Competition in the Bottled Water Industry in 2006

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1.What are economic characteristics of the bottled water industry?

If we define the economic characteristics in term of macro environment, there is several ways that we can categorize as the follow; Market size and growth rate
The bottled water industry has a high potential in growth rate and in the terms of sales volume or per capita consumption rate. For example, the United States’ capita consumption of bottled water lagged those of soft drinks by more than a 2:1 margin. In term of bottle water, the majority of sales volume has burden on single- serving PET containers than 5 or 1-2.5 gallon high density polyethylene containers which use for home or office. The single PET container has been satisfied by the customers because they are convenience and portable. So it could be purchased from a convenience store.

Number of rival
There were fierce competitions among the producers that have scale and scope of operations which were similar to each other. For instance, the Pepsi Co. and Coca Cola companies have developed the strategy and infrastructure, which are hard for the local sellers to complete with them. However, there were still many producers including new entrants that try to access the market and compete seriously with low price and differentiation- strategies among rivals.

Scope of competitive rivalry
The Local sellers have a little amount of scale and scope comparing to huge bottled water production companies (Pepsi, Coca Cola, Nestle Waters, and Group Danone). Those kind brand producers benefits of strong economies of scale and scope. For instance, Pepsi Co has its own spring water company and utilizes the facilities that produce soft drinks. These producers can purchase a large quantity of raw materials at a time which means they can reduce price per units. However, the small producers were having a hard time completed with those big companies because they don’t have enough budgets to achieve economic of scale like the big companies do. Buyer needs and requirement

The buyers have been satisfied with the bottle water because its purity comparing to soft drinks which isn’t healthy and tap water which is not pure. The statistics had shown the number of people who infected by disease that involve in tap water contaminating has increased percentages in United States and also some other part of the world. As a result, buyers tend to buy bottled water more than last decades.

Degree of product differentiation
Pepsi Co. and Coca Cola try to prove that their own water products like AQUAFINA and DASANI, are on the same level of purity and health concern. Thus, PepsiCo had alternatively produced functional water like PROPLE fitness water, which has been responded very well by its market.

Supply /Demand condition
The industry has a high demand and high supply. So the producers have to develop their bottling system. For example, if they don’t have their own water spring machine, they have to lease for the high fixed cost per month. However, the leading bottled water company has more bargain power with supplier in term of High volume for a lower price. For instance, the companies produced film and paper labels for water bottle have to complete with each other to get the contract to become a leading supplier.

Technological change has played an important role in the industry no matter the initiative process that seeks the water sources to the bottling facilities.

2.What is competition like in the bottled water industry?

The producers have to compete with each other in placing their products in the shelves. The companies that have a low scope and economies of scale tend to have a lower position to compete with price strategies comparing to leading companies in industry. For instance, the new entrants or low-scope companies has to compete on bargaining power with suppliers and slotting fees, as these are the types of cost that have been burdened, or even they have cost of securing their...
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