Cola Wars case study – Five forces analyses
Bargaining power of buyers:
Refer to the case, direct buyer is the bottler and indirect buyers are the end consumer and suppliers such as supermarkets and other outlets. Bargaining power of buyers for concentrate producers refers to the bargaining power of the bottlers. From the industry perspective, it is true that bottler could choose to switch their concentrate producers. Bargaining power of suppliers:
The direct suppliers for concentrate producers are the suppliers of ingredients. The concentrate producers have choices in selecting their suppliers. Generally, it can be said that the buyers of packaging have a higher bargaining power compare to the suppliers. Competition from substitutes:
The threat from substitutes mostly depends on buyers’ behavior and price performance of substitutes. As the bottlers are the direct buyers of the concentrate producers, the ultimate buyer is the end consumers who drink the soft drinks. The end consumers have wide variety of choices and therefore they have higher tendency to switch to other type of soft drink based on price. As stated in the case, price is a major determinant on the sale of soft drinks. Threat of new entrants:
There are some barriers for new entering concentrate producers. First, existing bottlers in the soft drink industry may not agree to bottle the new entrants especially if they have contracts or partnership with other companies. Second, the brand recognition among consumers requires investment in advertising and other promotional activities. Create a brand image takes years and the potential returns may be earned in long term. New entrant needs to have financial stability to stand in the market over a long period of time. Rivalry between established competitors:
One of the major factors affecting profitability of a concentrate producer depends on the competition among companies in the industry. In...