Cola Wars Continue: Coke Vs. Pepsi In The 1990s (Cola Wars)

1934 words - 8 pages

Question 1The concentration producing industry has one buyer and through its value chain. Instead, costs for advertising, promotion, market research, and bottler relations were significant. On the other hand, bottling industry is the mid-way player in the soft drink industry. There are two suppliers and one buyer involved in its value chain (Exhibit 1).Whether two industries are profitable depends on soft drink consumption, which had increased for more than 20 years and plateaued in the 1990s.The economics of the CP and bottling is very different from each other in terms of number and size of rivals, and the scope of competitive rivalry. There are two giants competing head to head on the CP industry, smaller national producers, such as Seven-Up and Dr Pepper, are relatively trivial. There are a lot of players of same size in the bottling industry. Unlike the furious competition between Pepsi and Coke, no sense of competition can be felt in bottling industry. Reasons are that, first, Pepsi and Coke control the majority of bottlers in 1990s; second, intrabrand competition is restricted by the franchise agreement, which is protected by 'Soft Drink Interbrand Competition Act'.From the view of capital requirement, it is easier for others to enter the CP industry than to enter the bottling industry, since comparing to $30-$50 million dollars requirement to establish a bottling plant covering only one 80th of ability to serve the entire US market, the requirement for one CP plant with a nation-wide capacity is only $5-$10 million dollars. In addition, brand loyalty is low in the CP industry since consumers are sensitive to price and there is little switching cost. There are many substitutes for soft drinks, such as tea, beer, and milk. There is no substitutes existing in the bottling industry, and no customer loyalty and switching costs for bottlers since they could only use packages authorized by the franchiser, which means no distributors can tell the difference of the same brand provided by two bottlers, and easily switch among different bottlers.Cost and financial structures of a CP and a bottler illustrate that high cost of sales is one of the major reasons behind the relative low profitability of the bottling industry. The ratio of cost of sales over net sales is 40% higher than that of CP. One possible reason is that bottlers heavily depend on CPs, and thus, CPs use bottlers to diversify expenses. Another reason is that bottlers hold much more inventory than CPs do since bottlers receive soft drink concentrates according to its processing capacity, while they sell products based on selling capability. Also, bottlers have plant and equipment that are ten times more than that of CPs, and a good will that is roughly 45 times more, which means that bottlers have to deduct more depreciation from gross profit than CPs do.One of the reasons why bottlers are backward integrated by CPs is that, as the Cola-war heating up, small bottlers were no longer...

Find Another Essay On Cola Wars Continue: Coke vs. Pepsi in the 1990s (Cola Wars)

cola wars Essay

1038 words - 5 pages Errors Pepsi: most imitators is that inimitably At Coca-Cola, and indeed , there is much to learn in sales promotion and advertising products. Few basic ingredients of success of this company - identified experts Masterforex-V: - Mythology . A mystery to be not only a woman , but in the carbonated beverage . Something which, as the myths and mysteries surrounding Cola during its existence created enough. Worth at least its supposedly secret

Problem Set - Cola Wars Essay

1049 words - 4 pages only competitive force on CSD industry profitability. At the very beginning of cola wars, Coke initiated a strategy by not reacting. When Pepsi began a campaign outlining the cheap cost of their product, Coke maintained a premium price strategy, although their market share began to be affected. This is a tradeoff that they were willing to make at the time. Because Coke established a "dominant postwar market shares in most European and Asian

Cola wars case study

619 words - 2 pages to increase soft drink sales and thus profits.Coke and Pepsi have already had some international operations in major markets, such as Europe, South America and Asia. Especially in Asia, the market is much more fragmented. There are many local brands competing with Coke and Pepsi. Coke and Pepsi should also continue to promote their brands in these global markets and increase the overall market. The marketing campaign can be tailored to these

Coca cola vs pepsi

1973 words - 8 pages Case OverviewAt December 4th 2000, PepsiCo, Inc. announced the merger with the Quaker Oats company. With this merger, PepsiCo, Inc. have the access to Gatorade and control the sport drink market by 83,6%. Analysts estimated that PepsiCo would control 33 % of the U.S noncarbonated beverage market after the Gatorade acquisition, While Coca Cola only control 21 % of the market.Key IssuesCoke and Pepsi had created one of the strongest rivalries in

Coke and Pepsi, The War Continue

594 words - 2 pages Coke and Pepsi, The War ContinueControl of market share is the key issue in this case study. The situation is both Coke and Pepsi are trying to gain market share in this beverage market, which is valued at over $30 billion a year (98). Just how is this done in such a competitive market is the underlying issue. The facts are that each company is coming up with new products and ideas in order to increase their market share. The creativity and

