COLA WARSCOURSE 2304

Erik Ingemansson (KTH), Karl Nielsen 40201, Henrik Engervall 20846

Contact: 20846@student.hhs.se, 40201@student.hhs.se, egjin@kth.se

BARRIERS OF ENTRY 1. Supply side economies of scale = HIGH 2. Customer switching cost = LOW 3. Capital requirements =VERY HIGH 4. Unequal access to distribution = VERY

HIGH

EXPECTED RETALIATION 1. Incumbents have previously responded

vigorously to new entrants = HIGH 2. Incumbents possess substantial resources

to fight back = VERY HIGH

THREATS OF ENTRY

POWER OF SUPPLIERS

1. Many suppliers = LOW SWITCHING COSTS 2. Similar products = LOW

POWER OF BUYERS

Homogeneous products = LOW Many bottlers are already owned by the

concentrate companies = LOW Low margins thanks to high costs = LOW

THREAT OF SUBSTITUTES

The threat that people will choose another product = LOW

This could become a bigger threat due to increased general health concerns by the public

RIVALRY AMONG EXISTING COMPETITORS

Two big competitors and a lot of really small ones.

Industry growth are slow and most of the markets are capitalized.

QUESTION ONE:HOW ATTRACTIVE IS THE INDUSTRY?

Very attractive, if you are in it, otherwise not attractive at all.

Why? Hard to get into the market by outsiders The ones that are already in earns the big money

thanks to good margins Strong brands reassure the status quo. Big existing companies can use their economies

of scale

QUESTION 2, THE BOTTLERS

THREATS OF ENTRY

1. Customer switching cost = LOW 2. Capital requirements =VERY HIGH 3. Unequal access to distribution = VERY HIGH

EXPECTED RETALIATION 1. Incumbents have previously responded

vigorously to new entrants = LOW 2. Incumbents possess substantial resources

to fight back = MEDIUM

BARRIERS OF ENTRY

POWER OF SUPPLIERS

1. Sweetener suppliers & Packaging suppliers = LOW (easy switch)

2. Concentrate supplier = VERY HIGH (when big companies like Coke and Pepsi)

POWER OF BUYERS

The retailers have a lot of power = HIGH But retailers are also depended on the strong

brands = LOW If you have a fountain, you don’t need the

bottle = MEDIUM

THREAT OF SUBSTITUTES

More companies will start using fountains and won’t need bottles = MEDIUM

The emerge of soda streaming at home = MEDIUM

The risk that people in general will stop drinking from bottles = LOW

RIVALRY AMONG EXISTING COMPETITORS

Lots of competitors that is still left Simple product The concentrate companies have lately

bought a lot of bottling operations

QUESTION TWO:WHY IS PROFITABILITY FOR BOTTLING LOWER?

Because their margins are squeezed between suppliers and buyers bargaining powers.

Material costs are higher All our analysis point towards that it is more

attractive to be a player on the concentrate scene then to work with bottling.

QUESTION THREE:What challenges face these companies today?

Health trends Substitutes Increased power of retailers (e.g. Walmart) Matured market

How has competition between Coke and Pepsi affected the industry?

Lower margins Creation of own subcategory Made Coke and Pepsi bigger and stronger Increased barriers of entry

Reference list

http://hbr.org/hb/article_assets/hbr/0801/R0801E_A.gif Porter, M.E., "What is Strategy?", HBR, 1996. Porter, M.E., “The Five Competitive Forces that Shape Competitive

Strategy”, HBR, 2008. Case: Cola Wars Continue