MGMT 223 Lecture Notes - Lecture 4: Incumbent, Market Power, Vertical Integration
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By tweaking the composition of a value chain via backward or forward integration, you can better position yourself. Higher concentration higher bargaining power winning. Quite profitable for bottlers and concentrator producers. There are only 2 main players, and they do(cid:374)"t reall(cid:455) (cid:272)o(cid:373)pete o(cid:374) pri(cid:272)e. the(cid:455) (cid:272)o(cid:373)pete o(cid:374) distri(cid:271)utio(cid:374) (cid:272)ha(cid:374)(cid:374)els a(cid:374)d territor(cid:455) ((cid:272)a(cid:374) they secure subway). They co(cid:373)pete o(cid:374) ad(cid:448)ertisi(cid:374)g a(cid:374)d selli(cid:374)g the (cid:862)good feeli(cid:374)g(cid:863) of drinking their product: 2 types of rivalry: qualitative- quantitative- you just compete on price. If (cid:455)ou"re e(cid:374)teri(cid:374)g a (cid:374)e(cid:449) (cid:373)arket, (cid:455)ou (cid:374)eed to offer so(cid:373)ethi(cid:374)g (cid:373)ore. pepsi has (cid:374)ot e(cid:374)tered as many markets as coke has. A (cid:272)o(cid:374)(cid:272)e(cid:374)trate produ(cid:272)er"s (cid:373)ost sig(cid:374)ifi(cid:272)a(cid:374)t (cid:272)osts (cid:449)ere for advertising, promotion, market research, and bottler support. All the companies are selling is an image. Anything that is digital and code-fiable has minimal marginal cost: compare the economics of the concentrate business vs. the bottling business.
