MGMT 449 Lecture 2 and Case 1

Environmental Scanning, Environmental monitoring, competitive intelligence

Components of creating an environmentally aware organization

assessment of the ways trends may affect an issue, and development of alternative futures based on these assessments

Scenario analysis

political economic social technological environmental legal

PESTEL analysis framework

the broad environmental context in which a company’s industry is situated

Macro-environment

a group of firms producing similar goods/services

Industry

threat of new entrants or substitutes, bargaining power of suppliers/buyers, rivalry among competitors

Five-Force Model components

regulation requirements, product differentiation, fear of retaliation, cost advantage

Competitive pressure of threat of new entrants

• Rivalry among existing competitors, VERY HIGH

• Industry growth to industry decline

“Both Coke and Pepsi achieved average annual revenue growth of around 10%, as both U.S. and worldwide CSD consumption rose steadily year after year.”

“By 2009, the average American drank 46 gallons of CSDs per year, the lowest CSD consumption level since 1989.”

• Concerning increasing threat of substitutes

“There were many alternatives to carbonated soft drinks, including beer, milk, coffee, bottled water, juices, tea, powdered drinks, wine, sports drinks, distilled spirits, and tap water.”

“In 2009, while carbonated soft drinks accounted for 63% of U.S. nonalcoholic refreshment beverage volume (down from 81% in 2000)…”

“New federal nutrition guidelines, issued in 2005, identified regular CSDs as the largest source of obesity-causing sugars in the American diet.”

• High buyer power, increasing

Small number of buyers purchasing large volumes → buyer power (walmart)

• Supplier power low

“Metal cans were essentially a commodity, and often two or three can manufacturers competed for a single contract.”

“Coke and Pepsi negotiated on behalf of their bottling networks, and were among the metal can industry’s largest customers.”

• Low threat of new entrants

“A large plant with multiple lines and automated warehousing could reach hundreds of millions of dollars.”

“Coke and Pepsi claimed a combined 72% of the U.S. CSD market’s sales volume in 2009.”

Coke and Pepsi Case notes