Also the absolute cost advantage for early entrants as new entrants will have to incur high cost in a plant, advertising, or R&D. Another important reason is the vertical integration as CPs acquire or own a percentage of bottling companies which gives them the advantage of controlling the bottling network and makes it very hard for new entrants to find bottlers for themselves. Rivalry, competition is concentrated with the top two players holding a total of 71.8% of market share (in 2009, Exhibit2), thus, leaving very small room for other competitors. Bargaining power of buyers is somewhat low and depends on the type of the buyer. For example, supermarket channel is fragmented and thus didn’t have much of a bargaining power.
Cola Wars Continue: Coke and Pepsi in 2010 1. Why, historically has soft-drink industry been so profitable? “Strategic Management” by Hitt, Ireland and Hoskisson (2008) states that the interaction between the elements of the industry environment determines an industry’s profit potential (38). Therefore, In order to determine why the soft-drink industry has been so profitable, we should conduct an analysis of the industry environment forces: threat of new entrants, the power of suppliers and buyers, the threat of product substitutes, and the intensity of rivalry among competitors. Threat of New Entrants Both Coca-Cola and Pepsi-Cola has a high percentage of the market shares, respectively 15.3% and 8.8%, according to Exhibit 8.
A strong brand influences the choices made and products bought by customers. Once a company has built a strong brand, it must maintain a positive reputation. Premium Price Companies with strong brands can charge more for their products and services because the brand is valuable in the eyes of consumers. Some customers won't even consider purchasing alternative products because they do not believe they will receive the same value. For example, a customer may choose to buy a premium cup of coffee from a national coffee chain instead of buying coffee at a local corner store.
The kinked demand curve shows how firms in an oligopoly are looking to protect and maintain their market share and that rival firms are unlikely to match another’s price increase but may match a price fall. To a large extent this has led to the local bus industry becoming an oligopoly at a local level where a single provider is the only firm truly competing and on a national level there is the occurrence of a monopoly where it is again these ‘big players’ who share between themselves a high concentration ratio of the national market. This is because those firms who own a large percentage of the market are able to benefit from barriers to entry in their favour. Examples of this would be the benefits of operating economies of scale or high set up costs. This would be an example of a natural monopoly where the monopolist has an overwhelming cost advantage.
Listo System is finding hard to differentiate itself in product and price from its competitors Power Shift to Buyer During 1990s, Listo was a great success. Listo inabilities to differentiate itself from the competitors jeopardize that success. If Listo had been able to differentiate and create competitive advantage, it would have created loyal customers and strong brand image. Creating loyal customers and strong brand image would help to keep bargain power to the seller. However, inability of Listo to differentiate shifts the bargaining power to Buyer.
Also the low switching cost and consumer awareness of shopping around to find the best bargains increased competition around stores to capture customers. Corporate stakes were high for Wal-Mart, this can be seen in its earlier years (Ben Franklin stores) where they were losing
J&J has a strong economy of scale. J&J’s cost efficient production facilities act as deterrents to new entrants looking to enter our consumer segment industry. New entrants are deterred by the amount of capital needed to build new factories capable of mass production. Confronted by J&J’s economy of scale, new entrants are relegated to seek niche market segments. Niche markets can allow for higher margins; however new entrants effectively position their product to a low volume high price model limiting their sales volume.
This paper gives a SWOT analysis on MMBC and discusses why it should expand its product line. Strength MMBC’s is differentiated from its competitors due to its brand equity which is based on its distinctive taste and reputable quality. This helped the company to create an “aura of authenticity” and a “culture” carried from generation to generation amongst its dedicated customers. In addition to this brand distinctiveness, MMBC’s access to the U.S beer market (largest in the world) gives it a competitive advantage since it shields it from the harshness of shipping costs, weak distribution networks, inability to control product freshness and margin reduction due to weakening of the U.S dollar unlike its import beer competitors. The fact that it was compared to leading names like Chevrolet and John Deere in other industries also gave an ascribed status in the region and as such an edge over its competitors.
The company needs to invest in R & D to come up with innovative models to stay at consumer’s top choice. Generic Strategy is differentiation Swot Threats DaBest is exposed to the international nature of trade so it sells its product in different currencies which destabilizes the costs and margins for profits over long periods of time. This type of exposure may cause DaBest to be manufacturing and/or selling at a loss, although that is not the case for a giant as itself. Price Sensitivity Consumers are constantly shopping
While attempting to expand the market for alternative beverages, increased sales and market share, beverage producers also were forced to contend with criticism from some that energy drinks, shots and relaxation drinks had health ricks for the consumer. External analysis Porters Five Forces Rivalries among Competing Sellers- The rivalry amongst these competing sellers is quite high due to the power of these already established companies. With low switching costs on the part of the consumers these companies will become very aggressive and making constant effort in order to establish customer brand loyalty. The strong emphasis on marketing and advertising is noticeable in these companies with advertising wars taking place (think Coca-Cola vs Pepsi). Substitutes- Substitute products for alternative beverages include bottled water, soft drinks, fruit juice, coffee, and tea.