Introduction (graphics not available) Holland Sweetener Company (HSC) is planning to enter the low-calorie, high-intensity sweetener market, currently dominated by NutraSweet. Below we first analyze our reference sector. Next we'll look at what kind of response HSC should expect from NutraSweet as it enters this market. We will also look at some likely scenarios that could occur and try to estimate the probability of each scenario. Based on our analysis, we will give a recommendation to HSC to plan its entry into this market. Industry Analysis The low-calorie, high-intensity sweetener market has been dominated by one major player, NutraSweet, with annual sales of $711 million and approximately 80 percent market share (the total market in 1986 was $884 million in annual sales). NutraSweet, an industry monopolist, has managed to command premium prices and successfully capture the majority of the pie. Additionally, the market was expected to grow 15% annually, with expected sales growth of 70% in Europe and Canada. However, as NutraSweet's original patents were set to expire soon (the patent in the European/Canada market expired in 1987 and in the United States in 1992), a new competitor was threatening to enter the lucrative low-calorie sweetener market: HSC. Barriers to EntryDuring the monopoly period, NutraSweet had successfully constructed several barriers to entry as a means of protecting its industry leadership and thwarting new competitors. Production: Production of aspartame required high initial capital expenditure (floor construction costs $100 million) and long production time (2-3 years to accelerate aspartame production). The facility was to be operated at or near its intended capacity and experience an MES of 2,000 tons per year. Furthermore, as a pioneer, NutraSweet had the advantage of increasing production efficiency (production costs have been reduced by 70% over the years). Patent Protection: NutraSweet owned several crucial patents in the United States and other regions. Among these were the patent on the use/mixture of aspartame and the patent on the manufacturing process. Blocked Buyers: The market was dominated by two main customers: Coca-Cola and Pepsi (accounted for approximately 50% of aspartame usage). NutraSweet had signed exclusive multi-year contracts with both. This would prevent potential competitors from establishing the sales volume necessary to support the minimum efficiency production scale necessary to effectively compete in the aspartame market. Brand Recognition: NutraSweet invested heavily in building its US brand with the introduction of a “branded ingredient” campaign, which required a large advertising investment ($30 million per year) and resulted in brand recognition of 98%..