India’s Soft Drinks Industry Essay

1. 1. 1 INDIAS PHYSICAL RESOURCES India is a country rich of raw materials, resources and land. For this report, we result cereb place on those physical resources that be essential for the delicate drinks labor wet, scratch, aluminium, condition sources. With a land space of over 2. 9 million determine kilometres (sq km) and a population of 1. 22 billion people, India has bargonly 314,070 sq km of piddle (CIA cosmea Fact book, 2012). Even though the Indian administration has done numerous things do betterd the situation by building weewee plants and water supply piping in the urban and rural atomic number 18as, there ar liquid round 18.5% of the population (226 million) that lack access to clean, deglutition water (CESS INDIA, 2004) With a sophisticated water purification installed in our muted drinks plantation, A. G. Barr be capable to emergence the unclean water into safe, drinkable water and workout it for the basis of the final products. Hence, A. G. Barr provide be able to adjure an alternative drinking source for the citizens with our soft drinks products. Next, with a integrality cultivable territory of about 1. 2 million sq km, agriculture is the gr proclaimgest industry and plays a major(ip) role in the socio scotch growth of India (Maps of India, 2012).According to food for thought and Agriculture Organization of the United Nations (FAO) (2012) and the Maps of India (2012), India is the 2nd biggest world manufacturing businesss of sugarcane (sugar) with about 453 sugar mills located all over India. INCLUDEPICTURE http//faostat. fao. org/DesktopModules/Faostat/Im shape ups/T20/ChartPic_3nemzw945otecriq01oo. png? 3f2841b2-add0-4841-9dc7-5707a2a011f0 * MERGEFORMATINET control board 1 Top Production Sugar cane 2010 Source FAO Thirdly, for aluminium, India is the fifth biggest arriver in the world after Australia, Guinea, Brazil and Jamaica (Maps of India, 2012).Finally, to obtain vast frugal growth and a flourishing industrial sector, the Indian government has invested and tending(p) top precedence to the power sector of the nation and as of the twenty-first century, India is able to start about 90% of its own energy with (Maps of India, 2012) Thermal/Coal Power Hydro Power Renewable Resources Power thermonuclear Power With most of the raw materials and resources readily available in India, the damage for these materials get out be relatively standard and scurvy. Hence, this will small(a)er the cost of takings.This is a key factor in venturing into the India grocery as A. G. Barr posit a spacious amount of clean water and sugar to produce the soft drink products. 1. 2 THREATS 1. 2. 1 INFRASTRUCTURE The infrastructure in India is one of the most problematic and unreliable in the world. As tell previously, even though India is able to generate 90% of its power, payable to the pitiful financial position of many power supply companies, the power supplies are always inconsistent and frequently being cart track-off (India Risk overview, 2011).Hence, companies, offices and industrial plants motive to cast their own back-up power facilities to ensure no interruption to the production processes (India Risk overview, 2011). The road and railway system in India is still t causeerous and many traffic congestions are resulted due to the inadequacy. Pan (Asiamoney, 2010) nones that while the Indian government are investing US$1 trillion in infrastructure from 2012 to 2017, political bureaucracy and lack of good projects are prevent the developments of infrastructure. At the same time, Roy (Euromoney, 2010) reports that while Mr.Rajiv Lall, chief executive of state-run lender root word Development Finance Company believes India infrastructure has been s outsetly improving, the dependable kind between the public sector and the private sectors in infrastructure will lead to corruption and thus may hinder the progression of big infrastructure projects. Therefore, a ny company that wish to make believe into India soft drinks foodstuff will need to spend a sizeable amount on power generator and water purification facilities. This huge victimisation up will put a dent on the initial capital investing and A.G. Barr need to take this into account and plan on how much of the expenditure to be transferred over to the final consumers through with(predicate) the products. 1. 2. 2 EDUCATION AND elbow grease According to several organizations CIA (2012), US Department of State (2011) and WEF (2011), Indias literacy rate is only at 61%. The education level in India is small-scale as many of the population live in mendicancy or the slump and unable to afford going school. Moreover, the Indian government lacks of cookery of education is hindering its people to learn and receive knowledge.This result in a low skilled workforce and the unemployment rate for youth age 15 to 24 in India is high up at 10. 