Cola War between Coca-Cola and PepsiCo

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Business Studies 1

Cola War between Coca-Cola and PepsiCo

Meili Wang

Bing Xu

27th Nov. 2008

Introduction

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 Company is the world’s biggest beverage manufacturer, distributor and marketer in the beverage market. Its most famous product is the Coca-Cola, besides, the company provides with about 400 brands in over 200 countries. But the power of PepsiCo can not be neglected. 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.

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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.

  • PEST analysis on the “societal-environment”

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