Cola Wars
MKTS 7303 - PRINCIPLE OF STRATEGIC MANAGEMENT
Cola Wars (Coke and Pepsi 2010) Case Study - Week 4
(S42166755)
1. Compare the competitive dynamics of the concentrate business to that of the bottling business? Why is the profitability so different?
By using Five Forces Model by Michael Porter, it will shows competitive dynamics in the industry. Therefore, to define everything further this model will be used to do the comparison between concentrate business (CB) and bottling business (BB).
• Barriers to entry, based on the case study and further research, it shows that it is quite impossible for new “challenger” to enter the market of concentrate business. The challenger needs a strong distribution channel and also considerably high capital cost. Meanwhile in bottling business, the chance to enter to market also almost impossible, due the difficulty of building new distribution channels, while the market leader is still in control, and requires a lot of resources. On top of it, the decreasing market growth of CSD industry will likely deliver second thought to the potential entrants to enter the market. Therefore, barriers to entry for both of the industries are high.
• Bargaining power of buyers, for the concentrate business the bargaining power of buyers is low, since the main buyers are bottling industry and fountain market which could be considered as a part of the parent company. Moreover, the CB has already acquired several big chain food chain industries players that offer fountain drink market. Regarding this acquire, even though there is huge demand on the fountain drink market industries (for example Pizza Hut) it still has low bargaining power due the low negotiation power among them because they all on the same side. Decreasing number of the bottling business as buyer also contributes to low bargaining power. Meanwhile, for BB the bargaining power is relatively moderate. Due the saturated market of CSD’s and also competition
Cola Wars (Coke and Pepsi 2010) Case Study - Week 4
(S42166755)
1. Compare the competitive dynamics of the concentrate business to that of the bottling business? Why is the profitability so different?
By using Five Forces Model by Michael Porter, it will shows competitive dynamics in the industry. Therefore, to define everything further this model will be used to do the comparison between concentrate business (CB) and bottling business (BB).
• Barriers to entry, based on the case study and further research, it shows that it is quite impossible for new “challenger” to enter the market of concentrate business. The challenger needs a strong distribution channel and also considerably high capital cost. Meanwhile in bottling business, the chance to enter to market also almost impossible, due the difficulty of building new distribution channels, while the market leader is still in control, and requires a lot of resources. On top of it, the decreasing market growth of CSD industry will likely deliver second thought to the potential entrants to enter the market. Therefore, barriers to entry for both of the industries are high.
• Bargaining power of buyers, for the concentrate business the bargaining power of buyers is low, since the main buyers are bottling industry and fountain market which could be considered as a part of the parent company. Moreover, the CB has already acquired several big chain food chain industries players that offer fountain drink market. Regarding this acquire, even though there is huge demand on the fountain drink market industries (for example Pizza Hut) it still has low bargaining power due the low negotiation power among them because they all on the same side. Decreasing number of the bottling business as buyer also contributes to low bargaining power. Meanwhile, for BB the bargaining power is relatively moderate. Due the saturated market of CSD’s and also competition