Case 1 (1)

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Arizona State University, Tempe *

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480

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Marketing

Date

Apr 3, 2024

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pdf

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4

Uploaded by CorporalValor815

For over a century Coca Cola and Pepsi have been the leading companies in the soda drink industry. They have gone head to head in this industry as the most successful companies for over a century. Both of these companies have not only expanded from just making soda products but making all sorts of drinks, as well as individually owning over hundreds of other drink/bottling companies. When looking at the external environment of Coke and Pepsi in economy using Porter's 5 forces model for analysis there are significant factors observed. The first aspect out of Porter's 5 forces analyzed was the threat of new entrants in the industry. The soft drink enterprises have
long imposed major restrictions on new competitors. Coke and Pepsi have created strong brand identities, distribution networks, and economies of scale, making it difficult for new competitors to enter. Furthermore, significant financial needs, access to distribution channels, and the necessity for large advertising budgets all serve as deterrents. The "Cola Wars Continue" case (Yoffie, 2011, p.7) demonstrates the significant investment and market expertise necessary to succeed in this business. Another aspect analyzed using Porter’s 5 forces was buyer power. While consumers have a wide range of options, their negotiating power is often limited. The competition between Coke and Pepsi provides customers choices, but brand loyalty, promotion, and product difference limit bargaining power. Both corporations use pricing methods, such as advertising initiatives and loyalty programs, to influence consumer decisions (Yoffie, 2011, p.8). With Coke and Pepsi being big names in this industry and major competitors, this in turn drives the consumer to play into the competition by choosing a side. Correspondingly the next force analyzed in Porter's model was supplier power. Suppliers of basic commodities used in the drinks, such as sugar and packaging materials, usually have little bargaining leverage. Coke and Pepsi have long-standing connections with their suppliers, and their size enables them to negotiate cost saving rates. However, any disruptions in the supply chain may affect output and distribution. This refers back to the new entrants force discussed earlier, as it is very hard to become a big name in this industry with Coke and Pepsi dominating, if a company did succeed this Coke and Pepsi would suffer with supplier power. Coke and Pepsi are able to have this negotiating power with suppliers because they make up a major of the consumer base for the supplier industry.
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