Samantha Napier

Samantha Napier Business Strategy

Dr. Randall

January 22, 2015

Using the five forces do an analysis of the industry structure of the concentrate producers.Suppliers:

In this industry, the raw materials needed to produce concentrate diet and regular are your basic supplies such as sugar, artificial sweetener, color, water, flavor, and high-fructose corn syrup. These are basic supplies you can find anywhere; therefore producers have no power over the pricing. Coke and Pepsi also have the freedom to select any supplier they desire which makes switching costs for the companies very low.

Buyers: The major channels for the soft drink industry include supermarkets (main distribution), fountain outlets, vending machines, mass merchandisers, convenience stores, and gas stations.

The buying power range from low to high depending on the channel. Fountain outlets typically have a higher buying power compared to the rest of the channels because of the large amounts of purchases they make.Barriers to Entry:

Although becoming a concentrated producer is rather a low investment and its possible to establish relationships. It is however, impossible to compete with big brand names such as Coke and Pepsi. A barrier to entry for concentrated producers is rather low. Marketing research for a start up would be a huge investment.

Substitutes:

The threat of substitutes is quite low due to Coke and Pepsi including juices, water, tea, and energy drinks into their portfolio.

There is also low switching cost due to fountain outlets signing long term contracts.Rivalry: The main rivalry is between Coke and Pepsi as the other competition doesnt contain a lot of market share. Between these two companies there is a strong amount of rivalry as they have been consistently competing back and forth on advertising and differentiation. Using the five forces do an analysis of the industry structure of the independent bottlers.

Suppliers:

The buying power of suppliers range for independent bottlers depending on whether its the sweetener producer, concentrate producer, or packaging manufacturer. Bottlers add your basic ingredients such as carbonated water and high-fructose corn syrup, which can be found anywhere. This makes the sweetener producer have no power over the price.

Bottlers purchase from the concentrate producers having long term contracts which gives them a high supply power.Buyers:

Buying power is the same as a concentrated producer ranging from low to high. Supermarkets and large convenience stores have a higher buying power compared to the rest of the channels in the industry. Barriers to Entry:

The barrier to entry is low because high investments are needed and a new bottler cannot start in a region of an existing bottler. Substitutes:

Concentrators are always seeking for bottlers and they require a huge investment making the power of substitutes low.

Rivalry: The level of rivalry is high because there are only two main competitors. Which is a more attractive industry and which two forces are most important?

The more attractive industry would be the concentrate producers because its a highly profitable compared to independent bottlers. Concentrated producers minimize capital cost, reduce margins in the bottling business, and overall are more efficient. Two important forces are substitutes and rivalry. Substitutes are an important force because more and more substitutes are becoming available to consumers and they have low switching costs. Rivalry is also an important force in this industry because although Coke and Pepsi are number one and number two there are other companies gaining more market share in the industry.