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Sse colawars group7a_2011

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Erik Bengtson
Erik Bengtson

The document analyzes and compares the CSD (carbonated soft drink) industry and bottler industry using Porter's Five Forces model. It finds that the CSD industry faces less threats from external forces like suppliers, buyers, and substitutes. This makes the CSD industry more attractive and profitable than the bottler industry, which faces greater threats from these external forces. Emerging issues like health concerns, environmental impacts, and saturated markets may pose future challenges to the profitability and competitiveness of both industries.

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2304 Media Management - Cola Wars case After analysis of the CSD (carbonated soft drinks) and the bottler industry one can conclude that the threat of external forces are less present in the CSD industry than in the bottler industry. This results in higher attractiveness for the CSD industry. Group 7a: Erik Bengtson ebengt@kth.se Gustaf Sundl旦f 21174@student.hhs.se Richard Gullberg rgul@kth.se Allison Schiffman 92175@student.hhs.se
Presentation outline CSD industry analyzed according to Porters Five Competitive Forces Conclusion Bottler industry analyzed according to Porters Five Competitive Forces Conclusion and comparison Future challenges for the industry
Threat of new entrants Bargaining power CSD Bargaining power of suppliers industry of buyers (Coke, Pepsi, etc) Threat of substitute products or services
CSD industry analysis CSD Products relevant: Carbonated beverages industry (Coke, Pepsi, etc) Geographic scope: United States market Level of rivalry: Saturated market resulting in high rivalry Major actors Coca-Cola and Pepsi accounted for 76% of the US CSD market share in 2000. (Yof鍖e, 2004. Cola Wars Continue)
Bargaining power of suppliers Bargaining power of suppliers Size matters - power of major corporations like Coke and Pepsi provides a bene鍖cial advantage in negotiations. Standardized commodity products result in many suppliers lowering switching costs for CSD companies. Bargaining power of suppliers -> low Threat of new entrants Threat of new entrants Relatively low capital investment required Major capital investment needed for market success (marketing, building brand equity) -> relatively low threat
Bargaining power of buyers Bargaining power of buyers Concentrate producer -> Bottler -> retailer -> customer Hence, bottlers are the buyers Franchise agreements with Coca-Cola and Pepsi For successful sales to retailers, bottlers are heavily dependant on the major CSD producer brands -> low bargaining power Threat of Threat of substitutes substitute products or services Substitutes: all non-alcoholic beverages (non-CSD) Given a 鍖xed consumption per capita, substitutes like bottled water and juices have kept rising, whilst the CSD industry has slowed down since the late 1990s. -> high threat of substitutes
Conclusions Porter analysis indicates multiple bene鍖cial forces (suppliers, buyers and new entrants). The CSD market has been a very lucrative and attractive industry for the past century. However emerging threats of substitutes and increasing rivalry within the industry, makes for a uncertain pro鍖t potential given the current strategy.
Threat of new entrants Bargaining power Bottler Bargaining power of suppliers industry of buyers Threat of substitute products or services
Bottler industry analysis Bottler industry Products relevant: bottling service of CSD concentrate Geographic scope: United States market Level of rivalry: Many bottlers of similar size, high exit barriers due to committed resources resulting in high level of rivalry.
Bargaining power of suppliers Bargaining power of suppliers Heavily dependent on CSD producers result in very high bargaining power of suppliers. Threat of new entrants Threat of new entrants High capital investment to establish bottling plant and long term contracts for existing bottlers result in low threat of new entrants.
Bargaining power of buyers Bargaining power of buyers Buyers sell the bottled products to end customers and thereby control the exposure of bottled products directly in鍖uencing sales. High bargaining power of buyers. Threat of substitutes Threat of substitute products or services No apparent threat of substitutes. Low Soda Stream?
Conclusions and comparison Pro鍖tability differs greatly. Bottler pro鍖tability is heavily affected by both suppliers and buyers high bargaining power, resulting in low margins. CSD producers are less in鍖uenced negatively by external forces leaving them with higher margins. After 鍖ve-force analysis one can conclude that the CSD industry is more pro鍖table than the bottling industry. Attractiveness based on pro鍖tability is greater with the CSD producers.
Future challenges for the industry ->1990s bene鍖cial rivalry Recently saturated market may decrease pro鍖ts due to 鍖ercer rivalry. Health issues (sugar related diseases) -> substitutes Environmental issues (plastic bottles) -> bottler margins decrease due to change of material Finding a new pie to avoid price competition
Sources: Readings: Porter, M.E., The Five Competitive Forces That Shape Competitive Strategy, HBR, 2008. Yof鍖e, D.B., Cola Wars Continue: Coke and Pepsi in the Twenty-First Century. Videos: Porter, M.E., The Five Forces that Shape Strategy: http:// www.youtube.com/watch?v=mYF2_FBCvXw

