Case study: Car Wash and Auto Dealing in Canada

Case: Car Wash and Auto Dealing in Canada

Porter’s 5 Forces

1. This includes all aspects of Porter’s model. You will be graded on your ability to write a concise, accurate, and in-depth analysis with corresponding implications.
   1. Read “How competitive forces shape strategy” in the Harvard Business Review for background
   2. Please note, you must ONLY use the information in the industry note for your analysis. There is no need for a bibliography or citations of external sources.  All references to facts or numbers from the industry note are known to the evaluators so there is no need to reference where you found them either.
   3. You Must specify whether each force is a high, medium or low and then make a final determination of the overall attractiveness of this industry based on your analysis of high, medium or low.
2. The total report is limited to 1 page of text, , 12 point font, single spaced, headings are necessary.

1. Porter’s Five Forces
   1. An industry tool
   2. Threat of new entrants, bargaining power of buyers, threat of substitutes, bargaining power of suppliers, intensity of rivalry.
   3. Rank each Low/Med/High, overall judgement Include exit barriers.
   4. Don’t forget to sub-segment the markets/businesses if necessary.
      1. Threat of New Entrant, i.e. what are the barriers?
         • Brand equity driven by spending on advertising (per share point – Exhibit 8)
         • Limited shelf space (merchandiser would have to remove incumbent)
         • Franchise system (bottlers have exclusive agreement with concentrate suppliers)
         • Would you set up a bottling business if you did not have a commitment from a concentrate supplier?
         • Is the cola industry scalable? Does this constitute a threat?
         • Is threat of New Entrant high/medium/low?
      2. Threat of Substitute
         • Do you want to drink Pepsi? What do you really want?
         • Is Pepsi a substitute for Coke?
         • What are some substitutes?
         • What factors will move you to select a substitute?
         • What are options for container material?
         • How other than drinking from a bottle/can is it possible to enjoy a Cola?
         • What are examples of “captive” forward integration
         • Is the threat of Substitute high/medium/low?

• Threat of Supplier (switching)
  • What really goes into the formula?
  • Are the ingredients readily available?
  • Are they expensive?
  • What other suppliers (other than the liquid elements) are necessary?
  • Do they pose a threat?
  • Considering all suppliers, is the threat of Supplier high/medium/low?

1. Threat of Buyer (leaving)
   • Bottlers are buyers of the concentrate and distribute the product
   • Would they be subject to bottle other liquids if they left? (consider switching costs, franchise agreements, cost of goods sold made up of concentrate)
   • Is the threat of a bottler leaving high/medium/low?
   • Final consumers are indirect buyers since they’re after the concentrate’s taste
   • What affects a consumer to not buy the product (fickle consumer, fragmented dispersion, price sensitivity, brand loyalty, switching costs incurred by buyer)
   • Final consumer “shops” at super markets, convenience stores, vending machines, fountain accounts
   • Which of above poses least threat of cola buyer leaving
   • Is the overall threat of Buyer (bottler and consumer) leaving High/Medium/Low?
2. Threat of Rivalry (within Cola business)
   • How can Pepsi and Coke make so much money in the middle of a war?
   • Is their war really promoting the Cola industry as a whole? (avoiding substitution)
   • Is the perceived differentiation real? (taste, life-style factors)
   • What are the elements being fought over?
   • Do any of them involve the concentrate per se, or is it all forward integrated?
   • Why doesn’t the war escalate out of control?
   • Who’s been winning the war?
   • Who’s been losing the war?
   • Is there a rivalry within the bottling faction? What are the parameters of the rivalry (cost, efficiencies, location)?
   • Is the threat of Rivalry high/medium/low?
3. Summation (for entire Cola Industry)
   • At the conclusion of evaluating the five threats we must always state a summation (see tool E10) as follow:
   • And therefore, “The Cola Industry is a ………. business to be in” (fill in the blank)

Note: For Buyer and Supplier, choose whether ‘Threat of Buyer’ ‘Threat of Supplier’  or ‘Bargaining power of Buyer’ ‘Bargaining power of Supplier’, and you must ensure consistency when you are analyzing industry by using Porter’s Five Forces. Case study help