5% (CIA World Fact Book, 2012). While a soft d rink company with high technology facilities and processes requires employees with minimal skills, it is still essential for these workers afford a base understanding and motor skills to operate the high-tech, expensive machineries. Another end of the spectrum is those super educated Indians where the information technology (IT) sector is booming.These IT personnel and engineers are executable to our company as they able to manage, supervise and suitable of the higher be jobs. Hence, to ensure the workers hired gather in the essential skills, A. G. Barr will need to frequently conduct training programs, skills development workshops and wipe out simple instructions which are easy to go on. 2. DEMAND CONDITIONS With the relaxation of the Indian government policy on FDIs and foreign companies, the soft drinks industry had change tremendously. As the US and EU commercializes are highly saturated, companies are looking into the Asiatic securities industrys to expand and watch more than revenues.Apart from China, Japan and South Korea, India is the 4th leading(a) Asian soft drinks market and the market is still growing and has yet to reach its saturation point. In 2010, there is a substantial demand for soft drinks as the market has grown by 10. 4% (Datamonitor, 2011). Datamonitor (2011) even predicts that by 2015, the Indian market will grow to a value of $5. 8 million. Table 2 shows the growth of India soft drink market from 2006 to 2010. Table 2 India soft drinks market volume million liters, 200610(e) Datamonitor (2011) also reports that as of 2010, the soft drinks industry has generated total revenues of $3.8 billion and with 50% of the total revenues, carbonates sale is the most profitable category. Table 3 India soft drinks market segmentation % share, by value, 2010(e) It is essential to note that currently there is a growing trend of vitamin water or nutrient water in the world as many people are becoming more health conscious. The Times (Lond on) (2012) reports that even India is not spared from the trend as PepsiCo, unneurotic with Tata Global Beverages, intend to market the nutrient water to Indias urban, set about-middle-class consumers where a bottle of such(prenominal)(prenominal) product will cost slightly higher than a standard bottled water.Hence, this could greatly affect the retail gross sales of carbonates. A. G. Barr has already altered its products to regular variants to low calorie and no added sugar variants in accordance to the gradual shift towards healthly living in the UK (A. G. Barr, 2012). For example, its fashionable porduct, IRN-BRU now comes in a sugar deliver variation, the IRN-BRU sugar free. Thus, the nutrient water market is another sector A. G. Barr could develop into not only in UK but also in India. 3.India has huge funding industries for the soft drinks market and the availablity of the main components for a soft drinks company in India is high. There are 453 sugar mills in India and the top 6 growing states are located in the Northern, Southern and Western regions of India (Maps of India, 2012). Noteably, the Indian government has been extentsively investing in the agriculture sector to ensure that the process of the sector from raw materials to warehousing and merchandising flow smoothly. And as for the aluminium industry, India has a sizeable number of aluminium plants located mainly in Northern and Southern regions.3. 2 BARGAINING POWER OF SUPPLIERS As inputs are readily available, suppliers are unable to provide their services or cheat their products at a higher charge than their competitors as it is of no red ink to the soft drinks company since the company is able to get the same or better services and products from other suppliers. A. G. Barr is able to obtain the primary inputs for its products through several sources in the region or state. Thus, the bar actualizeing power of suppliers such as the packaging producers and raw materials and soft drinks ingredients producers are relatively low (Datamonitor, 2011). 3.3 BARGAINING POWER OF BUYERS The power of the retailers and distributors in this market is short as most soft drinks manufactures work closely with the local bottling companies to care the ready for sale products to buyers within a certain region or sector (Datamonitor, 2011). Datamonitor (2011) also reports that with 46. 3% of the total market volume, the independent retailers such as the small family mart shops are the main distribution carry for soft drinks but this could change with the introduction of super and hypermarkets. Thus, consumers will have a wider range of soft drinks brands to choose from.In order to put on relatively significant market share, A. G. Barr needfully to do plenty of publicize and promotion. One of the strategies A. G. Barr could adopt is to set their soft drinks at a lower price than the main competitors, TCCC and PepsiCo in the rural areas while maintaining the same price in the urban areas where most of the middle-income and high-income classes have high consumer buying power. 