Question

Consider the industry in which you are working. (If you are not currently working consider the industry where you worked before returning to school, instead. Or if you never worked before, pick an industry of interest to you.) What were the key forces shaping the nature of competition and the opportunities for making profit in that industry? What, if anything, did firms do to insulate themselves from these forces?

Continuing with the industry you picked above, what were substitutes and complements? How did they impact profits?

Continuing with the industry you picked above, how did supplier power impact profits? What did firms do to insulate from the supplier power, if any?

Answer 1

I would want to work in the beverage industry as it seems fascinating to me to work in an MNC in such sector.

In such an industry major competition arrives because of the variety of taste and ways of freshness that can be provided by different competitors. Profit can be earned by providing a unique experience in terms of fizz/ flavour/ taste etc. Advertisement and marketing play a major role in increasing profits.

In order to ensure that competitors do not over power, major beverage providers have made a stront custot base and continue to heavily advertise to keep them engaged with the product. They also run various campaigns involving social issues in order to involve the customers.

The substitutes of soft drinks (say Coca Cola) are juices, flavoured non-aerated drinks, tea, coffee etc.

The compliments are sugar, plastic bottles, flavours etc. The substitutes take away profits of the company if they perform well. On the other hand, if compliments become cheaper, profits of the company increase.

Suppliers include suppliers of flavours, stored carbon dioxide, plastic bottles etc. Suppliers can collude amongst themselves and increase the prices of the raw materials provided by them, which results in decrease in profits of the company.

However, till now there have been no such cases because the bargaining power of companies like Coca Cola and PepsiCo has been huge and no supplier is big enough to charge higher prices for the raw materials provided.