Coke and Pepsi

Coke and Pepsi in the Twenty-First Century Threat of Entrylow 1. Economies of scale risque production volume but merit not clear (1st divide on page 2) 2. Product differentiation Brand identification (high advertising expense, Exhibit 2) 3. Capital requirements CPs little capital enthronisation (1st paragraph on page 2) Bottlers capital intensive (2nd paragraph on page 3) 4. Cost disadvantages independent of coat No 5. Access to distribution convey viands interjects (35%) wicked shelf space pressure (2nd paragraph on page 4) Fountain (23%) CPs dominated first viands chain (1st paragraph on page 5) 6.Government policy (N/A) Threat to entry is low because Coca-Cola Company, PepsiCo, and Cadbury Schweppes control 90. 1% of the trade sh atomic number 18 44. 1%, 31. 4%, and 14. 7% respectively. Although the growth come start of CSD consumptions have been steady at 3% a family, the capital requirement to enter the foodstuff is too great of an obstacle. In order to serv ice the replete(p) US, a firm would need $25-50 million to build a plant for concentrate producers, $6 billion ($75 million * 80 plants) to establish bottlers, footing associated to provide and maintain incentives to retailers, and the greatest cost to advertisements.Therefore, firms argon deterred from entering the CSD market due to economies of scale couple with brand image that the firm must face. In order provide product differentiation, the entering firm would have to invest heavily to fuck off a brand image for CSD aside from the three market leaders. Access to distribution channels is intense in CSD industry as bottlers argon ironing for shelf spaces in grocery stores. In addition, PepsiCo is in the eatery business of owning Taco Bell, Kentucky Fried Chicken, Pizza Hut by shutting down any opportunities for other CSD firms to sell fountain drinks in those restaurants.Other CSD firms like Coca-Cola has develop a relationship with remaining market leaders of restaurant for their fountain distribution (i. e. , McDonalds and Burger King). In addition, Soft Drink Interbrand Competition Act in 1980 uphold the rights of Concentrate Producers to grant exclusive territories. Therefore, it would be safe to assume that there are not many competitors in the market vying for a new ground since the existing Concentrate Producers would have driven off competition out of business through their rights of exclusive territories.Cost disadvantages independent of size is high as ontogeny brand image will require high investments in advertisement and to develop a new differentiating acquired taste for CSD consumers. Substituteslow (Non- locoweed beverage? ) Substitutes of CSDs admit water, juice, milk, and different types of alcohol. However, leading CSDs have branch out their products to water and juice to capture the market shares of CSDs substitutes. Other leading substitutes to CSDs are milk, coffee, and alcohol beverages. These substitutes are generally differe nt complement beverages than the CSDs.Coffee and alcohol beverages are geared towards adults only and milk is gear towards breakfast meal consumptions with cereal. Complements Complements to CSDs are food. CSD firms have made relationships with retailers of food (i. e. , grocery stores, gas stations). In addition, firms have made relationships with restaurants to complement their products with food. Since food is something that e genuinelyone consumes several times a day, CSD companies have a great opportunity to maximize their presence in different distribution methods. Buyerslow 1. magnanimous volume?Some buyers might buy in large volume but not found in the case 2. standard or undifferentiated? No 3. NA for this case 4. low profits? Food stores No, average (5th paragraph on page 4) Fountains extremely profitable, 80 cents out of one dollar (1st paragraph on page 5) 5. unimportant? No 6. does not save buyers money? (N/A) 7. credible threat? No Buyer groups are not strengthful against CPs and bottlers. Therefore, there is no significant bargaining power from buyer side in CSD industry. This situation contributes to maintain high profit of CPs and bottlers. (Reasons) 1.Because there are various retail channels, CPs and bottlers do not face the single retailer with power which purchases in large volume. 2. In general, selling CSDs yields high profit for retailers. (15-20% gross margin for food store, 80 cents out of one dollar for fountain. ) That fact prevents buyers to be price sensitive. 3. In fountain business, CPs and bottlers kept fountain sales profitable and succeeded to avoid cutting price pressure from retailers by paying rebate and investing restaurant retailers. 4. In food store, CSD represented a large percentage of its business (accounting for 3%-4% of food store business).To draw customers to store, it should be necessary for food store to carry the most selling brand in CSD, Coke and Pepsi. This structure weakens food stores bargaining power . 5. Vending machine is efficient retail channel for keeping price because bottlers can directly control. It also works in the dry land where Coke and Pepsi do not have distribution channel(ex. Japan). 6. Coke and Pepsi have already established strong brand identification. Some discount retailers have confidential label CSD but they can not scud the place of Coke and Pepsi.Internal Rivalry high 1. numerous? roughly reach? numerous No, oligopoly roughly equal Yes price increase, oligopoly (4th paragraph on page 11) 2. Industry growth plateau (Exhibit 3) 3. lacks differentiation? try to differentiate by marketing (5th paragraph on page11) 4. High fixed costs? 5. Capacity augments? Capacity itself not clearly mentioned in the case but early 1990s Yes? incurred excess supply? (1st paragraph on page 11, Exhibit 1) late 1990s 6. High exit barrier? Yes? capital intensive? 