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The Cola Wars Case: Industry Analysis Essay


Concentrate Producers

Bargaining Power of Buyers

In light of the fact that there are many similar products available for the target market, the bargaining power of consumers is very high. Although there are several distinct characteristics that set Coca-Cola apart from the rest of the brands with similar products, substitutes can be easily found.

Bargaining Power of Suppliers

Since sugar is a commodity, the bargaining power of suppliers can be considered to be at a medium level. Suppliers tend to secure pricing; as a result, the price is affected by a range of factors and, therefore, is prone to frequent changes. Furthermore, since most of the ingredients required for the product are rather basic (e.g., coloring agents, flavor additives, caffeine), the bargaining power of suppliers is also very low.

However, the companies that provide sugar and other ingredients necessary to produce Coca-Cola are not the only suppliers with which the organization has to cooperate. Apart from the active use of food resources, the firm also needs to consider the available packaging services; at this point, the bottlers factor in as the essential suppliers. They provide the packaging services that Coca-Cola requires to be able to represent its product successfully. Seeing that there are a plethora of bottling organizations that are ready to provide their services to world-renowned companies such as Coca-Cola, their bargaining power is comparatively low (Yoffie, 2009).

The threat of New Entries

Although Coca-Cola and PepsiCo remain powerful brands, the possibility of a new entrant taking over the market is moderately high. The rates of competition in the non-alcoholic beverage (NAB) market environment make it quite difficult for new entrants to gain prominence and take over the target market. However, given the opportunities that the identified environment offers—such as unique drink flavors, health benefits, and other characteristics that can be used as selling points—the competitive advantages of SMEs becoming a part of the global market may become very high, and the product may be welcomed warmly by the target audience (Porter, 2008).

The threat of New Substitutes

As stressed above, the product delivered by Coca-Cola is far from being unique. Therefore, despite the dominance of Coca-Cola and PepsiCo in the target environment, there is a moderate threat of new entries offering a similar product that customers will be enthusiastic to try. Therefore, the threat of new entries can be viewed as moderate.

Competition

Moreover, the competition rates are very high in the identified environment. Coca-Cola and PepsiCo remain in the spotlight of the market with brands that have been around for decades (Yoffie, 2009). Therefore, to draw the attention of members of the target population, new entries will have to be very creative in the design of their products, as well as the tools for marketing them (Porter, 2008).

Intensity of Rivalry

With corporate giants such as Coca-Cola and PepsiCo dominating the NAB industry, the rivalry rates are quite high. As a result, there is a constant need for Coca-Cola to improve its competitive advantage.

Bottlers

Bargaining Power of Buyers

The franchise agreements that Coca-Cola has made with the bottling companies that provide the necessary materials set boundaries for both parties, therefore restricting the bargaining power of buyers. Because of the specific terms of these contracts, Coca-Cola and similar companies must cooperate with the designated firms unless violations of the agreement occur and are documented. In this way, the bargaining power of buyers is somewhat reduced. It is quite remarkable that the specified feature of the relationships between Coca-Cola and its bottling firms remains intact despite the increasing number of packaging and bottling companies that are ready to offer their services at much lower prices (Euromonitor International, 2013).

Bargaining Power of Suppliers

The organizations that produce the equipment necessary for the bottling process, as well as the companies delivering either the raw material (i.e., plastic) or the finished bottles, can be viewed as the essential suppliers for a bottling organization. A closer look at the bottling machine manufacturing industry reveals that there are few companies that deliver high-quality products and remain environmentally friendly. Therefore, the bargaining power of suppliers can be considered low, since the firms providing bottling services to organizations such as Coca-Cola have many opportunities to choose from when it comes to sourcing their raw materials (Euromonitor International, 2013).

The threat of New Entries

Similarly, because of the ease of retrieving the necessary components, new entrants are likely to appear on a regular basis. Although the equipment that must be purchased to produce bottles and deliver the corresponding services to beverage-producing companies is rather expensive, a range of bottling organizations exists in the NAB market. Even though most of the companies that produce NABs tend to use their own resources instead of using the services of bottling firms, there are still many firms that are far too small to rely on their own resources for bottling. Therefore, they will need the support of bottling organizations, which makes the threat of new entries rather high.

The threat of New Substitutes

When considering the threat of new substitutes in the bottling industry, one must admit that the products and services delivered by these firms in the NAB industry are very similar to each other. Therefore, the only threat that bottling companies face is the possibility that NAB organizations will embark on the challenging yet cost-efficient process of producing their own bottles and packages. If such a transition does occur, bottling organizations are likely to sustain severe damage to their profitability.

Intensity of Rivalry

The competition rates are not very high in the bottling market. Since there are not many ways to improve the bottling services, firms entering the industry have almost equal opportunities.

Retailers

Bargaining Power of Buyers

In the NAB environment, stores, restaurants, cafes, and other companies selling these beverages to their customers have to put up with rather low bargaining power of customers. The small amount of product that the target audience can purchase at once is the primary reason for the phenomenon.

Bargaining Power of Suppliers

The suppliers, in their turn, also have a rather strong voice in the identified environment. Since the companies that provide retailers with the necessary products are the most well-known brands, they are able to determine the conditions on which their relationships will be based.

The threat of New Entries

The possibility of similar retail organizations entering the environment of the global economy and establishing a strong presence in it is rather low. Although not impossible, the identified objectives are hard to attain because of the significant power that existing retail organizations have gained.

The threat of New Substitutes

With organizations such as Wal-Mart, the threat of new entries affecting the environment of the global economy is comparatively low (Wahba, 2015).

Intensity of Rivalry

Since the realm of retail is dominated by a small number of organizations and invites opportunities for impressive profits, the rivalry rates are very high.

References

Euromonitor International. (2013). The Coca-Cola, swat analysis, in soft drinks (world). Web.

Porter, M. (2008). . Web.

Wahba, P. (2015). . Web.

Yoffie, D. (2009). Cola wars continue: Coke and Pepsi in 2006. Web.

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IvyPanda. (2020, October 13). The Cola Wars Case: Industry Analysis. Retrieved from https://ivypanda.com/essays/the-cola-wars-case-industry-analysis/

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1. IvyPanda. "The Cola Wars Case: Industry Analysis." October 13, 2020. https://ivypanda.com/essays/the-cola-wars-case-industry-analysis/.


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IvyPanda. "The Cola Wars Case: Industry Analysis." October 13, 2020. https://ivypanda.com/essays/the-cola-wars-case-industry-analysis/.

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IvyPanda. 2020. "The Cola Wars Case: Industry Analysis." October 13, 2020. https://ivypanda.com/essays/the-cola-wars-case-industry-analysis/.

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IvyPanda. (2020) 'The Cola Wars Case: Industry Analysis'. 13 October.

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