Question Details

(solution) After going over the case, complete an outline of the Dominant


After going over the case, complete an outline of the Dominant Economic Features of the industry by using the list found on page 59 of the book. In addition, complete a Porter 5-Forces Model for the industry.

https://community.worcester.edu/bbcswebdav/pid-1292390-dt-content-rid-1867354_1/courses/BA490_E1_FA_2016/KK%20Donuts.pdf (this is the case to be read)

attched is page 59 of the book, please review it and do the paper accordingly.

Also, please look up the Porter 5-Forces Model to do the paper on it as well.

last thing, i will also include an example on how the paper needs to be done. 

The paper needs to be 6-8 pages in length with the above instructions to be followed, please.


Competition in the Bottled Water Industry

 

Overview:

 

Bottled water was among the world?s most attractive beverage

 

categories with global sales exceeding 32 billion gallons in 2001 and

 

annual growth averaging nearly 9% between 1996 and 2001. Bottled

 

water had long been a widely consumed product in Western Europe

 

and Mexico, where annual per capita consumption averaged about

 

30 gallons in 2001, but until the mid-1990s bottled water had been

 

somewhat of a novelty or prestige product in the U.S. In 1990,

 

approximately 2.2 billion gallons of bottled water were consumed in

 

the U.S. and per capita consumption approximated 9 gallons by

 

2001 and was expected to grow to 26 gallons by 2005. The rising

 

popularity of bottled water in the U.S. during the late 1990s and

 

early 2000s had allowed the U.S. to become the world?s largest

 

market for bottled water.

 

The growing popularity of bottled water in the U.S. was attributable

 

to concerns over the safety of municipal drinking water, an

 

increased focus on fitness and health, and the on-the-go lifestyles of

 

American consumers. The convenience, purity, and portability of

 

bottled water made it the natural solution to consumer

 

dissatisfaction with tap water. The U.S. bottled water market, like

 

most markets outside the U.S., was characterized by fierce

 

competitive rivalry as the world?s bottled water sellers jockeyed for

 

market share and volume gains. Both the global and U.S. bottled

 

water markets had become dominated by a few international food

 

and beverage producers like Coca-Cola, PepsiCo, Nestle, and Group

 

Danone, but also included many small regional sellers who were

 

required to either develop low-cost production and distribution

 

capabilities or utilize differentiation strategies keyed to some

 

unique product features. By the close of 2002, competitive rivalry

 

continued to ratchet upward as sellers developed innovative

 

product variations, entered into strategic agreements to penetrate

 

new international markets, and acquired smaller sellers that might

 

hold strong positions in certain U.S. regional markets or emerging

 

countries. Industry analysts and observers believed the recent

 

moves undertaken by the world?s largest sellers of bottled water

 

would alter the competitive dynamics of the bottled water industry and would mandate that certain players modify their current

 

strategic approaches to competition in the industry.

 

Analysis:

 

1. Defining economic features of the bottled water industry

 

Market size: The worldwide total market for bottled water in 2001

 

was 32 billion gallons. The sales of bottled water in the U.S. during

 

2001 totaled 5.4 billion gallons ($6.5 billion).

 

Market growth rate: The industry had grown at about 8.7%

 

compounded annual growth rate between 1996 and 2001. The U.S.

 

market grew a bit faster (9.2%) over the same period. The U.S. per

 

capita consumption had grown from 9.3 gallons in 1991 to 19.5

 

gallons in 2001.

 

Segmentation: In the U.S., the industry was segmented into single

 

serving and 1-and 2.5 gallon containers sold in grocery stores,

 

convenience stores, wholesale clubs, vending machines, and 5gallon returnable in-home containers. In 2002, water sold in 1-liter

 

or less containers made up 36.2% of industry volume and 50.8% of

 

dollar sales. Water sold in 1-gallon or larger containers accounted

 

for 60.9% of gallons, but only 43.3% of dollar sales. Bottled water

 

was also segmented into spring water, purified water, drinking

 

water, artesian water, sparkling water, mineral water, and enhanced

 

water categories.

 

Entry/exit barriers: Barriers to entry varied depending upon the

 

bottlers sales expectations. A simple bottling line could be

 

purchased for about $125K, while state-of-the-art bottling facilities

 

could require a $100 million investment. In addition, the leading

 

sellers of bottled water spent tens of millions of dollars on

 

advertising in large markets such as the U.S. Bottled water sellers

 

were also required to have access to distribution networks.

 

Scope of rivalry: Rival in the industry could be considered to be

 

global, with the 5 largest sellers in the U.S. competing

 

internationally.

