• Existing firms have cost and performance advantage in this industry. This is because existing firms have already purchased large capital expenditures and have economies of scale. They also have direct supply and distribution channels setup
• Soft drinks are not proprietary products because anyone can make soft drinks. The only proprietorship is on patented flavors and brands.
• The majority of soft drinks have well-known brand identities, with the exception of generic brands. Brand identities define soft drink flavors (i.e. Sprite means lemon-lime, or Coke means cola)
• There are no significant costs in switching suppliers. The soft drink industry is very competitive, so prices only fluctuate slightly depending on geographical location (transportation) or short-run sale discounts.
• A lot of capital is needed to enter this industry because there are large capital costs needed for manufacturing. Bottling, distribution, and storage could be contracted out, but it would likely increase costs in the long run and weaken the supply chain.
• A new comer to the industry would face difficulty in assessing distribution channels. The major brands already control the main distribution channels, such as big supermarkets, gas stations, and restaurants. They have low costs, competitive pricing, and strong business relationships.
• Experience in this industry does help firms to lower costs and improve performance. The major brands run on economies of scale, and have experienced the highs and low of the industry and overcome them. New entrants can learn from the first entrants history but do not have first hand experience.
• There are licenses, insurances, and other difficult qualifications required in this industry. Companies must get FDA appro...
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...d names are an important competitive edge amongst new businesses.
• It actually would be difficult to get out of business because of money lost from fixed costs and advertisements, as well as binding contracts with set distribution channels.
• Customers would not incur high costs from switching from one player to another. The most they may incur would be a few cents because the prices in the industry do not fluctuate much among the firms.
• Since the products in this industry are simple carbonated beverages, there is no need for significant customer-producer interaction because customers purchase the products mainly based on taste.
• Market shares in the industry are not more-or-less equally distributed among competitors. This is evident because there are three main firms that own approximately 90% of the industry, yet there are over 100 companies in the industry.
This organization belongs to the oligopoly market structure. The oligopoly market structure involves a few sellers of a standardized or differentiated product, a homogenous oligopoly or a differentiated oligopoly (McConnell, 2004, p. 467). In an oligopolistic market each firm is affected by the decisions of the other firms in the industry in determining their price and output (McConnell, 2005, P.413). Another factor of an oligopolistic market is the conditions of entry. In an oligopoly, there are significant barriers to entry into the market. These barriers exist because in these industries, three or four firms may have sufficient sales to achieve economies of scale, making the smaller firms would not be able to survive against the larger companies that control the industry (McConnell, 2005, p.
Maintaining profits in this competitive industry is very difficult. The top competitors in the industry have an extensive portion of the entire market, nearly 80% of the market they control. This makes it extremely difficult for small entities entering the market to hold onto their position in the market and stay competitive.
Coke continuously out-stands Pepsi, even though they share a very similar taste and colour, however Coke should not be the drink that receives all the love and attention for what it offers. Despite their similar soda colour, the drinks actually contain some different ingredients, which produce a different taste, and affect the body differently. Furthermore, the way the companies markets their drinks makes a huge contribution to how successful their products will become. The major element for success however stems from their impact on society and how the companies utilize their social power to evolve. The two major soda companies are constantly head to head with one another, yet it is what they do that sets them apart.
This will lower the cost for the customer, keep each company competitive and allow them to keep a high margin. Another cost is the inventory cost for each company. Each company needs major capital to store their broad catalog of products. This is especially true for Fastenal because one of their niches is time of delivery. Since Fastenal has more distribution plants, we as a company are able to get a customer an order in a shorter period of time.
The beverage industry is highly competitive and presents many alternative products to satisfy a need from within. The principal areas of competition are in pricing, packaging, product innovation, the development of new products and flavours as well as promotional and marketing strategies. Companies can be grouped into two categories: global operations such as PepsiCo, Coca-Cola Company, Monster Beverage Corp. and Red Bull and regional operations such as Ro...
The soft drink industry in the United States is a highly profitably, but competitive market. In 2000 alone, consumers on average drank 53 gallons of soft drinks per person a year. There are three major companies that hold the majority of sales in the carbonated soft drink industry in the United States. They are the Coca Cola Company with 44.1% market share, followed by The Pepsi-Cola Company with 31.4% market share, and Dr. Pepper/Seven Up, Inc. with 14.7% market share. Each company respectively has numerous brands that it sales. These top brands account for almost 73% of soft drink sales in the United States. Dr. Pepper/Seven Up, Inc. owns two of the top ten brands sold. Colas are the dominant flavor in the U.S carbonated soft drink industry; however, popularity for flavored soft drinks has grown in recent years. The changing demographics of the U.S population have been an important factor in the growing popularity of these flavored soft drinks. The possible impact of this factor will be addressed later in the case.
Bottling Network: Both Coke and PepsiCo have franchisee agreements with their existing bottler’s who have rights in a certain geographic area in perpetuity. These agreements prohibit bottler’s from taking on new competing brands for similar products. Also with the recent consolidation among the bottler’s and the backward integration with both Coke and Pepsi buying significant percent of bottling companies, it is very difficult for a firm entering to find bottler’s willing to distribute their product.
Analysis of the Coca-Cola Company The Coca-Cola Company is the world's leading manufacturer, marketer and distributor of soft-drink concentrates and syrups. The Coca-Cola Company is the world's leading manufacturer, marketer and distributor of soft-drink concentrates and syrups. The Company markets many of the world's top soft drink brands, including Coca-Cola, Diet Coke, Sprite and Fanta. Through the world's largest and most pervasive distribution system, consumers in nearly 200 countries enjoy the Company's products at a rate of more than one billion serving a day.
Everyone enjoys a taste of fizzyness in their mouths, in other words, soft drinks, which are also known as “soda, pop, coke, soda pop or fizzy drink”, is a beverage that contains water, not always carbonated, it also contains sweetner as well as a flavoring agent. sweetner used in these drinks may be sugar, high-fructose corn syrup, fruit juice, in case of diet drinks it may have sugar substitues and a combination of all of these. Soft drinks may also contain caffine, colorings, preservatives and “other ingredients”.The high demand of soft drinks made me look into it and the company I chose to focus on for my case study is Coca-Cola. The reason I chose this company is because I find the logo and the font it uses quite intruiging. The curving of each of the letters used in the logo relate closely to the movement of art nouveau and for some of the background of the logo, it closely fits in with art deco as a movement. The simplicity of the logo appealed to me and as a result I chose to make Coca-Cola as my focal point. It is quite interesting as to how the brand had once started off and where it has come to now.
Pepsi Company (PepsiCo) owns many brands of beverages, snacks and other foods. Its major product, Pepsi Cola, is one of the most popular carbonated beverages. Besides that, PepsiCo owns the brands Quaker Oats, Gatorade, Frito-Lay, Tropicana, Mountain Dew, Naked, Mirinda and SoBe. In order to maintain, or preferable expand, its market share, PepsiCo constantly introduced new products under its brands. This is a marketing strategy known as Product Development. By modifying the formulas and ingredients, PepsiCo had invented and marketed more than 50 types of carbonated beverages under the brand of Pepsi. To name a few, Pepsi Free introduced in 1982, Pepsi AM introduced in 1989, Pepsi Tropical introduced in 1994, Pepsi Blue introduced in 2003, Pepsi Edge introduce in 2004, Pepsi Lime introduced in 2005, and Pepsi Ice introduced in 2007. Some of the products survive and being accepted by consumers, however large number of the new formula Pepsi had failed and been removed from the market shelves in as short as 6 months.
New entrants to an industry, with a desire to gain market share, will put pressure on prices, costs and capital needed to compete. It can affect the profit potential.
Dr Pepper Company is the oldest major manufacturer of soft drink concentrates and syrups in the United States. Dr Pepper is the company's principal brand. Cadbury Schweppes PLC acquired Dr Pepper/Seven-Up Cos. Inc. in March 1995. The new business will be called the Dr Pepper Company, which will focus on the Dr Pepper brand by handling all beverage system sales, which account for 75 percent of its business, in addition to related independent bottlers. The second operating group will be Cadbury Beverages/Seven Up Co., which will service independent bottlers not carrying Dr Pepper. Dr Pepper/Seven Up soft drink brands now hold about 16 percent of the U.S. market. Dr Pepper and Seven-Up are among the top 10 carbonated soft drinks, with Dr Pepper being the top non-cola soft drink. Other soft drink include: A&W Root Beer, Canada Dry, Schweppes, Welch's, Sunkist, Squirt, Crush and Hires (Levy 1999). According to the soft drink industry report, there is large sales growth recently in non-colas. Dr Pepper was number three in the industry. The reason is because non-colas have above-average caffeine level, and will be aimed at the 12-to 21-year-old market. Obviously, management sees this product as an opportunity to more fully participate in the growing popularity of non-colas.
There are high entry costs to enter the market. The large industry competitors already have captured the market share.
Soft drinks are one of the most recognized parts of Western culture. Beginning as tonics for fatigue and anything else that might be the matter with a patient, they have evolved into sweet bubbly accompaniments to hamburgers and French fries and other widely recognized parts of Western culture. Most soft drinks are characterized by carbonated water, sugar, and caffeine. Variations in soft drinks generally advertise either flavor differences, or the absence of one or more of the three main ingredients.
This competitive advantage has been rendered sustainable as other players have found it difficult to catch up with the company's competitive strategy. In spite of this clear advantage, it was noted that the company faces some challenges being the world leader in soft drink distribution. The canning and bottling of the product which is done in many countries have now fallen into the hands of independent companies, thus it becomes hard for a given company to control the quality of the packaging