Antonio Cesaro - Strategic Management - Section 1 – Coke and Pepsi’s Case I pledge that I have neither received nor given unauthorized assistance for the completion of this work.
Coke and Pepsi: a century of war in a “five star” industry The beverage market includes several products that can be divided into two main categories: alcoholic, such as for example beer, wine, spirits, and non-alcoholic within which, in turn, we can distinguish carbonated soft drinks (CDSs) and “non carbs” (like milk, coffee, juices, tea, sports drinks, energy drinks and water). The aim of this essay is to focus on CSDs, especially on the cola segment, and to explain what are the most crucial features that make them one of the biggest and the most profitable industries both in the United States and in the world: indeed, although the soft drink industry is growing more slowly respect to the past, its ROIC (return on invested capital) remains on a high level, more than 30%.
Firs of all, in agreement with Porter’s model, it’s important to identify and “to measure” the five key competitive forces of the industry, by considering that the production and distribution of CSDs involve suppliers, concentrate producers, bottlers and retail channels, substitutes.
- As to the industry structure, we can find very competitive oligopoly: indeed there are two centenarian major companies, Coke and Pepsi, representing more than the 70% of the US CSD market share, (followed by Dr Pepper Snapple Group and other) but, while the former is a more international brand, the latter is more rooted in US. However, their competition is not on price as on advertising, innovation of both product and process, reputation and thus it follows that it is a high but benign rivalry: among the major events that mark their historic competition we can remember their experiments with new cola and non-cola flavors in 1960s, their switching from sugar to high fructose corn syrup to reduce costs of ingredients, their...
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