Cola Wars Continue - Coke and Pepsi in 2010
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Cola Wars Continue - Coke and Pepsi in 2010
Coke and Pepsi are companies that operated in a "carbonated soft drink (CSD) industry" (p.1). However, they have been introducing more of non-CSD drinks and becoming an overall beverage industry. In order to further analyze the industry, Michael Porter\'s five forces framework, competitive strategies and resources and capabilities helps determine the attractiveness of the overall industry.
Carbonated Soft drink industry analysis
Threat of new entry
Threat of new entrants is low since the industry has already developed a high barrier that is difficult for new arrivals to enter or survive. The major companies in this market are Coke and Pepsi that have made huge and risky capital investment throughout the years. One of the spendings was towards marketing campaigns for advertisements, rebranding, sponsorships, and promotion in their brand that created a strong brand loyalty for buyers to rely on and prefer over new arrivals (p. 9-10). As well as, it is difficult for new entrants to gain buyers access, so entrants should think of a way to get their products on the self- space, because running a successful business is highly depends on how much sales they can generate. New entrants need have their product to be innovative in order to enter in the industry because Coke and Pepsi already established a strong uniqueness. Therefore, the threat of new entrants is re latively low for CSD industry.
Bargaining power of buyers:
Buyers of CSD industry is the retail channels such as are supermarkets, vending machines, fountain outlets, mass merchandisers, and more (p.4). These buyers have medium to high power in the industry because some of these buyers contribute for huge part of the revenue for Coke and Pepsi. For supermarkets, they generate $12 billion of CSD products in U.S., with that high amount, it causes huge demand from CSD companies to display their products. Yet there is strong self-space pressure since retailers only want to stock their self with popular brands. So buyers have the options to switch and try other brands (p.4). Therefore, the bargaining power of buyers is medium to high in CSD industry.
Bargaining power of suppliers
Suppliers in CSD are concentrated, sweeteners, and packaging. Commodities like coloring, caffeine, citric acid, caramel, natural flavors, and metal cans are standardized materials with no differentiation so they can be easily available in the market (p.5). As metal cans turn out to be very attractive and friendly packaging materials, Coke and Pepsi became the largest consumers of metal cans. To name few cans supplier are Rexam, Ball, and Crown Cork & Seal. As the cans became an important component of the production, it was necessary for CSD industry to establish a good relationship that is long term with the suppliers. Yet there were often competition among the can manufacturers to get a single contract. Therefore, the bargai ning power of suppliers are low (p.5) .
Threat of substitutes
There are many substitute products at that time, which includes milk, coffee, bottled water, juice, tea, wine, sports drinks, and more. There were some health issues from drinking CSD, like obesity and "high fructose corn syrup as unnatural" (p.9), causing some of the substitute products to have few benefits compared to drinks from Coke and Pepsi. This causes buyers to purchase healthier alternative drink, thus decreasing in sales for Coke and Pepsi. So both companies changed the ingredient from corn syrup to natural sugar in drinks, which had lower health issue (p.9-10). Consumers are buyers\' private label drinks, which is a cheaper price compared to Coke and Pepsi (p.10). As a result, threat of substitutes is high for CSD industry.
There are two major players in CSD industry are Coke and Pepsi. The competitive rivalry is high because both companies could receive any updated information about any external or internal changes being made from their rivals. For instance when both companies introduce new flavours. Coke presented Fanta and sprite while Pepsi launched Mountain Dew (p.6). With that both companies have spent amount of time and money in advertising and promoting which most of the massages indicates the superiority of their own brand over other (p.7). Also both coke and Pepsi were aggressively expanded their own non-carbs products to increase their sales and eventually
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Coca-Cola, Patent medicines, Marketing, Convenience foods, Kosher food, Pepsi, The Coca-Cola Company, Porters five forces analysis, Cola Wars, Cola, Diet drink, Brand
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