4. strong STRATEGY, STRUCTURE AND RIVALRY 4. 1 CULTURAL IMPACT ON tight STRATEGY AND STRUCTURE A. G.Barr core strategic focus is based on the following 7 platforms (A. G.Barr, 2012) Core Brands and Markets Portfolio development Route to market Partnerships cost-effective Operations People Development Sustainability To ensure these strategies and structure is maintain in other country, A. G. Barr has to train its overseas employees, make them understand and cultivate the A. G. Barr functional culture. However, this will be a tough challenge in India due to the misfortunate education and different socio-culture. Thus, A. G. Barr needs to accommodate its Western working(a) culture with India working culture, as yet without losing its main mission and strategy.To ensure this is excuted properly, A. G. Barr needs to obtain a specialist in the Indian market and culture. 4. 2 RIV ALRY AMONG EXISTING COMPETITORS In India, the soft drink market is reign by three main players The Coca-Cola Company (TCCC), PepsiCo and Parle Bisleri Ltd securing 74. 1% of the total market volume (Datamonitor, 2011). Table 4 India soft drinks market share % share, by volume, 2010(e) BBC news (2011) reports that TCCC planned to invest $2 billion in India to ascension its market share and expected India to be in its top vanadium markets by 2020.Meanwhile, PepsiCo intend to launch a new product, nutrient water with Tata Water targeting at the young urban consumers to shit more market shares (Pagnamenta, 2012). This shows how free-enterprise(a) the rivalry in the India soft drinks industry where the two major market shares are actively investing and developing new products to gain more shares. 4. 3 THREAT OF NEW ENTRANTS The big players of the India soft drinks industry are actively improving themselves and distinguishing their products through discordant methods. Furthermore , TCCC and PepsiCo are famed world soft drinks brands which have been existing in the India market for many years.Though new companies in the industry may have encumbrance competing with the existing players, it may accomplish small success by using different production method or focusing on the lesser ventured catergories of the soft drinks markets such as health drinks and energy drinks (Datamonitor, 2011). This could be a major break through for A. G. Barr as its most popular products the IRN-BRU is low in sugar and contains additional benefits of an energy drink. In addition, the Rockstar series which are designed to target those who lead active lifestyles may be able to attract the young, urban consumers.With several advertising accolades, A. G. Barr has the knowledge and is able use the power of media to attract possible consumers and gain more market shares. 4. 4 THREAT OF SUBSTITUTES The main substitutes for soft drinks markets are traditonal tea and coffee, homemade juic es and orthogonal water from the water plants or piping system. As A. G. Barr and other leading soft drinks companies have diverse products to cater to the different needs of the consumers carbonates, bottled water, juices etc this will narrow down the threat of substitutes.However, the threat is still relatively soften as retailers and distributors may give more shelf space for traditional tea and coffee products as they may be stored at direction temperatures (Datamonitor, 2011). 5. GOVERNMENT BBC give-and-take (2011) reports that India is ranked ninety-fifth out of 183 nations in the transparency Inter topic Corruption Perceptions (TICP) list. Due to the high corruption scandals among its government officials, low or invisible legislative work, red tape and bureaucracy, India has dropped from 87th in 2010 to 95th (BBC News, 2011).Despite its numerous intervention, corruption in India is an issue which is very touchy to get rid off since most of the political members and o fficals have their own agendas and are resistant to change (India Risk overview, 2011). Hence, foreign companies will approach many change of minds when they venture into the India sectors. 6. ROLE OF CHANCE The role of chance plays a small part in factoring the soft drinks industry as most of the technology are at it most advanced state. The only main issue currently is the Iran oil crisis.As India still refuses to cut Iranian oil imports, this may lead to a huge setback if USA decides to attack Iran and ignore Indias relation with Iran (CBS News, 2012, Kennedy, 2012). With a potential strain relationship with USA, this could lead to severe freeze in the slyness and foreign direct investments. Furthermore, the other two traid nations, EU and Japan, may follow suit USAs decision to cut ties with India for refusing to withdraw the purchasing of Iranian oil. CONCLUSION In conclusion, the soft drinks market in India is huge though it is predominately hold by 3 major key players.To v enture into this territory, a new company need to set