The Coca-Cola Pricing Strategy

The pricing strategy that I chose is marketing objectives. Our company will deliver on this strategy to this stand by competing with our competitor’s stand. Our competitor, Jimmy, manages the Lemonade Stand “Liquid Yellow” charges $1.50 for one cup of lemonade. However, they use artificial ingredients, such as artificial flavoring and coloring, white sugar, etc. My company decided that we want to have a price that is higher than Jim’s price. We decided that we want to charge $2.00 for a cup of lemonade. We decided to charge this price because unlike Jim’s stand, we use all natural ingredients, which cost more than artificial ingredients and are healthier for you than artificial ingredients are. That is my company’s pricing strategy.

Since there are a wide range of products available, the pricing for both Coca Cola and Pepsi is done according to the Market demands and the geographic segment and thus both the products pricing are set around the same level. Neither of the brands can win if they enter into a price war, simply because the cost of manufacturing and transportation is huge. The advantage to either of the companies was if they enter into a brand war. Since, Coca Cola always had competitors constantly driving them to be smarter, better and faster and since they were successfully been existing for more than a century, they have had to remain consistent with their pricing strategy. Throughout the years, Coca Cola has made many pricing decisions, but eventually the ultimate goal is to maximize the shareholder value. Coca Cola uses lower price point to penetrate new markets to face competition and also to raise brand awareness. This strategy is strongly implemented till it repositions itself as the Premium beverage as compared to its competitors.

Such recognition is what informed its pursuit of the business and corporate-level strategy. One of the business-level strategies that PepsiCo has implemented is cost leadership (Ferguson, 2017). This firm usually prices its products at levels that are lower than the price buy competitors, such as Coca-Cola, because it can produce at the lower cost compared to most of its competitors. Furthermore, the company has the option of pricing the same level with competitors to generate higher profits. Through this strategy, PepsiCo has been able to enhance its financial performance. Moreover, thanks to the cost leadership strategy, PepsiCo has developed a competitive edge (Ferguson, 2017). The cost leadership strategy has allowed PepsiCo to penetrate new markets and outperform such rivals as

Third, the price must be high enough to cover costs and make a profit but low enough to attract customers. There are a number of possible pricing strategies. The most commonly used are:

Coca-Cola shows impressive performance in profitable growth. Coca-Cola’s current gross profit margin is very high, which is good because this indicates that the company has done an exceptional job in cutting costs. Coca-Cola is making considerable effort in making use of costs of goods sold. The management team at Coca-Cola is effectively using raw materials, labor, and manufacturing supplies. According to Muhtar Kent, it

The pricing of Pepsi is competitive as the soft drinks market is shared by Coca cola and Pepsi. Pepsi gives promotional discounts and also comes up with discounts on bulk orders.

The Coca-Cola is doing a great job in planning and control activities and they are the best soft drink providers in the whole world. The Coca-Cola is distributing their products all around the world and even small regions of countries. They are facing the market demand in a right manner of planning and controlling their operational objectives, product process, layouts and etc…

Therefore, the oligopolistic firm has little to gain from utilizing pricing strategies that results in rigid or inflexible prices. Oligopolistic firms rely on non-pricing strategies of competition such as advertising, product differentiation, and barriers to entry. The goal for oligopolies is to increase market share while keeping price constant. The Coca-Cola Company is the global leader for carbonated soft drinks (Carbonated Soft Drinks Industry Profile: United States, 2005). In 2004, Coca-Cola had a 44% volume of the U.S. market, PepsiCo, Inc. had a 31.1% share, Cadbury Schweppes p/c had 15.2% (Carbonated Soft Drinks Industry Profile: United States, 2005). The Coca-Cola Company, PepsiCo, Inc. and Cadbury Schweppes p/c hold 90.3% market share of carbonated soft drink (CSD) sales in the U.S. while private label brands have only 0.4% share of the market (Carbonated Soft Drinks Industry Profile: United States, 2005). The Coca-Cola Company, Inc. exhibits oligopolistic characteristics whereby it is the largest of three oligopolistic CSD companies in the U.S. market, offers differentiated carbonated soft drink products, controls price with mutual interdependence, limits barriers to entry by significant brand recognition and trademarks and has a high concentration ratio of 44%. Pricing strategies for Coca-Cola and the other CSD oligopoly firms, as stated above,

In terms of theory, pricing strategies can be defined as businesses choosing one method to appeal to customers to purchase goods and achieve marketing mix according to the assessment of consumer demand and cost analysis (BDS Forum, 2009). For a company, pricing strategies can be made difficultly. If prices of goods are too higher, they may lose market share. If the price is two lower, the company cannot get bigger profit (Bized, 2006). Therefore, before developing a pricing strategy, the company has to consider much more factors. Such as pricing objectives which rely on production cost, barriers to entry, rate of product diffusion and so on, pricing methods including cost-plus pricing, target return pricing, value-based pricing and psychological pricing as well as other factors to make the best price for the firm and the consumer (Net MBA, 2009). Three points of views of pricing strategies can be discussed in the following in this report. Firstly, pricing strategies should

Throughout the years Coca-Cola has made many pricing decisions but one might say that their ultimate goal has always been to maximize shareholder value. As Cola consumption has decreased in the US Colas have come to realize the untapped international market. In 2003 both Coke and Pepsi had a solid presence in India and had each introduced a 300mL bottle. In order to grab market share Pepsi began to drop prices (even with summer approaching, which was contrary to policy in America).

Coca Cola choose the Product Line Pricing, which sets the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors’ prices.

A pricing strategy takes into account segments, ability to pay, market conditions, competitor actions, trade margins and input costs, amongst others.

The pricing technique of Coca-Cola has supported the firm to compete and grow in the soft drink effectively. The volume discount and pricing penetration are the vital aspects to provide the firm generates its sales in the market. For instance, Coca-Cola partners with large supply chains such as Costco, Sam’s Club, and Walmart to provide great discount pricing in order to generate its sales substantially in the U.S and the global market. Equally, the firm also distributes its

Coke was a company ruling the markets before Pepsi entered. Earlier the price of coke was cost based i.e. it was decided on the cost which was spent on making the product plus the profit and other expenses. But after the emergence of other companies especially the likes of Pepsi, Coca-Cola started with pricing strategy based on the basis of competition. Nowadays more expenses are spent on advertising rather than on manufacturing.

The global beverages industry is currently a low-growth market, with an expected compound annual growth rate of 5.7% between 2017 and 2025 (Grand View Research 2017). Additionally, the industry is quite saturated with firms that offer increasingly differentiated products. However, due to this low growth rate, companies have been engaging in price competition to gain competitive advantage and increase their market share. Nevertheless, Coca Cola is a dominant force in this market, controlling 40% of the industry, and is therefore at a low risk of losing its position.