Industry Analysis of Carbonated Soft Drinks in Myanmar Porter's five forces include - three forces from 'horizontal' competition:

threat of substitute products, the threat of established rivals, and the threat of new entrants; and two forces from 'vertical' competition: the bargaining power of suppliers and the bargaining power of customers.

1 Threat of New Entrants

Identifying new entrants is important because they can threaten the market share of existing competitors. One reason new entrants pose such a threat is that they bring additional production capacity. As a result, new competitors may force existing firms to be more efficient and to learn how to compete on new dimensions. Barriers to Entry: Existing competitors in Carbonated Soft Drinks industry try to develop barriers to entry. An absence of entry barriers increases the probability that a new entrant can operate profitably. Several kinds of potentially significant entry barriers may discourage competitors. Economies of Scale: Economies of scale are derived from incremental efficiency improvements through experience as a firm grows larger For example, a firm may choose to reduce its price for glass-bottled carbonated soft drinks and capture a greater share of the market. Alternatively, it may keep its price constant to increase profits. In so doing, it likely will increase its free cash flow, which is helpful in times of recession. Distribution channels: for example, ease of access for competitors; Government legislations: for example, introduction of new laws might weaken companys competitive position; Differentiation: for example, certain brand that cannot be copied

2. Competitive Rivalry between Existing Players This force describes the intensity of competition between existing players (companies) in an industry. High competitive pressure results in pressure on prices, margins, and hence, on profitability for every single company in the industry. The major players in Carbonated Soft Drinks Industry are Myanmar Golden Star (MGS) Beverages Co., Ltd, Loi Hein Co., Ltd and Pinya Manufacturing Co., Ltd. Employing more than 1,100 people, the market leader MGS Beverage has a network of more than 14 own branches all over the country. MAX from Pinya Co., Ltd has an effective sales force and a sales fleet of more than 80 vehicles in Yangon.

MAX is believed to be the toughest competitor to MGS, the market leader in carbonated soft drink market in Myanmar.

3. Bargaining Power of Suppliers Supplier bargaining power in carbonated soft drinks industry is likely to be high when: The soft drink market is dominated by a few large suppliers rather than a fragmented source of supply, There are no substitutes for the particular input, The suppliers customers are fragmented, so their bargaining power is low, The switching costs from one supplier to another are high, The buying industry has low barriers to entry.

4. Bargaining Power of Customers Customers bargaining power is likely to be high when They buy large volumes; there is a concentration of buyers, The supplying industry comprises a large number of small operators The supplying industry operates with high fixed costs, High switching costs for customers Legislation and government action

5. Threat of Substitutes A threat from substitutes exists if there are alternative products with lower prices of better performance parameters for the same purpose. This category also relates to complementary products. Similarly to the threat of new entrants, the treat of substitutes is determined by factors like

Brand loyalty of customers, Close customer relationships, Switching costs for customers, The relative price for performance of substitutes, Current trends.