Cosmos Bottling Corporation: Strategic management study

(A) Objective The main purpose of this paper is to come up with proposed objectives and strategies for Cosmos Bottling Corporation (CBC), the beverage subsidiary of food giant RFM Corporation. The study aims to achieve the following: (1) Identify and analyze the situation of the beverage industry (2) Determine direct and indirect competitors of CBC (3) Classify the opportunities and threats within the industry (4) Review CBC\u27s activities and performance (5) Evaluate CBC\u27s strengths and weaknesses (6) Formulate new sets of objectives and strategies. (B) Methodologies This paper is supported by primary and secondary information. Primary sources came from an interview with the RFM core plan person, including documents to support first hand information. Secondary sources were gathered from published articles, magazines, references and annual reports collected from the net and libraries of Board of Investment (BOI), Philippine Stock Exchange (PSE), Asian Institute of Management (AIM), De La Salle University (DLSU), University of the Philippines, College of Business Administration (UP-CBA) and Business World Office. (C) Framework The paper covers the following: the beverage industry study the company review the formulation of the strategy and implementation plan. The framework and models used for this study comes from the book of Michael E. Porter (Competitive Strategy) and the book of Arthur A. Thompson, Jr. and A.J. Strickland III (Strategic Management Concepts and Cases), which consist of the following: (1) The five-forces model (2) Value-chain activities (3) Strategy-shaping factors (4) The principal strategy-implementing tasks. (D) Scope and Limitations The study is only based on information that is accessible to the public. Present company policies are confidential and company strategies are limited to protect the firm\u27s position. The researcher\u27s intention is to come up with the best-proposed strategy, given the limited data gathered within seven (7) months period (December 1999 to June 2000). (E) Industry The beverage industry is composed of different companies catering to the drinking needs of consumers. They handle the manufacturing and marketing of beers, liquors, soft drinks, fruit juices and bottled water. New entrants are trying to make their position in the industry, while the existing players try to maintain or improve their market share by making expansion plans and improve their production capacities. Most incumbents come from large-scale manufacturers. These firms have already established their market share and earned their distinct brand names through all the years of their existence. In the global perspective, based on the Beverage Digest in 1998, everybody loves soft drinks, and nobody loves them more than Americans. The runner up positions are Mexico and Puerto Rico. Places with mid-range per capita consumption - like Brazil and the Philippines - are right up there on the top 10 along with Canada (currently represent the eight largest soft drink market). Presently, cola\u27s are gaining ground in the European market, especially in Asia and the Middle East where most countries usually have hot climates. Almost half of the Philippines\u27 consumer price index is accounted for food, beverages and tobacco whose prices are expected to move moderately. Three companies dominate the soft drink industry in the country namely: Coca-Cola Bottlers Phils., Inc. (CCBPI), Pepsi-Cola Products Phils., Inc. (PCPPI), and Cosmos Bottling Corp. (CBC). (F) Industry Problems New Taxes imposed (i.e. House Bill 740 - Excise tax at 10% of sales based on ad valorem.) on carbonated beverages will bring heavy losses to soft drink companies. Analysts interviewed by Business World last December 10, 1999 forecasted a negative scenario for the local soft drinks industry over the next two years where sales will start declining after 5 consecutive years of tremendous growth. (G) Other areas to Consider The beverage industry depends on the market aspects. These includes factors affecting demand - elements that influence consumers (income, pricing, brand loyalty, product positioning, health consciousness), factors affecting supply (production capacity depends on the availability of raw materials, type of equipment used, tax measures, and competition) and expenditure on beverage