 

Scale economies: Economies of scale were vital to keep costs at an

 

acceptable per unit basis. Some scale economies were also possible

 

in bottling operations. Capacity utilization: With large-scale bottling plant investments

 

exceeding $100 million, it was essential that bottlers maximize

 

production to minimize per unit costs.

 

2. Five-force analysis

 

Bargaining power and leverage of buyers ? a strong force

 

Convenience and grocery stores, and wholesale clubs had

 

considerable leverage in negotiating slotting fees with bottled

 

water producers since shelf space was limited to about 3-5 brands.

 

Similarly, distributors who carried bottle water for sale to

 

convenience stores had considerable leverage with bottlers in

 

choosing brands of water. The second tier brands were most

 

vulnerable to buyer leverage, but even Evian experienced some

 

volume and market share loss in 2001 as it lost shelf space in retail

 

stores. Coca-Cola and PepsiCo were least vulnerable since they sold

 

a wide variety of beverages that convenience and grocery stores,

 

and wholesale clubs wanted to offer to customers. As a result of

 

Coke and Pepsi?s appeal with consumers, Dasani and Aquafina

 

almost always found shelf space in retail stores. In addition Cocacola and PepsiCo?s strength in negotiations with retailers also

 

allowed the 2 companies to charge higher wholesale prices than

 

other bottlers. Delis and restaurants had low switching costs from

 

brand to brand, but had less ability to negotiate for deep pricing

 

discounts due to their purchase volume limitations.

 

Bargaining power and leverage of suppliers ? a weak force

 

Suppliers to the bottled water industry have very little leverage in

 

negotiations and represent a weak competitive force. Packaging is

 

readily available from many suppliers and is commodity-like.

 

Bottling equipment manufacturers may have slightly more leverage,

 

but equipment is still available from several sources. Perhaps the

 

strongest suppliers would be the spring owners who leased springs

 

to the bottlers of spring water. Municipal water sources have little

 

to no negotiating power with the producers of purified water.

 

Competition from substitutes ? a moderate to strong force

 

There were many substitutes to bottled water, including any other

 

type of beverage (soda, juices, teas, etc.) - tap water being the strongest substitute. This may be evident by those who refill water

 

bottles with tap water!

 

Threat of entry ? a weak competitive force

 

As the industry consolidates and reaches maturity, it will become

 

increasingly difficult for new entrants to achieve success in the

 

industry. The barriers to actually enter the industry can be quite low

 

($125K for a small operation). But the barriers to gaining

 

distribution, shelf space, advertising, and enough sales volume

 

necessary to capture scale economies are extremely high. New

 

brands must be able to push existing brands off of store shelves

 

with either exceptionally low pricing and higher than standard

 

slotting fees or a superior image and reputation ? a nearly

 

impossible task for any newcomer, regardless of size. Rivalry among competing firms ? a strong competitive force that is

 

likely to intensify

 

Rivalry among competing bottled watered sellers is very strong and

 

will only grow stronger in coming years. Competition among major

 

brands centers primarily on image, attractiveness of packaging, and

 

access to distribution, although some modest price competition has

 

begun to appear in the industry. Competition among second tier and

 

private label brands is based heavily on pricing. These producers

 

must also have acceptable images and packaging, but their access

 

to retailers weighs heavily on their ability to compete on price. As

 

the industry growth rate slows in the U.S., competition will almost

 

certainly intensify.

 

Conclusion:

 

Based on the above analysis, it would appear that the bottled water

 

industry remains moderately profitable, and will continue as such in

 

the near future. However, above-average profitability may only be

 

available to the few large producers who can compete on price and

 

heavy advertising, and who have full access to distribution

 

channels. Smaller and local producers may only be able to secure

 

average to below average profits as the industry moves to higher

 

levels of consolidation, and as the industry matures. 3. Industry key success factors Access to distribution

 

Access to distribution is the most important industry key success

 

factor. Bottled water cannot be sold unless it is available in stores,

 

and there are far too many brands for all to be included on store

 

shelves. Brands offered by Coca-Cola, PepsiCo, and Nestle were

 

more likely to have consistent access to distribution. Even Evian

 

(Group Danone), found it difficult to gain access to distribution soon

 

after Coca-Cola began marketing Dasani. Purity

 

One of consumer?s strongest attractions to bottled water is the

 

perceived purity of the product. Bottled water that is labeled as

 

drinking water (water from municipal sources with no further

 

purification) is relegated to commodity status and is appealing only

 

to those consumers who have no other access to safe drinking

 

water. Image

 

Since most brands of bottled water are very similar in formulation,

 

image is a deciding factor for many consumers in choosing a brand.

