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Sse Cola Wars Group2

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  • 1. CSD Industry Research Liting Dai Rui Liu Yi Li Yige Xiao
  • 2. Introduction
    • The CSD industry is the largest beverage industry which includes two key players: Coca Cola & Pepsi.
    • Coca Cola
    • Founded:1886
    • Country of origin : United States
    • Sold in over 200 countries now
    • Pepsi
    • Introduced1898 (as Brad's Drink), 1903 (as Pepsi-Cola),1961 (as Pepsi)
    • Country of origin : United States
  • 3. Porter’s Five Forces Analysis
  • 4. Rivalry
    • High investment leads to high exit barriers
    • High industry concentration (two industry giants with a lot of mediums and laggards) ; fierce competition between competitors
    • Industry growth slows down in recent years
    • A lot of choices in whole beverage industry
    • Most current producers have high brand identity even reputation
    • Many different products make it have high diversity between rivals
    Soft-drink Industry
  • 5. Threat of Substitute
    • Various beverages exist in the market
    • Low cost for customers to switch into any other beverage
    • Buyer always has a low inclination to substitute
    • More other drinks get popular than CSD
    Soft-drink Industry
  • 6. Barriers to Entry
    • Easy to use experience from existing company
    • Economies of scale stays steadily and has slightly decrease
    • A large amount of investment for entry and commercials
    • Difficult for new entrant to find out niche market in saturated market
    Soft-drink Industry
  • 7. Supplier Power Entry
    • Simple additives available in open market
    • Low cost of ingredient
    • Large amount of buying weakens supplier’s bargain power
    Soft-drink Industry
  • 8. Buyer Power
    • Food-stores, fountains, mass merchandisers, vending machines are main selling channels
    • Some big buyers have bargain power
    • Concentrate producer has great freedom to change price
    Soft-drink Industry
  • 9. Rivalry
    • High exit barriers because of large amount of investment
    • 2,000 in 1970 reducing to 300 in 2000 reveals high industry concentration and low industry growth.
    • Bottling and canning lines 4-10million for each.
    • Minimum cost to build a small bottling plant 25-35 million.
    • Low product differences
    • High switching costs
    • Low brand identity
    • Low diversity of rivals
    Bottling Industry
  • 10. Threat of Substitute
    • Bottling industry including metal cans (60%), plastic bottles(38%), glass bottles(2%).
    • The only substitute, soft package is not the ideal option.
    Bottling Industry
  • 11. Barriers to Entry
    • 2,000 in 1970 reducing to 300 in 2000 indicates the low economics of scale
    • Bottling and canning lines 4-10million for each.
    • Minimum cost to build a small bottling plant 25-35 million
    • Low brand identity
    • High switching costs
    Bottling Industry
  • 12. Supplier Power
    • Package and sweetener sellers are main suppliers
    • Open market with various providers and low reputation
    • Low bargaining power
    Bottling Industry
  • 13. Buyer Power
    • Food-stores, mass merchandisers, vending machines are main selling channels
    • Some big buyers have bargain power
    • Bargaining power depends on different products
    Bottling Industry
  • 14. Recommendation
    • Intensive competition exists in soft-drink industry with monopoly by two beverage magnates
    • Saturation in bottling industry and low power
    • Soft-drink industry have higher profitability compared with bottling industry
  • 15. Challenge
    • Seesaw battles in US and other countries between two giants
    • Low price strategy threatens other competitors to follow, leading to low profitability
    • High exposure commercials of two giants and new strategies draw consumers away from other brands
    • Two giants going into popular non-carbs makes profit run away from existing producers
    • The conquering in new countries makes local beverage market reshuffle
  • 16. Challenge
    • Different industries can sustain different level of profitability; part of this difference is explained by industry structure.
    • Five forces provided a framework help business manager to better understand the industry context in which the firm operates
    • http:// www.quickmba.com/strategy/porter.shtml
  • 17. References
    • http://www.quickmba.com/strategy/porter.shtml
    • DAVI D B . YOFFIE, “Cola Wars Continue: Coke and Pepsi in the Twenty-First Century”, Harvard Business School , January, 2004
    • http://en.wikipedia.org/wiki/Coca-Cola
    • http://en.wikipedia.org/wiki/Pepsi
  • 18. Thank you

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