Competition often includes more than the firms that are direct competitors, like Coke and Pepsi. Exhibit 3-6 shows the different levels of competition for diet colas. The product form (variant) is the most direct form of competition. Nevertheless, other product category soft drinks also compete for buyers, as do various beverages. A complete understanding of the competitive arena helps to guide strategy design and implementa­tion. Since competition often occurs within specific industries, an examination of industry structure is important in defining the competitive arena.

The competitor analysis is conducted from the point of view of a particular firm. For example, a soft drink producer such as Coca-Cola should include other beverage producers in its industry analysis. This analysis looks at two kinds of informational) a description of the industry and (2) an analysis of the distribution channels that link together the various organizations in the value-added system serving end-u: industry study is 'a horizontal analysis covering similar types of firms (e.g., soft producers), whereas the distribution channel analysis focuses on the vertical value system of firms that supply materials and/or parts, produce products (and distribute the products to end-users. The soft drink market in Japan is an interesting competitive arena. As many as new products are introduced each year by national and international companies, producers, and private label suppliers. Vending machines are popular, off* different brands. Coca-Cola Japan alone operates 700,000 vending machines, comprise about 10 percent of the Japanese beverage market (see Coca-Cola Japan