Question

Read the Article posted below, then answer the following questions, Please fully answer the following questions about the case.

(1000 words all together if possible)

(typed no pictures)

1) Perform a PESTEL analysis. This includes discussing the general environment factors affecting the beverage industry’s Performance such as economic, political/legal, socio-cultural, demographic, technological and global issues.

2) Perform Porter’s five forces analysis on the beverage industry.

3) Assess the beverage industry’s attractiveness in terms of growth and profitability. Specifically, present a comparative chart on the beverage industry on ROA, ROE, Debt to Equity (D/E), Current Ratio, and end of year stock prices between 2006- 2011 inclusive.

4) In your opinion, what are the beverage industry's Key Success Factors (KSF)? What are the most CRITICAL factors that lead to success in this industry?

5) Identify and discuss major strategic challenges the industry is facing and possible solutions to these challenges.

Article:

Answer 1

QUESTION 1

PESTEL ANALYSIS FOR THE BEVERAGE INDUSTRY

All these factors which are discussed below form part of macro environment for the industry.

POLITICAL: Political factors play a major role for any industry to work in the society. one problem associated with political pattern is that it keeps on changing. Every party has its own beliefs and thought process according to which it creates policies and may sometimes effect the legal position of the country. New policies framed by the political parties affect the industries and firms of beverage and food industry and any other industry.

ECONOMICAL :Even when the DPS was one of a leading manufacturer in the beverage industry, the most significant factor which influences the food and beverage companies is the economic stability. Since carbonated soft drinks are a discretionary item, sales are impacted by the weakness in the economy. Between 2008-2010, economy was the major problem faced by the beverage industry which impacted companies like DPS, Coke & pepsi. Intensified by the inefficiency and failures of the securities market US found itself in one of the worst recessions in history. As unemployment rates increased , credit markets froze, consumer significantly reduced spending which ultimately impacted food and beverage industry.

SOCIOCULTURAL : The beverage industry and all other industries which do business in the society has to serve the society and has to safeguard the interests of society. The food & beverage industry has to be extra responsible towards the social duties the validity of their product. For any firm which thinks of a long term position in the market has to take care of the economic, social and legal factors of the region. The industry should not go against the norms of society and should act as a trustee towards the society. Sociocultural factors can influence the growth and profitability of the firm for both the short term and long term span. If any industry is boycotted by the society, how would it survive in that society , so a industry should respect the social beliefs and culture of the region.

TECHNOLOGICAL: Technical factors play a major role in beverage industry. Technology is driving the beverage industry with a huge impact.The more accurate quality control measurement and equipment make effect on the final product. If one company fails to adopt the technological innovations it fails to face the competition as other firms of the same industry would adopt to the new technology and will create a better product at a better price.So for facing the competition and maintaining the market position technological advancement should be emphasized. Technology is an integrated function for a firm which impacts the whole of the industry and not only the process and performance. Technological advancement helps in acquiring the competitive edge in the market.

LEGAL : The company grows in environment, it has a direct relationship with the environment for the resources, data and information.Law plays an important role for any industry to grow and survive. Legal implications vary from place to place.For a industry to grow globally it has to work according to the law.The beverage industry involves liquid, gas, and other elements and is directly consumed by the people, hence has a direct impact on health. The legal provisions of the region require some sort of certification which should be complied lawfully and then the beverage should be sold in market for a long term position in the market.

GLOBAL : For the industries which are extended through out the world due to globalization are impacted by global issues. Global issues for the beverage industry could be plastic ban or the health consciousness of the region, rumors about the product,etc .all these factors impact the beverage industry and its firms.Global factors may influence the industry wholly as in a global environment the world market is treated as a single market.

QUESTION 2

PORTER'S 5 FORCE MODEL FOR THE INDUSTRY IS FOR THE ANALYSIS OF COMPETITIVE FORCES IN THE MARKET

THREAT FROM EXISTING RIVALRY : In the beverage industry the key leaders are coke, pepsi and DPS. Each of these track the activities of the rival beverage firm. All of these beverage firms are key leading sellers of the market, which can create a huge impact to other firms of the industry.However there are less equitable rivals but there are huge competitors in this industry.

THREATS FROM NEW ENTRANTS : This takes into consideration the size of the entrant in the industry, if the size of the entrant is huge the competitive pressure is high and vice versa

THREATS FROM SUBSTITUTES : The competitive pressure from the substitutes is high. Beverage industry is that kind of industry in which any number of firms can enter with a new kind of taste, for example. in beverage industry where people were bored from sweet cola, DPS came with a flavoured beverage which took a good market position with its different taste.

BARGAINING POWER OF SUPPLIERS : We know suppliers play an important role in any kind of industry, when we specifically talk about the beverage industry the suppliers are mainly of plastic, soda other ingredients which are easily available hence the competitive pressure from the suppliers is comparatively less than other industries.

BARGAINING POWER OF CONSUMERS : where the bargaining power of buyers is high, competitive pressure is high. in this industry the bargaining power of buyers is not very high as not everyone can make the similar product at home and beverage is something related to direct consumption which is the reason that people switch less to the unauthorized sellers.