Coca Cola Wars

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The cola industry is an attractive industry if you’re a concentrate producer and an incumbent in the business. 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 many suppliers to offer those inputs. In addition, analyzing the cola wars case, Coca Cola concentrate producers dictate the price at which the bottler must purchase the concentrate and also explicitly decided what items the bottlers can bottle and distribute. This illustrates the supply power of the concentrate producers as strong against the cola bottlers. The threat of substitute products is high in the cola industry. 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 and most significant for concentrate producers. The treat of new entrants is very low because of the high cost associated with the industry which include, marketing a new cola, gaining name recognition, obtaining slotting space and a number of other factors makes for favorable conditions to operate for the incumbents. The rivalry among existing competitors is extremely intense however; it proves to provide benefits for the industry. For instance when Coca Cola introduces a new venture Pepsi may follow or vice versa, essentially offering more products for consumers. The intense rivalry keeps competitors from entering the industry because of the intense price war.
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