itself apart from the majpr players through unique advertising, differentiated production method and diverse product offerings. New companies may set an initial low price of its products to attract consumers however this should not be a long term strategy. Companies need to have a huge capital investment to counter the corruption, trade policies and poor infrastructure. Thus, expenditures and initial start-up cost will be high and companies will have to redistribute part of the cost to its final consumers in order to gain profits.PART B CRITICAL EVALUATION OF PORTERS subject area DIAMOND MODEL Michael E. ostiary is a well renowned economic strategist whom has writen 18 books and over125 articles (HBS, 2008). With a core field in competitive strategy, Porter has written and developed a number of strategic frameworks such as the Porters National adamant mock up and Porters 5 Forces analytic thinking. Since the model was based on eight developed countries and two industrialized countries, an analysis on developing, growing countries such as India is flawed.This is because these developing countries are not on the same economic level as the 10 countries. Thus, though the Porters National Diamond (PND) model analysis almost every aspect of Indias profile, it still lacks in-depth analysis and companies should not base their analytical evaluation on the PND model alone. As supported by Van Den Bosch, and Van Proojien (1992), both(prenominal) authors believed that PND model provide curb analysis on the control of national culture on the competitive advantage of nations.Similar to the EU countries, India as well as has a diverse set of culture which plays significant role in the management of the countrys economy, laws, trade policies and governance. There are limited sources on India and the soft drinks market due to the lack of legistative work from the government officals. Furthermore, some of the report s or statistics may not be entirely blameless due to the high corruption level. For example, reports may state that India is able to generate 90% of its power but the power plants are inconsistent and supplies are frequently distrupted.Also, to what extend is the literacy rate of India is correct? The literacy rates may be higher than stated as with 1. 22 billion people, India officials may have a tough job collecting the accurate datas. Moreover, with high poverty and low income, most of Indian citizens have the thrifty mindset whereby they favor things which are basically free even though it maybe unhealthful such as drinking untreated water. These are the pros of the PND model for India outline different aspect of the country profileTakes into account the role of regime which is the most essential for India These are the cons of the PND model for India Limited credible sources for analysis Little depth as India is a huge country with various swinging factors. Limited analysi s on the cultural effect on a countrys competitive advantage Ways to improve the PND model for India Supporting the model with other analysis model such as PEST, SWOT, Porters 5 Forces and Fons Trompenaars Seven Cultural Dimensions. Intentsive look for on the market and the growth of the market. REFERENCES A. G. Barr (2012) About Us.Available at http//www. agbarr. co. uk/agbarr/newsite/ces_general. nsf/wpg/about_us-our_strategy (Accessed 22 March 2012). BBC News (2011) Coke plans $2bn India investment in bid to cost increase growth. Available at http//www. bbc. co. uk/news/business-15731884 (Accessed 20 February 2012). BBC News (2011) India Transparency worldwide corruption index blow. Available at http//www. bbc. co. uk/news/world-asia-india-15979646 (Accessed 01 March 2012).CBS News (2012) U. K. Attack on Iran has enormous downsides. Available at http//www. cbsnews. com/8301-202_162-57380838/u.k. -attack-on-iran-has-enormous-downsides/? tag=mncollst1 (Accessed 20 February 2012 ). India. CESS (2004) Right to Drinking Water in India. Available at http//www. cess. ac. in/cesshome/wp%5CWater. pdf (Accessed 22 March 2012).CIA (2012) South Asia, India. Available at https//www. cia. gov/depository library/publications/the-world-factbook/geos/in. html (Accessed 20 February 2012). FAO (2012) Faostat. Available at http//faostat. fao. org/site/339/default. aspx (Accessed 01 March 2012). HBS (2008) Harvard business organisation School Faculty & Research. Available at http//drfd.hbs. edu/fit/public/facultyInfo. do? facInfo=bio&facEmId=mporter (Accessed 10 April 2012). India Risk overview (2011) Business Asia, 43, 14, pp. 10-11, Business Source Premier, EBSCO Online. Available at http//searchebscohost. com (Accessed 22 March 2012). Kennedy (2012) US Pleas for Asia to Cut Iranian Oil Imports square off on Deaf Ears, Oilprice. Available at http//oilprice. com/Latest-Energy-News/World-News/US-Pleas-for-Asia-to-Cut-Iranian-Oil-Imports-Fall-on-Deaf-Ears. html (Accessed 20 February 2012). Maps of India (2012) India Agriculture.