It is important that Roxx Beverage Company have a good understanding of who their customers and also their buyers and suppliers. Porters five forces analysis help analyze the level of competition within an industry. This model is based on the insight that a corporate strategy should meet the opportunities and threats in the organizations external environment (Recklies, 2001). Because of the size and competitiveness of the beverage industry it is crucial for Roxx Beverage Company to determine the competitive intensity and attractiveness in the industry.
• Threat of new entrants o Existing firms have cost and performance advantage in the beverage industry. o Beverages are not proprietary, only flavors and brands. o Brand Identities…show more content… It would be best for Roxx Beverage Company to directly align with recognizable brands (Patrick Lucas, 2012).
• Bargaining power of customers (Buyers) o $65 billion dollars annually in sales (Tuttle, 2012) o There is no need for an explanation on how to use the product. o Customers are sensitive to the price and are willing to change brands in one becomes too expensive. People are very brand loyal. o Firms typically provide incentives to customers purchasing their product; this can come in the form of a contest or special sale pricing. Incentives can often draw customers to a different brand. o Because the soft drink industry is very competitive, changing suppliers is fairly easy and the price difference is rather minor. Change can occur based on geographic location and how far the products need to travel (Recklies, 2001)
• Bargaining power of suppliers o Each firm has a different formula, color, and flavor for their beverages. No two products are typically exactly alike, the exact inputs and materials are extremely…show more content… The main revenue comes from bringing the soft drink beverages and equipment for the firms to the customers. o Most soft drink companies own a portion of their own supply companies. It is all about price and how efficient they are upon delivery.
• Intensity of competitive rivalry o Industry is currently not growing rapidly. It would be best for Roxx Beverage Company to align itself early with a company who has the distribution channels setup for a new beverage company. o The fixed costs are a high percentage of total costs for a firm in the beverage industry. Fixed costs include costs for warehouses, trucks, labor, etc. and can act as a barrier of entry (Recklies, 2001).
Global
International expansion for Roxx Beverage Company can only come after the successful launch in America. Much of the success of a beverage internationally comes with brand recognition and following. Ideally Roxx Beverage Company would license the recipes and use of the proprietary ingredients and brand items for oversees distribution. Some of the advantages of licensing include speed of entry, High ROI, minimal risk and investment, ability to circumvent trade barriers (QuickMBA: Strategic Management, 1999-2010). Disadvantages to consider include a lack of control over use of licensed assets, licensee may become a competitor and knowledge spill overs (QuickMBA: Strategic Management, 1999-2010).
