Any water bottling company wishing to gain a competitive advantage should consider its economies of scale. These dictate a number of other factors such as developing an efficient low-cost production method, access to conveniently located distributors who include; large grocers, beer, wine and food distributors, supermarkets and convenience stores.
It should consider cost reductions by bargaining for quantity discounts, and consider investing in their own production equipment to cut down on costs. Economies of scale help firms to negotiate for exclusive sponsorship contracts, to boost sales.
Large water bottling firms have managed to set up efficient distribution channels. They are able to restock their sales agents more efficiently and at considerably lower costs. A company should execute a competitive pricing strategy that entices retail stores to offer them shelf space.
They should also extend rebates to help acquire distributors for their brands. Firms should develop a strong and elaborate network with distributors, with adequate distribution systems, and who are strategically located to deliver products to customers within a short period of time.
Established water bottling companies utilize fast resources at their disposal to develop low cost production designs, to enable them brush off competition from rivals in the industry. Brand building is very critical in increasing sales and enhancing the profitability of a firm.
The bottled water industry seems to have reached a saturation point. There are many firms in the bottled water industry, and as such, the level of competition is so intense that only the most efficient ones will be able to survive. Profitability in such a highly competitive environment can only be achieved through cost reductions.
However, there is more collaboration with educational institutions and sports stadia, for event sponsoring contracts that seem to have a pay-off through increase sales. Most firms have resorted to production of functional product-variants such as energy and nutritional drinks, and addition of flavors to achieve product differentiation and diversification.
The availability of a large number of firms that provide packaging supplies, has offered water bottling firms the ability to negotiate for lower prices, thus reducing their production costs, offering them a chance to make more profits. Firms are setting a global presence by franchising and making strategic acquisitions.
The acquisition of smaller firms, strategic partnerships with distributors through joint ventures and franchising, offers existing firms a growth potential. Such strategies have given firms strong distribution capabilities in the national and global arena.
The introduction of enhanced or functional water products, by a number of major bottling firms such as Coca-Cola and PepsiCo, has provided further competition, threatening to squeeze profitability for them.
However, such innovative products increase the diversification possibilities, which is a major success factor. Those companies with respected brands prior to entering the bottled water industry have an upper-hand in building new brands. Acquiring existing brands and adding them to their product lines, will favor profitability, and offers a competitive advantage.