STRUCTURAL FORCES EFFECTS on COLA DRINKS INDUSTRY SUPPLY CHAIN
Carbonated soft drinks branded under Coca Cola and Pepsi Cola remain major household names in the soft drinks industry. Spanning operation from the original Franchise agreement of 1899 to-date, is an indication of managerial ingenuity of strategy design, implementation and control. Profitability and sustainability as a key issue in business operations necessitates these value chain components to critically evaluate the Structure-conduct-performance framework as an ongoing process. As suggested by Porter (2008/1977), the evaluation of the industry structure would assume the assessment under the five forces concept: The threat of entry, the power of suppliers, the power of buyers, the threat of substitutes and the competitive rivalry.
The major players in the Carbonated Soft Drinks (CSD) industry in the production and distribution process are classified in four major groupings: Concentrate producers, bottlers, retailer channels and suppliers. As major part players in the Carbonated Soft Drinks Industry (CSD), analysis of the Industry structure is synonymous to assessment of the Industry major players on Structure-Conduct-Performance (SCP) paradigm. This essay seeks to subject to assessment the CSD Industry major players to the five forces concept.
In this part of the industry, raw materials are converted into concentrates. Ingredients are blended with sugar, high fructose corn syrup or artificial sweeteners. The concentrates are then sent to bottlers.
The threat of entry,
The initial capital investment required is substantial from USD 25-50 Million, consequently stiffening the barrier to entry. One concentrate producer can supply several bottlers. Both from the Supply side economies of scale and demand side benefits of scale, new entrants need the financial muscle to enter the market.
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