1
Competion In Energy Drinks
YourFirstName YourLastName
University title
2
Strategic management has become an indispensable condition of profitable and
prosperous organization. During these post financial crisis developments – or new waves of
crisis – such approach based on strategic thinking of organization improving is of importance
in modern cutthroat competition movements.
This framework generally consists of 4 stages such as strategic planning, strategy
formulation, strategy implementation and strategy evaluation. Every strategy of various
organizations is crystallized through their models aiming at understanding the market longterm direction, in the first place, as it relates to the projection into the future, in contrast to
short-term tasks that are required as they constant steps in the direction of organization’s
goals. First, I will describe the current situation on the market of energetic beverages. Then, I
will analyze the market conjuncture and positions of beverage producers from the perspective
of different models, including SWOT analysis, Michael Porter’s five forces models, PEST
analysis and others. Finally, I will summarize all the key findings of this analysis.
The crisis of 2008 has made own adjustments to manager’s plans. Consequently, the
sports drinks lost 12.8 percent in the period of 2008-2009 as well as vitaminizing water. It is
an example of adequate reaction of consumers to decrease in their income. On the contrary,
the global beverage industry amounts $1.58 trillion in 2009 to almost $1.78 trillion in 2014.
As we can see, projected figures are enough are enough positive, the growth is nearly $20 bn
(dollar value). Furthermore, volume sales reached the mark of 458 billion of liters in 2009
comparing with 542 in 2014. So, from this point, economic downturn and dire straits were
not able to put on breaks the boost of beverage industry.
Other factors have also contributed to such growth, for instance, in last 5 years
companies were tented to expand the markets, especially developing countries, by means of
developing their lineup of drinks with numerous flavors and variations, refocused on new
non-carbonated drinks such as sport drinks, fruit juices, energy drinks, ready-to-drink teas
3
and coffees. In this segment the companies have begun to pay more attention from 2000s
alongside with constant step-by-step development. At the same time, this type of beverages –
alternative beverages – is still criticized both by experts and consumers, but at the beginning
of 2011 producers were only concerned about how to improve their positions on the market
to overcome crisis influence, instead of improving the water quality.
SWOT analysis
Strengths
On the one side, the US market is broadest one in the world with more than 40% of
total volume that can be also saturated by the new products and developed as well through
implementation new sensitive customer service. On the other side, developing and emerging
markets are potentially in the focus of beverage companies where they are able to operate.
Weaknesses
Energy drinks, energy shots, relaxation drinks are viewed as risky and forthputting for
consumer’s manner of living because of their nutritious and non-nutritious supplements and
hard sell of incredible abilities due to energetic beverages.
Caffeine ingredients may provoke insomnia and arrhythmias, melatonin and kava are
harmful for consumers, alcohol mixing up with energy drinks can influence the level of
intoxication and promote problem drinking among people.
Opportunities
Beverage sellers should have developed distribution system to supermarket and
convenience stores.
Distributors and sellers of alternative beverage industry should be concentrated ontime delivery approach and provide responsive customer service.
4
Threats
A high level of competition is able to provoke minimizing the volume and market
share of a particular producer.
The process of distribution requires additional costs for warehouses, trucks, labor and
others.
PEST analysis
Political
Technical rules, quality control, criteria of patentability and other key features of
production process may be tightened.
Anti-alternative beverages lobby caused by the interests of competitors and public
opinion on some risks of energetic drinks.
Socio-political situation in a certain region create their business environment.
Economic
Alternative drinks have expanded on a broad sphere of consumption – restaurants, fast
foods, delis, convenience stores, wholesale clubs, supercenters, sport events and
competitions.
This industry is forced to deal with the difficulties in distribution the products in
convenience stores.
The overall industry competition is tough; however, the level of competition is lower
between producers of sports drinks and vitamin-enhanced drinks.
Coca-Cola and PepsiCo have managed to provide the restaurants with both fountain
drinks and of sports drinks and vitamin-enhanced drinks.
5
Social
Negative public opinion about ingredients of energetic drinks is caused by excessive
concentration of harmful ingredients such as aspartame, artificial colors, caffeine, taurine and
others.
Association with a particular brand pushes people to select one or another producer; it
concerns sportsmen, celebrities, public people and others.
Another peculiarity refers to such component as mass culture of energetic drinking
that comprises sport events, festivals, concerts, amusement parks.
Technological
Technological factor is crucially important inasmuch as connected with innovative
item of producing drinks, especially alternative ones. Producers are expanding their lineups to
increase the amount of flavors and variations as well as to create brand new products.
Use of vending machines is a kind of additional competitive advantage as gives an
opportunity to improve the presence on the market. On the other side, some supplements, as
taurine, are available from only a few sources that hinder production process.
Porter five forces analysis
The threat of substitute products
Carbonated soft drinks, fountain drinks, fruit juices, alcoholic drinks, cocktails have
the most powerful positions on the market as competitors.
The threat of the entry of new competitors
The overall beverage industry, including alternative drinks, is characterized by
relatively cheap attempt to enter this market and some innovative products may instantly
occupy a market share.
6
The intensity of competitive rivalry
Innovative movements have become a determining factor of company’s permanent
development and competitiveness.
The bargaining power of customers
The US market is equal to 42.3% of alternative beverages in figures of 2009, AsiaPacific – 31.5%, Europe – 22.2% and the rest respectively.
The bargaining power of suppliers
The product range can be distributed through direct delivery or by third-parties.
Alternative beverage industry is quite multilevel sphere of business activity. For
instance, first, the lineups of different producers are aiming at maintaining the current level of
health and improve it after/before training, at work, on vacation or at the party. Second, these
products contain potentially dangerous ingredients that can harm the health, especially if it
contains excessive concentration of such ingredients, or if people consume it abnormally, or
if people mix it up with alcohol (some energetics originally have a certain percentage of
alcohol). Only customer-oriented approach to create energetic products gives an opportunity
to provide qualitative beverages that freshens up you and initializes the burst of natural
energy. Furthermore, this industry has enough prospects to meet the highest demand as
innovative component takes a crucial place in designing, creating and distributing processes.