderate, Direct concentrate delivery, fountain sales don’t influence bottlers
sales
3. Bargaining
Power of supplier: Low, as the bottlers are geographically
scattered and pressure from CP’s forced them to cater only to the respective
surrounding
4. Bargaining
power of buyer: Low as Coke bound them with long term
contracts and gave better technology, which didn’t allow bottlers to cater to
competition
5. Rivalry:
Among bottlers competition was high.
Contributed by:
Ayushi Thakur
Section A
Strategic Management
Class of 2013-15
