The eight key concepts analysis is applied to identify the key issues with regard to both Coca-Cola and Pepsi. The outcome of the analysis is utilized to establish the new strategy for both companies. The key issues for each concept are described in this paragraph.
The mission and vision of the two companies, described in the case, differ on one major issue. The Coca-Cola Company direction limits its market to a product portfolio of beverage brands, whereas PepsiCo does not only focus on beverages, but includes convenient food as well.
The scope of the two companies, described in the case, is rather similar. This is due to the fact that they are in the same industry, the only difference occurs in the business definition of PepsiCo, which has incorporated convenient foods in its product portfolio. The scope of Coca-cola Company and PepsiCo can be found in appendix 1.
The environment will be analyzed in two steps. First we will assess the macro environment, using the PEST model, after which we will zoom in on the CSD industry using Porter’s five forcer’s model. A full description of the PEST analysis can be found in appendix 2.
•The anti-trust legislation, due to the combined market share. •Health issues, both caffeine and sugar (obesity) related. •Globalization of the markets.
•The American identity.
•The plateauing of the CSD market in the US.
•Strong fluctuation in the dollar value.
•The Western customer tends to uphold a healthier and more social responsible lifestyle. •Growing number of potential consumers in Asian countries. •Decreasing consumption because of aging in Western European countries.
•Computerized technology will improve the efficiency of the bottling process. •IT enables the industry to easily expand and control their operations globally.
Porter’s five forcers model for the CSD industry.
Potential entrants – low
•The only potential entrants are companies with a vast distribution system, so they can compete with the same economies of scale as the current market players do. •Switching costs of customer is low, because the customer carries little risk by trying a new brand. •Barriers of entry are high, because consumers are brand loyal.
The bargaining power of the suppliers - medium
•Although the industry only needs few commodities for the production of its product, the commodities can be attracted from various suppliers. •Both Coca-Cola and Pepsi handle the supply contracts for the concentrate factories as well as the bottlers. •Both companies have negotiates with multiple suppliers, which results in less power for the suppliers.
The bargaining power of the buyers - low
•Due to customer loyalty the power of the buyers is relatively low. Both the retail channel as the restaurant channel are bonded by both contracts and customer demand.