Coca Cola Vs Pepsi An International Battle

1101 words - 4 pages itself. I conclude that there is not much difference between Coke and Pepsi. The requirements for success are to detect all the changes in the future.While both companies have been in Eastern Europe for many years, the main task now is to develop the market. Both Coca-Cola and Pepsi are trying to have their colas available in as many locations in Eastern Europe as possible, and are recognizing the concepts which are becoming more important in

You got the "Right One Baby"! The world of Coca Cola vs. Pepsi Cola

1117 words - 4 pages , Pepsi has really given Coke a run for their money.Handicapped by a fickle market and numerous executive turnovers (five within fourteen years), Coca Cola has had to restructure, revamp and renegotiate in order to gain international market share against Pepsi as well as other competitors. (Kripalani & Clifford, 2003) They currently hold the third position in sales in India (preceded by a local soda which they also own, Thums Up, and Pepsi).Over

The History of Pepsi-Cola Company

3540 words - 14 pages A young pharmacist called Caleb Bradham, who was trying to create a refreshing drink in the summer in order to serve his customers and when the drink had won the admiration of people invented Pepsi cola drink in 1898. Bradham has established in 1902 his Pepsi-cola company, Pepsi-cola was advertised as a drink that aids digestion and the brand started to widespread, and increase sales and Caleb give the brand a slogan “Drink

This is a five forces analysis for the "Cola Wars" Harvard Business School case.

746 words - 3 pages Untitled 5) The Cola Wars have been raging for many years, mainly between Pepsi and Coca-Cola. There have been, and are, minor players in the game, who are able to exist, but none of these have a share of the carbonated soft drink (CSD) market that comes close to equaling Pepsi or Coke. To evaluate the CSD industry, I will use Porter's Five Forces Model. First, one must look at the center of the model, which talks about the

Marketing Mix Of Pepsi-Cola

1264 words - 5 pages hard task, and also a big weakness for Pepsi-Cola. Even though PepsiCo has better total sales than Coca Cola (20.4 billion vs. 16.2 billion), however, the market value of the whole company is just about half of Coca Cola (44 billion vs. 93 billion). The main reason is that PepsiCo has its foot into fast food market. Furthermore, the profit margin they make is not even one third of current market leader in fast food industry-McDonald (4% vs. 15

Advertising strategies of Pepsi-Cola

1932 words - 8 pages Advertising strategies of Pepsi-ColaPepsi-Cola, produced in 1898, has had relatively successful history with the American society. According to an article titled "Coca-Cola," "Coke lost market share to competitor Pepsi-Cola, produced by PepsiCo, which for the first time topped Coca-Cola in sales" (par. 3). In 1954 an array of advertisements came about beginning with the slogan "The Light Refreshment" which later on incorporated "Refreshing

Similar Essays

Cola Wars Continue: Coke Versus Pepsi In The 21st Century. Industry Structure And Competitive Interaction

1123 words - 4 pages prices and other contract terms2. How has the competition between Coke and Pepsi affected the industry's profits?For over a century, intense rivalry between duopoly Coke and Pepsi shaped the soft drink industry (combined 73% market share). The most intense battles of the cola wars were fought over the $60 billion industry in the United States, where the average American consumes 53 gallons of carbonated soft drinks (CSD) per year. In a carefully waged

'the Cola Wars Continues: Coke And Pepsi In The 21st Century': Competitive Strategy Case Study

4581 words - 18 pages . Rev. June 30, 1983.[5]. Lessard, D. (2003). Frameworks of global strategy analysis. J. of strategic management education, 1(1): 81-92.[6]. Dube, JP. (2004). Product differentiation and mergers in the carbonated soft drink industry. University of Chicago Graduate School of Business.[7]. Van Leeuven, M. (2004). Coca-Cola needs a stronger refreshmentThe Interactive Investor Journal ([8]. Yoffie, D. (2004). Cola Wars Continues: Coke and Pepsi in the 21st Century. Harvard Business School. Rev. January 27.

Cola Wars Essay

1585 words - 6 pages persuade people into purchasing their products, both companies have successfully publicized their drinks. As a result they have become the two leading soft drink brands in the nation. The competition between Pepsi and Coke will not only prolong the greatly known cola wars, but will also allow new advertising techniques to be aired on television. Pepsi uses excellent marketing strategies, such as celebrity appearances and contemporary product

Cola Wars Essay

1020 words - 4 pages . The Coca-Cola and Pepsi brands have existed for 115 years and became significant icons, which have been able to create strong brand fidelity among customers. This fidelity was demonstrated by the strong resistance of Coke "fans" against the launch of the New Coke Formula. An entrant firm would therefore face extremely high advertising and promotion costs in the attempt to challenge those brands. A representative example of a failed entry into the