ID#1208468413 expanding into the global markets non-CSDs (juice).

ID#1208468413

Cola Wars

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Executive
Summary

 

The Cola Wars is
one of the biggest competitive battles between two companies. The competitive
market stared in the 1890’s, but they start making aggressive advertising between
1980’s and 1990’s. they competed on many different levels. worked on improving
their vendor also they both have a huge amount of funds for advertising, furthermore,
this competition expands to field of research, both companies continuing their reaches
within the carbonated soft drink (CSD) market, however, they both have the same
threaten which is decreasing in CSD usage.

External Environment:

·     
Economic Factors: Pepsi Co. focused on expanding
into the global markets non-CSDs (juice). Coca-Cola promoted more of CSD.

·     
Political and legal factors: in the 2000’s CSD
industry fight reports say, CSD usage led to poor health issues such as obesity.

As a reaction to this report the government intervention in some cases for
example, banning soft drinks in schools, also several states implemented soda
taxes and bans.

·     
Technological Factors: In today’s marketplace,
technology is a key player in helping a business stay profitable, but I don’t think
this is a major factor in this industry.

·     
Competitive Factors:  Both Coke and Pepsi have tried to fight against
this substitute threat by having or acquiring their own product lines.

Why is the soft-drink industry so profitable?

The industry is
profitable because all five forces are favorable:

1.    
The power of buyers is low which is
customers loyalty.

2.    
The power of suppliers is low which
is no pricing power.

3.    
Rivalry is low due to duopoly.

4.    
Threat of entry is low because of
brands power and market share.

5.    
Threat of substitution is low.

How has the
competition between Coke and Pepsi affected the industry’s profits?

The competition
between Coke and Pepsi did not hurt industry profits. Statistically industry
profits increased, because of the increasing of demand and prices. From 1975 to 1995 both companies
achieved average annual growth 10% as both US and worldwide CSD consumption
consistently raised.

Can
Coke and Pepsi sustain their profits in the wake of flattening demand and the
growing popularity of non-CSDs?

 

The challenge is decreasing in demand. However, yes, Cola and Pepsi can sustain their profits in the
industry because of the following reasons:

·     
The industry structure for over century has been kept without
new threats from new competition and no major changes appear on the future

·     
This industry doesn’t have a big threat from technology.

·     
Cola and Pepsi have been in the business long time to have a big
amount of brand equity, and this is helping them to sustain for a long time and
also, they can use that for diversifying their business