Question 1. Evaluate the competitive threat in the industry and conclude on prospects for
profitability within the industry (3 points).
Threat of New Entrants:
When Phoenix first starts up with their ginger fizz, they are facing a rather saturated
beverage industry that is dominated by two giants: Coca-Cola and Frucor. As a new
entrant, Phoenix, to begin with, does not have competitive advantage when it comes to
popularity and brand awareness among customers. They have to build up their brand’s
culture, reputation and customer loyalty from the beginning while these two companies
have already craved up the beverage industry in New Zealand. That is, Phoenix needs to
win over its own customers from its competitors. In order to do so, large amount of
money is required to be contributed to product promotion and marketing, which can be
overwhelming for a start-up.
Rivalry among Existing Firms:
As is mentioned above, Coca-Cola and Frucor are Phoenix’s main competitors.
Compared to these two companies, Phoenix’s products have a higher fixed cost. They
provide organic beverages that made out of in season ingredients. This means that
Phoenix requires a more complex supply chain and most importantly, these ingredients
are two or three times more expensive than artificial substance. For example, instead of
using artificial sweetener, Phoenix uses honey to add flavor to their products, which
roughly increase the cost by at least 8 times (). This put Phoenix in a inferior position
while competing with Coca-Cola, who not only have a wider range of products choices
but also have a cheaper price.
Threat of Substitute Products or Services:
In terms of substitute products, for people who have a tight budget, they will not hesitate
to choose cheaper beverage, such as soda or just water, over organic drinks that are
rather expensive. There are also a large amount of people who are fans of coffee instead
of carbonated drinks, thus Phoenix will not even pop out in their mind when they ever
feel thirsty. Additionally, with Coca-Cola fill up all those vending machines in
convenient stores while Phoenix is mainly targeting supermarket, it will be easier for
people to get Coca-Cola at hand. Last but not least, with all those famous Youtubers
sharing their recipe of fruit tea making, some people may choose to DIY their own
organic smoothies or drinks, which is even healthier and cheaper.
Bargaining Power of Buyers:
Although the concept of eating healthily is prevailing, Phoenix Organic could still face
some resistance from customers. To begin with, as a newly immersed company, there is
still a long way to go before they can win over their customers’ trust, and it is not a good
timing to do so since customers are becoming more and more suspicious these days.
Additionally, the generally higher pricing of Phoenix Organic’s product can also make
them less competitive than other beverage company. If it is too costly for customers to
include Phoenix’s product into their daily diet, Phoenix’s business prospect can be