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Cola Wars Continue Media Magagement course Ahmed Hassan Cecilia Teljas Adit Rahman Nataliia Danylchenko Yunyun Han

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  • 1. Cola Wars Continue Media Magagement course Ahmed Hassan Cecilia Teljas Adit Rahman Nataliia Danylchenko Yunyun Han

2. The Five Forces of the Concentrate Business 3. Porters five-forces

  • Rivalry
  • Highly concentrated industry
  • Two main competitors
    • Coca cola
    • Pepsi
  • Aggressive growth strategies
  • High barriers to exit (major fixed costs)
  • Slow market growth
  • Little product differences
  • Perishable products
  • Strategic stakes are high
  • Threat of Substitute products
  • Extensive substitute products
    • Juice, Coffee, Tea, Beers, Wine, Milk, Energy drinks d
  • Low switching costs

4. Porters five-forces

  • Threats of NewE ntrants
  • Well established brand names
  • Have strong distribution systems
  • Huge investments need to be made in market research and bottler relations
  • Economies of scale
  • Bargaining Power of suppliers
  • Inputs
    • Artificial sweetner, caramel coloring, phosphoric and citric acid, natural flavours, caffine
  • Packaging
  • Many suppliers are available
  • Buyers threaten for backward integration
  • Very less differentation

5. Porters five-forces

  • Five main channels
    • Food store, Fountains, Mass merchandiser, Convenient stores, Vending machine
  • Bargaining power for fountain is higher
  • Low power of negotiation
  • Industry products are standardised
  • Buyers are fragmented
  • Little diffrentiation
  • Distributor can influence end users purchase decisions

Bargaining Power of Buyers 6. The Five Forces of the Concentrate Business HIGH HIGH LOW HIGH HIGH 7. Industry Attractiveness

  • High Attractiveness
  • 1996-2006 the US average industry ROICwas 14.9 %
  • Over the same period ROIC for soft drinkswas 37.6 %
  • Soft Drinks second after security brokers and dealers
  • Low Attractiveness
  • Over all consumption has decreased
  • Advertisement and marketing costs are high

8. The Five Forces of the Bottlers Business 9. Q 2 10. Bottlers

  • Low Threat from Substitutes
  • concentrators are always seeking for bottlers
  • Huge investments are required
  • Development of special management skills
  • Low Power of suppliers
  • Raw materials are easily available in the market

11.

  • High Power of buyers
  • Five main channels
    • Food store, Fountains, Mass merchandiser, Convenient stores, Vending machine
  • Bargaining power for fountain is higher
  • Low power of negotiation
  • Have to fight for shelf space
  • Barriers to entry
  • Good relation ships with retailers
  • Defend by discounting and other tactics
  • New bottler cannot start in a region of an existing supplier

12. Pretax profit

  • Concentrate35%
  • Concentrate Producers input in ingredients is small
  • The production process is basically simple invloves little overhead, or labor
  • Bottler 9%
  • bottlers have to invest at least $25million to $35 million to build a small bottling plant, and up to $75 million (in 1998) to build an efficient large plant

13. For selling and delivery

  • Concentrate Producers
  • deals with normal delivery of blended ingredients
  • Bottlers serves
  • direct store door (DSD) delivery, which involved route delivery sales people physically placing and managing the CSD brand in the store
  • This is obviously large amount of cost for labor

14. Advertising and marketing

  • Concentrate Producer
  • initiate programs and plays an active role in advertising, promotion, market research
  • send staff to work with bottlers in store to ensure quality of in-store activities.
  • Bottlers
  • Also participate in advertising costs

15. Economics and Attractive Business

  • Concentrate Producers business model is more intensive and efficient
  • bottler
  • takes more risk, as they invest more on fixed assets and rely much on different relationships

16. The Five Forces of the Bottlers Business LOW LOW HIGH LOW HIGH 17. What challenges face these companies today?

  • Pepsi has long been the biggest challenge of Coke, and vice versa
  • Decline of sales in the US and other markets due to:
    • the global economic crisis
    • consumers re-orientation to healthier beverages
    • plenty of various substitutes and potential entrants
  • Competing, substitute and potential entrants brands have to be prevented
  • Negative stereotypes of Pepsi and Coke
  • Pepsi and Coca-Cola develop new beverages:
    • Substantive amounts are invested
    • Often result in cannibalism
  • Differing regulations in different national markets prevent business synchronizing worldwide
  • Protectionism of national brands in certain national markets ( e.g . Brazil)
  • Huge amounts spent on advertisements
  • Conquering of new markets:
    • Often lack certified, experienced and reliable local suppliers and distributors
  • Dependence on bottlers (sometimes mutual)
  • Tough competition makes Pepsi and Coke engage in increasingly risky business operations

18. F iveF orcesA nalysis

  • 1. Pepsi has long been the biggest challenge of Coke, and vice versa
  • 2. Decline of sales in the US and other markets due to:
    • the global economic crisis
    • consumers re-orientation to healthier beverages
    • plenty of various substitutes and potential entrants
  • 3. Competing, substitute and potential entrants brands have to be prevented
  • 4. Negative stereotypes of Pepsi and Coke
  • 5. Pepsi and Coca-Cola develop new beverages:
    • Substantive amounts are invested
    • Often result in cannibalism
  • 6. Differing regulations in different national markets prevent business synchronizing worldwide
  • 7. Protectionism of national brands in certain national markets ( e.g . Brazil)
  • 8. Huge amounts spent on advertisements
  • 9. Conquering of new markets:
    • Often lack certified, experienced and reliable local suppliers and distributors
  • 10. Dependence on bottlers (sometimes mutual)
  • 11. Tough competition makes Pepsi and Coke engage in increasingly risky business operations
  • We considered the challenges mentioned from the prospective of the five forces:
    • Industry competitors (1, 2, 5, 8, 11)
    • Suppliers (9, 10, 12)
    • Substitutes (2, 3, 5)
    • Buyers (2, 4, 8)
    • Potential entrants (3, 4)
  • At the same time, the five-forces analysis does not take into account the factor of national states (6, 7)