Case analysis of the Soft Drink Industry

Case analysis of the Soft Drink Industry - Table of...

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Table of Contents Introduction 3 Description 3 Segments 3 Caveats 4 Socio-Economic 4 Relevant Governmental or Environmental Factors, etc. 4 Economic Indicators Relevant for this Industry 4 Threat of New Entrants 5 Economies of Scale 5 Capital Requirements 6 Proprietary Product Differences 7 Absolute Cost Advantage 8 Learning Curve 8 Access to Inputs 8 Proprietary Low Cost Production 8 Brand Identity 9 Access to Distribution 9 Expected Retaliation 9 Conclusion 10 Suppliers 10 Supplier concentration 10 Presence of Substitute Inputs 11 Differentiation of Inputs 12 Importance of Volume to Supplier 13 Impact of Input on Cost or Differentiation 13 Threat of Backward or Forward Integration 13 Access to Capital 14 Access to Labor 14 Summary of Suppliers 14 Buyers 15 Buyer Concentration versus Industry Concentration 15 Buyer Volume 15 Buyer Switching Cost 15 Buyer Information 16 Threat of Backward Integration 16 Pull Through 16 Brand Identity of Buyers 17 Price Sensitivity 17 Impact on Quality and Performance 17 Substitute Products 18 Relative price/performance relationship of Substitutes 18 Buyer Propensity to Substitute 18 Rivalry 18 Industry Growth Rate 20 Fixed Costs 21 Product Differentiation 21 Brand Identity 21 Informational Complexity 22 Corporate Stakes 22 Conclusion 23 Critical Success Factors 23 Prognosis 24 Bibliography 26 Appendix 27 Key Industry Ratios 27 Introduction
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Description The soft drink industry is concentrated with the three major players, Coca- Cola Co., PepsiCo Inc., and Cadbury Schweppes Plc., making up 90 percent of the $52 billion dollar a year domestic soft drink market (Santa, 1996). The soft drink market is a relatively mature market with annual growth of 4-5% causing intense rivalry among brands for market share and growth (Crouch, Steve). This paper will explore Porter's Five Forces to determine whether or not this is an attractive industry and what barriers to entry (if any) exist. In addition, we will discuss several critical success factors and the future of the industry. Segments The soft drink industry has two major segments, the flavor segment and the distribution segment. The flavor segment is divided into 6 categories and is listed in table 1 by market share. The distribution segment is divided in to 7 segments: Supermarkets 31.9%, fountain operators 26.8%, vending machines 11.5%, convenience stores 11.4%, delis and drug stores 7.9%, club stores 7.3%, and restaurants 3.2%. r Table 1: Market Share T 1990 1991 1992 1993 1994 Cola 69.9 69.7 68.3 67 65.9 Lemon-Lime 11.7 11.8 12 12.1 12.3 Pepper 5.6 6.2 6.9 7.3 7.6 Root 2.7 2.8 2.3 2.7 2.7 Orange 2.3 2.3 2.6 2.3 2.3 Other 7.8 7.2 7.9 8.6 9.2 Source: Industry Surveys, 1995 S Caveats The only limitations on access to information were: 1. Financial information has not yet been made available for 1996. 2. The majority of the information targets the end consumer and not the sales
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This note was uploaded on 05/21/2011 for the course ACCT 101 taught by Professor All during the Spring '11 term at Kaplan University.

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Case analysis of the Soft Drink Industry - Table of...

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