Coca-Cola Wars

     PepsiCo. Incorporated and The Coca-Cola Company are the two largest and oldest archrivals in the carbonated soft drink (CSD) industry. Coca-Cola was invented and first marketed in 1886, followed by Pepsi Cola in 1898. Coca-Cola was named after the coca leaves and kola nuts John Pemberton used to make it, and Pepsi Cola after the beneficial effects its creator, Caleb Bradham, claimed it had on dyspepsia. The rivalry between the soda giants, also known as the "Cola Wars", began in the 1960’s when Coca-Cola's dominance was being increasingly challenged by Pepsi Cola. The competitive environment between the rivals was intense and well-publicized, forcing both companies to continuously establish and

The existing concentrate business is largely controlled by Coca-Cola Company (Coca-Cola) and PepsiCo (Pepsi), together claiming a combined 72% of the U.S. carbonated soft drink (CSD) market sales volume in 2009. Refer to Exhibit 1 for an illustration of the CSD industry value chain. For more than a century, Coca-Cola and Pepsi have maintained growth and large market shares through mastering five competitive forces, shown in Exhibit 2, that drive profitability and shape the industry structure.

Porter's Five Forces is a simple but powerful tool that consist of 5 different forces to understand the competitiveness of your business environment, and for identifying your strategy's potential profitability. The five forces are degree of rivalry, threat of entry, threat of substitutions, buyer power, and supplier power. Each force is helpful in their own way to get to know your rivals a lot better and get to know what can happen in your market.

The five forces examines the dynamics within an industry. Understanding the competitive forces, and their underlying causes, reveals the roots of an industry’s current profitability while providing a framework for anticipating and influencing competition and profitability over time. Understanding the structure of its industry is also essential to effective strategic positioning.

As we all go about our day, we rush to place to place. Around us there are things for sale, people everywhere trying to make money. As we are rushing around, we all tend to get thirsty as we have a thousand things going on. In America we have dozens of choices when it comes to soft drinks, although the two most widely known are Coca-Cola and Pepsi. Many are often stuck between choosing Coke or Pepsi; even though they are slightly different in appearance, taste, and price it makes a world of difference to the customer.

In an industry dominated by two heavyweight contenders, Coke and Pepsi, in fact, between 1996 and 2004 per capita consumption of carbonated soft drinks (CSD) remained between 52 to 54 gallons per year. Consumption grew by an average of 3% per year over the next three decades. Fueling this growth were the increasing availability of CSD, the introduction of diet and flavored varieties, and brand extensions. There is couple of reasons why the industry is so profitable such as market share, availability and diversity and brand name and world class marketing.

Porter 's five forces framework assesses the competitive pressures a company faces within the industry. The five forces of competitive pressure include: competition from rival sellers, competition from potential new entrants to the industry, competition from producers of substitute products, supplier bargaining power and customer bargaining power. The model helps us determine the strength of competitive pressures and profitability of an industry. [3]

The case explains the economics of the soft drink industry. There activities that add value to consumer at nearly every stage of the value chain of the soft drink industry. The war is primarily fought between Coca-Cola and PepsiCo as market leaders in this industry; who combined have roughly a ninety percent market share in their industry. The impact of globalization on competition has allowed both of these major players to find new markets to tap which has allowed each continued growth potential.

Porter 's Five Forces model (PFF) is a powerful instrument that can be utilized by companies to investigate its situation and identify its industry 's competitors. Analyzing industry will help any business in determining the competitive strength and weaknesses. By using PFF model, investors can gain valuable information regarding what the actual factors that affect the organization 's profitability (Evans & Neu 2008). This paper will analyze the Cola Wars case study based on the PFF model, and the primary components of soft drink industry. At the end of this paper, some recommendations will be given to Coca-Cola company to enhance its position in the market.

Porter’s five forces are used to determine the competitive intensity and attractiveness of a market. These are close forces that affect a company’s ability to make a profit and serve customers. If any of these forces change, a company must reassess its marketplace. The five forces include: the threat of substitute products, the threat of the entry of new competitors, the intensity of competitive rivalry, the bargaining power of customers and the bargaining power of suppliers.

The change in the consumers' taste is another key trend in the industry. Many substitutes to carbonated soft drinks gained more popularity among consumers. Exhibit 5 shows an increase in the consumption of bottled water from 11.8 in 1998 to 13.2 gallons/capita in 2000, and that of juices from 10 to 10.4 gallons/capita at the expense of

The last two topics within Porter’s Five Force Analysis are the threats of substitutes and new entries. The threat of substitutes for PepsiCo and Pepsi products could be considered quite high. In recent years, Americans have been cutting back soda consumption, approximately 1.2% in 2015, and 0.9% in 2014 (Taylor, 2016). Customers have been replacing soft drinks, in particular, with water, coffees, and all natural juices. This also leads the way for the threat of new entries. As people are tending to lean away from traditional soft drinks, the threat of new entrants could be considered moderate. This is because the cost of entry is relatively low as it is not a technology driven industry. Most of the cost of entry would be related to branding and marketing of the new product (Thompson, 1996). In recent years many competitors have entered the market with desirable ingredients and non-soft-drink beverages.

The 5 forces are the environmental forces that impact on the companies ability to compete in the given market. The purpose of 5 forces analysis is to diagnose the principal competitive pressures in a market and assess how strong and important each one is.

Rivalry is intense among the competition in the cosmetic and skin care industry. There are numerous existing cosmetic companies competing in the market. The giant corporations acquire numerous brand name products and compete for the same number of customers. The competition consists of companies such as, Procter & Gamble, L’Oreal, Unilever, Avon Products, Inc., Estee Lauder, in addition to competing with large retailers, who order mass

Porter’s 5 Forces analysis is a commonly used business theory that identifies the 5 competitive forces of an industry. By identifying and analysing these forces you can determine an industries weaknesses and strengths. Porter recognised the 5 forces in most business markets to be internal rivalry, entry, substitutes and compliments, supplier power and buyer power.