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Cola WarsContinue
Will Day #40080
Sofia Hjelm #40092
Oskar Karlsson #40104
Julie Miller #40078
Sarmad Saleem #70408
Media Management spring 2010Instructor Robin Teigland
Rivalry within the
Concentrate Industry
High
Tit-for-tat
Threat of New entrants
LOW
- Economies of Scale
-Capital requirements ($ 25-$ 50 million per plant
- Customer loyalty Bargaining Power
of Buyers
LOW
-Unique recipes
-Concentrate producers have strong brands
-Have the relationship with
the end users
Threat of Substitute Products and Service
HIGH
Milk, juice, mineral water, tap water.
Bargaining Power of Suppliers
LOW
-Concentrate ingredients
commodities
-Many suppliers
Is the concentrate industry profitable?1)
Rivalry within the
Bottling Industry
LOW
static
Threat of New Entrants
LOW
- Capital intensive
- Specialized knowledge
- Distribution networks
Bargaining Power of Buyers
HIGH
-Walmart does not need Coke
as much as Coke needs
Walmart
-Branded products
lowers the buyers
bargaining power
Threat of Substitute Products and Service
LOW
Fountains
Bargaining Power of Suppliers
High
-Unique concentrate
recipes
-Many suppliers have strong brands
Profitability of the bottlingindustry2)
Conclusions
• Concentrateproducershavesupplier power over the bottlers
• The concentrateindustryproducesuniqueproductswhereas the bottlingindustryproductsproducesgenericproducts
Pretax margin
• Concentrate industry 35 % of sales
• Bottling industry 9 % of sales
Challenges
• The five forces analysis enables formulating a better strategy and how to be more profitable
• International differences
• Health consciousness
• Consumer preferences
3)
Cola wars
The competition between Coke and Pepsi has increased industry profits
– Increased barriers to entry (high marketing costs)
– The war has strengthened the entire category
– The war has made the benefits of the category more emotional which would enable higher prices
Sources
• Porter ME, ”The fivecompetetiveforces that shapecompetetivestrategy”, HBR 2008
• Cola warscontinue: coke and pepsi in the twenty-firstcentury, Harvard Business School
