This report is based upon the information from the Harvard business case: “Cola Wars Continue: Coke and Pepsi in the Twenty-First Century”. Both Coca Cola Company and PepsiCo are the largest players in the Carbonated Soft Drinks (CSD) industry. The purpose of this report is to gain insight into the possible strategies that can be applied, in order to expand the overall throat share in the future. History revealed that a highly competitive strategy that was utilized in the past by both companies resulted in a ‘Nash Equilibrium’. Because of this, the report is described from the perspective of both Coca-Cola and Pepsi. The scope of this report covers not only on the increase of overall market share, but also finding new opportunities in unrevealed markets. The analysis is also based upon the eight key concept model. In addition the PEST-analysis and the five forces model of Porter is also utilized to gain insight into the ‘macro-environment’ and ‘meso-environment’
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.
Bibliography: - Johnson, G. and Scholes, K. (2005), ‘Exploring Corporate Strategy’ 7th ed. Pearson Education Limited, Harlow
- Cola Wars Continue: Coke and Pepsi in the Twenty first century, Harvard Business School, (9-702-442), p.1-24.
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