Cola War between Coca-Cola and PepsiCo
When a new business starts, there are always hundreds of competitors fighting for the cake division. While only minority of them can stay up to be the leaders of the whole industry after intense competition and restructuring. Especially during the process of industry globalization, there would appear huge industry giant companies. Coca-Cola and PepsiCo in beverage industry are examples for birth of giants in their industries. They have competed for the worldwide beverage market “throat share” since the past more than 100 years.
During the “carefully waged struggle” period (1975-1995), both of them kept a growth rate at average around 10% for the consistent increase in the US and world Carbonated Soft Drinks (CSD) consumption. However, their comfy situation has not last a long time since worldwide consumption for Coca-Cola and PepsiCo both slowed down in the late 1990s. Therefore, they began to take corresponding “bottling, pricing and brand strategies” (Yoffie, 2002, p1).
With the continuing intense competition, the cola giants are facing new challenges; this essay aims at giving possible strategies that can be applied for their further development based on detail analysis on their competitive position in this industry. Case Background As it is stated by Chorafas (2006), The Coca-Cola
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According to Angelkov, et al (2003, p8), “to be a large conglomerate, PepsiCo is with great interest in the manufacture, marketing and sale of beverages and its products varieties in beverages, salty, sweet and grain based snacks as well as other foods. ” December 2005 is a big day for PepsiCo for it surpassed Coca-Cola for the first time in market value in the past 112 years. As it is introduced, since both The Coca-Cola Company and PepsiCo are the largest players in CSD industry, this essay will limit the comparative scale of the two companies into the CSD industry.
The difference of the two companies’ mission and vision lie in one major aspect is that Coca-Cola limits its market into beverage product brands while PepsiCo focuses on both beverages and convenient foods. Since they are in the same industry, the two companies are rather similar in scope. Competitive Environment Analysis As Grimm, et al (2005) state “within a market, the competitive environment and the competitive position of a particular company will determine its ability to grow by increasing market share”.
There are numbers of factors determining a company’s competitive position and the evaluation of it is the premise for strategy formulation. The external environment of The Coca-Cola and PepsiCo will be analysed by using PEST model from the aspect of “societal environment” (Wheelen & Hunger, 2006) as well as focusing on CSD industry through applying Porter’s Five Forces Model. Both Coke and Pepsi face difficulties concerning anti-trust legislation for combing market share. Caffeine and sugar are major issues in the CSD industry and this industry has been exposed to unstable politics in many parts of the world.
Moreover, all sorts of economic measurements can bring negative influence to the CSD industry business. Both Coke and Pepsi are closely identified with the American ideology, however, in nowadays political situation it might not turn into a business advantage. “Economic forces” The force from the CSD market makes the two companies have to search for new attractive markets. Fluctuations in current exchange and the globalization trend make them hard to continual operate in the industry. “Social forces”
There is a trend that consumers begin to uphold a much healthier and more social responsible lifestyle which would improve their needs in low calorie and environmental friendly packaging. Furthermore, population aging trend appears in western countries and these two reasons will bring decrease to the consuming number. However, an obvious growth shows in the Asian population provides opportunities for Coca-Cola and PepsiCo to increase their market share. “Technological forces” Computerised technology would bring improvement to the efficiency of the bottling process and IT makes the industry easier to operate globally.