Case of Bottled Water Industry essay
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The bottled water industry has over the years seen a tremendous increase in growth, both in terms of the returns and the competition among the industry players. Initially viewed as a luxury and a preserve of the financially capable people, the period around the 1990s saw some of the lowest levels of consumption of bottled water in the United States. However, as time progressed, business picked up and the bottled water industry gradually developed into a booming commerce and one of the most sought prototypes of business in the category of beverages. The increase in consumption between the mid-1990s and the early 2000 stood at an impressive nine percent per annum. Consequentially, it was not long before the United States toppled other massive consumers, such as Mexico and Europe, to become the world’s largest market for bottled water.
The rise in interest and subsequent demand of bottled water in the United States was the effect of a combination of factors. These included growing concerns and doubts over the safety of the municipal water, health issues and on-the-road lifestyle of Americans. The most notable of these matters was dissatisfaction with the quality of the municipal water that was running in household taps. It frequently came under scrutiny due to the number of people contracting ailments because of the contaminated water. Research had also demonstrated that soft drinks were more likely to lead to obesity. In addition, bottled water was recommended as healthful and good for the body by health professionals. These are some of the factors that pushed a number of people into adopting the use of bottled water. The nature of Americans’ lifestyle was another factor attributable to the growing demand for bottled water. Americans used to be the people constantly on the move, and the portability and efficiency that bottled water came with was a supplementary incentive to the product. Such were some of the contributory factors that led most consumers to either part ways with soft drinks and adopt bottled water, or take up the consumption of bottled water without shifting alliances.
As expected, the rise in demand of bottled water elicited an equal rise in the product providers in the market. International companies like Coca Cola, Pepsi and Nestle all plunged into the industry causing cut-throat competition for the lucrative returns that the bottled water industry promised. These industry players resorted into all forms of strategies to beat their rivals and get the bigger piece of the cake. They adopted the use of local companies in the sale and distribution of their products and engaged in price wars in a bid to get more control to hold the market. In addition, they undertook product variations and development of innovative products to win over consumers.
The bottled water industry has witnessed immense progression and has restructured on numerous occasions. With the aid of the Porter five forces analysis of market structure, emerging trends have been possible. The first force that has contributed to the shaping of the bottled water industry is the effect of new entrants. Initially, most of the companies that later came to control the bottled water industry were companies limited to production of soft drinks and other beverages. However, when the opportunity presented itself, most of these companies indulged into the bottled water industry. Such companies include the Coca Cola Company and Pepsi. Initially the dominant names in soft drink manufacture, these companies took to the bottled water industry for the sake of realization of the potential returns and gains that could be made from the then emerging market.
The challenge posed to the new and upcoming industry was not only limited to the stiff competition among industry players that highlighted it. Competition from other established businesses that had been in the market for longer also proved a thorn in the flesh for the bottled water producing companies. The most noteworthy form of competition was observed in the soft drink manufacturing companies. Long before bottled water had taken center stage in the United States’ market, soft drinks ruled the industry. However, the onset of bottled water brought competition to the doorsteps of soft drink manufacturing companies. Nevertheless, as years progressed, bottled water got more preference from the population and gradually ousted soft drinks from their coveted place among consumers.
As the bottled water industry grew and matured, the mother companies, such as Pepsi, adopted market strategies in which they involved other smaller companies in helping them sell their products. The rush to gain customer’s loyalty, therefore, did not just remain at the top with the mother companies but also trickled down to the associated corporations that took the competition in the markets a notch higher.
The competition further continued through the suppliers of raw materials and resources needed in water bottling. The large bottlers were offered incentives by the suppliers and, as a result, obtained the resources more cheaply compared to the smaller companies. The enterprises that engaged in purification of municipal water as opposed to leasing springs had an upper hand as they incurred less transportation costs. Their profit margins therefore looked more palatable than those of the companies that leased springs.
The pressure of obtaining markets for their products was palpable among the new players in the water bottling industry. The commerce was characterized with little alliance in terms of loyalty. Nevertheless, more established companies, such as Coca Cola and Pepsi, had a field day as their brands were already widely known and accepted. This gave them an upper hand and tipped the competition to their favor.
There have been a number of driving forces that have dictated the turnout of events in the water bottling industry. Product innovation leads the pack. The cut-throat competitions in the industry lead to adoption of mechanisms to steer clear of the contest. One of these ways was accomplished through adoption of new innovative products to increase customer’s satisfaction. In addition, change in technology resulted into the increase in the capacities of production of the industry players. Such driving forces were phenomenal in helping the related companies establish a larger and more loyal customer base as approval of their products saw an increase in turnover.