7. rivals diverse in strategies? No?Coca-Cola and Pepsis history of intense rivalry has emergenceed in the execution of a large number of strategies designed to gain market share and brand recognition. As the industry matures and Coca-Cola and Pepsi learn from old strategies, increased profitability heavily relies on their ability to cut costs, gain fountain contracts, globally expand product mix, and vertically integrate bottler distribution channels. handed-down strategic initiatives such as new product development, advertising, price reduction, and product differentiation will produce minimal results considering Coca-cola and Pepsi are similar in size and power.Coca Cola and Pepsis ability to quickly respond to competitor strategies generally lead to industry wars where neither firm is better off then when they started. musical composition it is important to continually maintain brand awareness and pursue various market trends, large gains in profitability will ensue from strategies that create a sustainable competitive advantage. It is more advantageous for Coca-Cola and Pepsi to invest in strategies that increase the industry demand versus short term profit. Such strategies include but are not limited to, entering developing countries, signalise acquisitions of growing businesses (i. Yahoo, Diageo, Arista Records, or Starbucks), and increased efforts to vertically integrate bottler distribution channels. Key acquisitions are important in that they can provide the means in which each company can redefine their brand name as more then a cola. Successful examples are Sony, Disney, and GE. Supplierslow 1. dominated? Metal cans excess supply (1st paragraph on page 6) 2. unique? not unique 3. obliged to press? (N/A) 4. credible threats? No 5. important customer? Metal can largest customer (1st paragraph on page 6)Coke and PepsiCOKE AND PEPSI LEARN TO COMPETE IN INDIABrief OverviewThe case of Coke and Pepsi in India is a lesson that all marketers can observe, analyze and learn from, since it involves so many marketing aspects that are essential for all marketers to take into considerationPepsi entered into the Indian beverage market in July 1986 as a give voice venture with two local partners, Voltas and Punjab Agro, forming Pepsi Foods Ltd. While Coca-Cola hold fasted suit in 1990 with a joint venture with Britannia Industries India before creating a 100% owned company in 1993 and then ultimately aligning with Parle, the leader in the beverage industry.As some(prenominal) companies would curtly discover, competing in India requires special knowledge, skills, and local expertise what works here does not always work there. (Cateora & Graham, 2008, p. 604). In this article, analyze the primary obstacle to Pepsi and Coca-Colas success, cover their strategies to cope with the issue, and ultimately propose my own suggestions to improvement.Question 1 The political environment in India has proven to be critical to company performance for both PepsiCo and Coca-Cola India.What specific aspects of the political environment have played key r oles? Could these effects have been anticipated prior to market entry? If not, could developments in the political reach have been handle better by each company?Indian government viewed as unfriendly to foreign investors. Outside investment had been allowed only in high-tech sectors and was almost entirely prohibited in consumer corrects sectors. The Principle of indigenous available If an item could be obtained anywhere else within the country, imports of similar items were forbidden.This made Indian consumers had a little choice of products or brands and no guarantees of quality or reliability.Indian Laws, the government mandated that Pepsis products be promoted under the Lehar Pepsi name. For Coca-Cola, they attempted to enter into Indian market by joining with Parle and became Coca-Cola IndiaYes, it could anticipate the effect prior to market by using information from own company research, the business partner in that country, the expertise service, and own experience in near area. They could developments in political arena Coke could agreed to start new bottling plants instead of buying out Parle, and and so wouldnt agreed to sell 40% of their equityQuestion 2 Timing of entry into the Indian market brought different results for PepsiCo and Coca-Cola India. What benefits or disadvantages accrued as a result of earlier or later market entry?PepsiCoPros (1) entered the market before Coca-Cola and getting an early entry was able to help Pepsi go so far-off with Indian market while it was still developing (2) the fact that company gained 26%market share by 1993Cons (1) The government mandated that Pepsis product be promoted under the name Lehar Pepsi, because foreign collaboration rules in force at the time prohibited the use of foreign brand names on products intend for sale inside India (2) Indian Govt limited their soft drink sale no exceed 25% of total sales for the new entrant (3) Pepsi Foods struggled to fight off local competitions.Coca ColaPros (1 ) have ability to align themselves with the market leader.In fact, Parle offered to sell Coca Cola its bottling plants in four key cities, and (2) Parle also offered to sell its leading brands. (3) Finally, Coca Cola set up two new ventures with Frooti, Soda, and local product was called Britco FoodsCons (1) was denied entry until 1993 because Pepsi was already there (2) It was very difficult for Coca Cola take market share away from Pepsi and local firms, due to the beverage market was itself growing consistently form year to year (3) Coca Cola was not allowed to buy back 40% of equity when the company chose to leave Indian market in 1977Question 7 What lessons can each company draw from its Indian experience as it contemplates entry into other Big Emerging Markets?PepsiCoBeneficial to keep with local tasteSignificant to follow market trendsSponsors and Celebrity appeals make more exceptional advertisingIt pays to keep up with emerging trends in the marketCoca ColaPays specific attention to deals made with the governmentEstablish a good business relationship with the governmentInvestment in quality productsAdvertising is essentialBeneficial to follow market trends