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Sse colawars group7a_2011

  • 1. 2304 Media Management - Cola Wars case After analysis of the CSD (carbonated soft drinks) and the bottler industry one can conclude that the threat of external forces are less present in the CSD industry than in the bottler industry. This results in higher attractiveness for the CSD industry. Group 7a: Erik Bengtson ebengt@kth.se Gustaf Sundl旦f 21174@student.hhs.se Richard Gullberg rgul@kth.se Allison Schiffman 92175@student.hhs.se
  • 2. Presentation outline CSD industry analyzed according to Porters Five Competitive Forces Conclusion Bottler industry analyzed according to Porters Five Competitive Forces Conclusion and comparison Future challenges for the industry
  • 3. Threat of new entrants Bargaining power CSD Bargaining power of suppliers industry of buyers (Coke, Pepsi, etc) Threat of substitute products or services
  • 4. CSD industry analysis CSD Products relevant: Carbonated beverages industry (Coke, Pepsi, etc) Geographic scope: United States market Level of rivalry: Saturated market resulting in high rivalry Major actors Coca-Cola and Pepsi accounted for 76% of the US CSD market share in 2000. (Yof鍖e, 2004. Cola Wars Continue)
  • 5. Bargaining power of suppliers Bargaining power of suppliers Size matters - power of major corporations like Coke and Pepsi provides a bene鍖cial advantage in negotiations. Standardized commodity products result in many suppliers lowering switching costs for CSD companies. Bargaining power of suppliers -> low Threat of new entrants Threat of new entrants Relatively low capital investment required Major capital investment needed for market success (marketing, building brand equity) -> relatively low threat
  • 6. Bargaining power of buyers Bargaining power of buyers Concentrate producer -> Bottler -> retailer -> customer Hence, bottlers are the buyers Franchise agreements with Coca-Cola and Pepsi For successful sales to retailers, bottlers are heavily dependant on the major CSD producer brands -> low bargaining power Threat of Threat of substitutes substitute products or services Substitutes: all non-alcoholic beverages (non-CSD) Given a 鍖xed consumption per capita, substitutes like bottled water and juices have kept rising, whilst the CSD industry has slowed down since the late 1990s. -> high threat of substitutes
  • 7. Conclusions Porter analysis indicates multiple bene鍖cial forces (suppliers, buyers and new entrants). The CSD market has been a very lucrative and attractive industry for the past century. However emerging threats of substitutes and increasing rivalry within the industry, makes for a uncertain pro鍖t potential given the current strategy.
  • 8. Threat of new entrants Bargaining power Bottler Bargaining power of suppliers industry of buyers Threat of substitute products or services
  • 9. Bottler industry analysis Bottler industry Products relevant: bottling service of CSD concentrate Geographic scope: United States market Level of rivalry: Many bottlers of similar size, high exit barriers due to committed resources resulting in high level of rivalry.
  • 10. Bargaining power of suppliers Bargaining power of suppliers Heavily dependent on CSD producers result in very high bargaining power of suppliers. Threat of new entrants Threat of new entrants High capital investment to establish bottling plant and long term contracts for existing bottlers result in low threat of new entrants.
  • 11. Bargaining power of buyers Bargaining power of buyers Buyers sell the bottled products to end customers and thereby control the exposure of bottled products directly in鍖uencing sales. High bargaining power of buyers. Threat of substitutes Threat of substitute products or services No apparent threat of substitutes. Low Soda Stream?
  • 12. Conclusions and comparison Pro鍖tability differs greatly. Bottler pro鍖tability is heavily affected by both suppliers and buyers high bargaining power, resulting in low margins. CSD producers are less in鍖uenced negatively by external forces leaving them with higher margins. After 鍖ve-force analysis one can conclude that the CSD industry is more pro鍖table than the bottling industry. Attractiveness based on pro鍖tability is greater with the CSD producers.
  • 13. Future challenges for the industry ->1990s bene鍖cial rivalry Recently saturated market may decrease pro鍖ts due to 鍖ercer rivalry. Health issues (sugar related diseases) -> substitutes Environmental issues (plastic bottles) -> bottler margins decrease due to change of material Finding a new pie to avoid price competition
  • 14. Sources: Readings: Porter, M.E., The Five Competitive Forces That Shape Competitive Strategy, HBR, 2008. Yof鍖e, D.B., Cola Wars Continue: Coke and Pepsi in the Twenty-First Century. Videos: Porter, M.E., The Five Forces that Shape Strategy: http:// www.youtube.com/watch?v=mYF2_FBCvXw

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