 

The image presented by the product?s name and emphasized in

 

advertisements, and the attractiveness of bottled water packaging

 

created demand for one brand over another. Small producers with

 

poor image building capabilities found it difficult to compete in the

 

industry. Low cost production capabilities

 

It was essential that bottled water producers minimize the

 

production cost of the product, since marketing was so critical in

 

building an image and gaining access to distribution. Small

 

producers with high relative production costs had little margin

 

available to support a strong marketing effort. Sufficient sales volume to achieve scale economies in

 

marketing expenditures Successful bottled water producers were required to have sales

 

volume in the millions of cases in order to keep marketing expenses

 

at an acceptable per unit basis. 4. Industry change drivers

 

Slowing industry growth As the industry reaches maturity and growth begins to slow,

 

competition can be expected to become more intense. Industry consolidation The industry is moving toward consolidation to the point where only

 

the largest firms will survive. Small companies will be acquired

 

and/or forced out of the industry due to their inability to compete. Product Innovation A clear hint as to the industry?s stage of maturity is in the level of

 

product innovation. Water is being enhanced with flavors, minerals,

 

vitamins, etc. This trend will continue as companies jockey for new

 

positions in the marketplace. Globalization This is an industry where competition is global. The best

 

opportunities may lie in the international arena where water

 

supplies are poor, and as other countries become more

 

?Americanized?.

 

Overall, it appears that the industry change drivers will make

 

profitability harder to come by. As the industry slows and

 

competition intensifies, the industry will consolidate. Product

 

innovation will be more difficult to come by. In sum, the driving

 

forces will have a negative impact on the industry.

 

5. Key Success Factors Access to distribution: Access to distribution is the most important industry key success factor since brands of water

 

cannot achieve good sales volumes and market shares

 

unless they are widely available in stores?there are far too

 

many brands for all to be included on store shelves.

 

Product innovation skills: Continuing product innovations

 

were essential to developing additional volume gains from

 

line extensions and the entry into new categories like

 

vitamin water.

 

Brand image: Image was also a critical factor in helping

 

consumers choose a brand. The image presented by the

 

product?s name and emphasized in advertisements,

 

endorsements, and promotions created demand for one

 

brand over another. Brand image was also a result of labels

 

and packaging that bottled water consumers found

 

appealing. Small producers with poor image building

 

capabilities found it difficult to compete in the industry

 

unless the product enjoyed a distinct advantage.

 

Sufficient sales volume to achieve scale economies in

 

marketing expenditures: Successful bottled water were

 

required to have sufficient sales volumes to keep marketing

 

expenses at an acceptable cost per unit basis. Recommendation

 

The recommendation for current industry players would be to

 

accelerate the pace of mergers/acquisitions and consolidation. This

 

would mean for the larger companies to acquire smaller companies

 

in order to solidify their positions. Smaller companies committed to

 

the industry should seek joint ventures with companies that could

 

help them with distribution and marketing issues.

 

The industry is changing rapidly, and that change will make

 

profitability a more difficult proposition.

 


Solution details:
STATUS
Answered
QUALITY
Approved
ANSWER RATING

This question was answered on: Jan 30, 2021

PRICE: $15

Solution~0001016914.zip (25.37 KB)

Buy this answer for only: $15

This attachment is locked

We have a ready expert answer for this paper which you can use for in-depth understanding, research editing or paraphrasing. You can buy it or order for a fresh, original and plagiarism-free solution (Deadline assured. Flexible pricing. TurnItIn Report provided)

Pay using PayPal (No PayPal account Required) or your credit card . All your purchases are securely protected by .
SiteLock

About this Question

STATUS

Answered

QUALITY

Approved

DATE ANSWERED

Jan 30, 2021

EXPERT

Tutor

ANSWER RATING

GET INSTANT HELP/h4>

We have top-notch tutors who can do your essay/homework for you at a reasonable cost and then you can simply use that essay as a template to build your own arguments.

You can also use these solutions:

  • As a reference for in-depth understanding of the subject.
  • As a source of ideas / reasoning for your own research (if properly referenced)
  • For editing and paraphrasing (check your institution's definition of plagiarism and recommended paraphrase).
This we believe is a better way of understanding a problem and makes use of the efficiency of time of the student.

NEW ASSIGNMENT HELP?

Order New Solution. Quick Turnaround

Click on the button below in order to Order for a New, Original and High-Quality Essay Solutions. New orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.

WE GUARANTEE, THAT YOUR PAPER WILL BE WRITTEN FROM SCRATCH AND WITHIN A DEADLINE.

Order Now