Who is the major part of the value chain in Coca-wars case? Why? - An insight into the cola wars case!

A value chain is a chain of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market. Value chain for the Cola industry is largely producer dominated which gives them paramount importance.

The role of concentrate producers of the Carbonated Soft Drinks is discussed below.

Concentrate Producers: These producers would blend the raw material ingredients, package it in plastic canisters and ship it to the bottler. Their major costs would be for advertising, promotion, market research and bottler relations. They invest heavily in their trademarks over time, with innovative and sophisticated marketing campaigns. They negotiate with the bottler’s major suppliers to encourage reliable supply, faster delivery and lower prices.

The powers of input suppliers which supply the main ingredients in cola concentrate are weak. The bargaining position of the concentrate producer is extremely strong since most of the inputs required to manufacture concentrate is relatively easy to purchase and the concentrate industry has abundant suppliers to offer the inputs. The producers are the price – takers here, as they dictate the prices to which the bottlers should succumb and the decision regarding what items the bottlers can bottle and distribute is also taken by the producer. Between the cola concentrate producers and the bottlers, the bottlers have little to no option in switching concentrate because of contractual agreements. Therefore, this makes the threat of substituting concentrate producers impossible. Entering this industry would be extremely difficult because of the high cost of marketing the new product, creating a brand image, getting slotting place etc. High competition between the industry leaders brings benefit to the customers in terms of quality, taste and economical prices.

Contributed By:
R. Sandhya
Section A
Strategic Management
Class of 2013-15