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SMMC＿G5_ [BS-2] External Analysis (Case study: The Soft Drink Industry …

- - - - Have to be very attuned to the regulatory environment
    - - Spend a lot of time with obviously industry press :timer_clock:
    - - 30 years back, the standard employer-employee contract was full-time employees. :back:
      - Now some of the industries, 50% of the workforce are contingent workers.
        
        A lot of the work that is produced practically by company today is from non-employees. :red_cross:
    - - Make sure your build a product that is not only consumer friendly but also regulatory friendly :two_men_holding_hands:
    - - File the quarterly financials even if you're mutual company, not a stock-held company.
- - - - Buyers and sellers
      - Barriers to entry
      - Product differentiation
      - Cost structures
      - Demand growth :chart:
      - Switching costs
    - - New product
      - Development
      - R&D spending
      - Pricing :heavy_dollar_sign:
      - Capital investment
      - Advertising :trumpet:
      - Bargaining
    - - How narrowly or broadly you define it for your analysis is a matter of judgment
    - - Economic profits
  - - - Natural entry barrier
        
        Capital requirements
        
        Product differentiation
        
        Customers are loyal to existing products
        
        Learning curve economies
        
        Costs decline with total cumulative production over time :chart_with_downwards_trend:
        
        Access to distribution channels
        
        Shelf space may be difficult,logistics of distribution may be difficult
        
        Scope economies
        
        Costs decline when mulitple products are made
        
        Other advantages
        
        Raw materials,Govermant regulations,Teconolgies and processes
        
        Scale economics
        
        Costs decline with scale of production
    - - Meets similar needs
        
        More innovative or value providing
        
        Uber or Lyft :taxi:
        
        Improving very quickly in costs and/or performance,
        
        Tesla :racing_car:
        
        Better cost structure
        
        Airbnb :love_hotel:
    - - The more concentrated the buyer’s industry, the better they are able to bargain.
    - - Intensity of rivalry is higher when
    - - The greater the reliance, the lower the bargaining power.
    - - Unprofitable
        
        Entry
        
        Easy to lease plane and crew,buy/lease gates and landing spot
        
        Suppliers
        
        Fuel and labor suppliers have some bargaining power
        
        Rivalry
        
        Perishable commodity,high fixed cost,undifferentiated service
        
        Buyers,Substitutes
        
        Train、car、ship :ship:
      - Profitable
        
        Buyers
        
        Vital health need,fragmented decision-making,insurance coverage
        
        Substitutes
        
        Generics were less competitive until less year
        
        Rivalry
        
        Differentiated product,patent protected,brand loyalty
        
        Suppliers
        
        Mostly commodities
        
        Entry barrier
        
        R&D investment,patents,marketing and regulatory capabilities
- - - - Provides very little guidance on what one should specifically look for
    - - Essentially a checklist, which is fairly comprehensive :spiral_note_pad:
- - - - Dominated by two multinational firms
    - - Health effects of soft drink consumption
  - - - Being upstaged by beverages :tropical_drink:
  - - - Strong following of brand loyal customers :silhouettes:
      - Pepsi taste challenge
      - High spending on advertising :money_with_wings:
    - - Manage a network of bottlers :spider_web:
      - Conduct negotiations with major retailers, restaurants, and suppliers
    - - The key determinant of taste :key:
      - Concentrate supplied to bottlers and “fountain” accounts
      - A single concentrate plant costs less than $100 Mn. to build
        
        Can supply an entire country like the U.S.
      - Concentrate made from basic commodity ingredients like flavoring, phosphoric acid and caffeine
  - - - To diversify away from sugary drinks
  - - - Bottling/ packaging must be closer to end consumer to lower transportation cost
      - Each bottler manages an exclusive territory
      - Distribute to different channels
      - Bottlers responsibility
        
        Stocking
        
        Merchandising
        
        Display
        
        Distribution logistics
    - - Prohibited from carrying directly competing products
      - Frictions
        
        Investments :moneybag:
        
        Marketing
        
        Profit sharing
      - Have bought up or increased control over many bottlers :baby_bottle:
    - - Packaging is the biggest material cost
      - But getting good distribution is challenging
      - Consists of water, carbonation, sweetener and flavoring (concentrate)
  - - - Major retailers and restaurants are main customers
    - - Many potential entrants choose to partner with them
      - They have developed their own sparkling flavored water brands to address health concerns
      - They have muscled out many entrants and new products :muscle: