Strategic Management Chap 3

Five forces model for Vietnam beverage industry 1. Bargaining Power of Buyers * . Tran Quy Thanh, chairman of Tan Hiep Phat Beverage Group, said Viet Nam's annual per capita consumption of soft drinks rose sharply in recent years, from three litres in 2007 to 23 litres at present. Muhtar A. Kent, chairman and CEO of the Coca Cola Company, said that soft-drink consumption in Viet Nam was about a quarter of the global average. He said that beverage companies were jumping into the market because per-capita purchasing power had risen to about US$3,500 per year and the middle class was continuing to grow at a fairly fast rate. * Customers are highly sensitive to the price of the drinks and are willing to change brands if one becomes much more expensive than the other. The drinks are not a need and people won’t pay any price for it. * Products are very unique in the drink industry and people are very brand loyal to the drink of their choose. Though many drinks rather similar in type they have distinct tastes. * Firms often provide incentives to customers on the buyer side. These deals can often sway customers to choose a particular brand. * Rather high competitive pressure in general

2. Bargaining Power of Suppliers * The inputs specifically the materials are extremely differentiated as every firm is trying to create the best product. Each firm has a different formula, color, and flavor for their beverage. No two products are typically exactly alike. Product innovation is necessary to fill the buyers need for a variety of tastes. Coca Cola has decided to invest US$300 million in developing new brands. PepsiCo Vietnam and Suntory (Japan) have agreed to set up a joint venture in the beverage sector. Suntory will buy 51 percent of PepsiCo Vietnam’s shares. PepsiCo’s popular brands include Pepsi Cola, 7-UP, Sting, Mirinda, Tropicana, Twister, Lipton, and Aquafina. * Firms can switch between suppliers very quickly and easily.