Introduction
The video provides an overview of the Cola Wars between two giants concentrated soda producers, such as Coca Cola and Pepsi. The key parties involve in the soft drink business include concentrated producers, bottlers, retailers, and suppliers. Coca Cola and Pepsi held about 75% market share and focus on the advertising, product portfolios and operational efforts to compete with each other. Both companies pursued effective strategic management strategies for business, corporate and global level. For example, both companies focused on the differentiation and cost leadership at a business level by adding new products to portfolios like Mountain Dew by Pepsi and Minute Maid by Coca Cola. In addition, to maintain cost leadership, both companies pursued different strategies at global level. For example, Coca Cola focused on the franchising to improve its bottling operations and enhance margins. On the other hand, Pepsi acquired seven bottling companies to improve operations to provide low cost products to customers (refers to case).
The objectives of the portfolio are to evaluate strategies adopted by two rivals i.e. Coca Cola and Pepsi and their competitive advantages in relation to sustainability, inevitability and brand management. Moreover, the objectives include industry analysis and recommendations for the companies.
Both Coca Cola and Pepsi have competitive advantages that enable them to maintain the high market share. One of the competitive advantages is linked to sustainability as sustainability positively affects the business strategy of the company (Hubbard, Rice and Galvin, 2014). Coca Cola focuses on the well-being that can be understood by the fact that all markets offer front-of-pack information with respect to global policy on nutrition labelling. In addition, it works for the women economic empowerment, human & workplace rights, and sustainable communities. Other initiatives include water stewardship, sustainable packaging, climate protection and sustainable agriculture (Coca Cola, 2014) (refers to Appendix A). On the other hand, Pepsi focuses on the human, environmental and talent. For instance, it refines its food and beverage choices to meet continuously changing needs of consumers by decreasing sodium, and sugars and saturated fats (PepsiCo, 2014) (refers to Appendix B). In relation to resource-based view (RBV) of strategic management, inevitability refers to the extent to which other companies cannot easily acquire the resource. For instance, patents lead to barriers that in turn make a resource inimitable (Moran, 2015). Coca Cola and Pepsi developed a unique taste of soft drink due to which both brands are inimitable. Moreover, with respect to brand management Pepsi (a challenger)’s brand image as well as market grip are lower. Hence, it challenges Coca Cola on price, products and image as it keeps its prices lower than Coke. It challenges Coke by working on palatability and taste and innovates by necessity. In turn, made line extensions like Diet Pepsi earlier than Coke. Its brand image is based on the soft drink for younger taste and experiences (Kapferer, 2008). On the other side, Coca Cola has built an image of cool drink by sponsoring music events, fashion and sports events and festivals according to the culture of different countries (Dvorak, 2013).
The industry analysis of the Cola industry through Porter’s Five Forces Model that shape competition in the industry (Hill, Jones and Schilling, 2014) identified that competitive rivalry in cola industry is high. It is due to the fact that both Coca Cola and Pepsi try to stay ahead from each other by implementing diversified strategies and known as equal competitor (Ireland, Hoskisson and Hitt, 2010). The bargaining power of suppliers in the Cola industry is also low and the main reason is the high switching cost and strong supplier relationships. It can be understood by the fact that Coca Cola developed exclusive franchise agreements with the suppliers. No other bottlers can offer the material to other companies. In addition, Pepsi developed relationships with the bottling companies through merger and acquisitions. Hence, the loyalty leads to low bargaining power of suppliers (McGuigan, Moyer and Harris, 2013). The bargaining power of buyers is moderate as the switching cost is low. The customers can move to other choices like Pepsi’s consumers to Coke and Coke’s consumers to Pepsi and other brands. Besides low switching cost, loyalty is the factor that enables the consumers to stick with their brands like Coca Cola and Pepsi. In turn, the bargaining power of the buyers is more moderate than suppliers.
Threat of substitute is highest in the Cola industry as there are various juices, tea, coffee and other drinks that can be substituted for Coca Cola or Pepsi. Refers to the case study, in the blind taste test people were not able to identify the difference between Coke and Pepsi. On the other side, the threat of new entrants is low in the Cola industry. It is due to the fact that high level investment is needed by the companies to establish the position in a market like Coca Cola and Pepsi. It is difficult to sustain the position in the market, where players like Coca Cola and Pepsi have strong brand images, product portfolios, and supplier relationships.
On the basis of the analysis, it is recommended to the companies (Coca Cola and Pepsi) that they should use a mix of strategies in business, corporate and global level. Sustainability or green initiative is the key factor of success in today’s business environment. According to Stead and Stead (2013), suitability factors like reduction in Co2 provide competitive advantage and improve performance. Moreover, they should move to diversify by focusing on new technologies and market growth to cope with the changing business environment. Furthermore, at global level culture should be kept into consideration as it affects the strategic planning (Katsioloudes, 2009). Brand promotions should be based on the culture of the countries along with mergers and acquisitions with technological and other companies like restaurants and packaging companies, etc.
Conclusion
It can be concluded from the above discussion that Coca Cola and Pepsi are two major players of soft drinks in the Cola industry. They are equal competitors and develop strategies to sustain their positions in market on a continuous basis. Coca Cola’s key strength is the brand management and promotional tools it uses to communicate with the customers with supplier relationships. On the other hand, Pepsi also challenges Coke through low prices and different products. No other player has been succeeded to sustain its position in the Cola industry due to strong brand images and positions of Coca Cola and Pepsi. However, the business environment is continuously changing and therefore to maintain the positions the companies should focus on sustainability, diversification and merger and acquisitions with key companies related to their operations in the market. They can acquire the packaging companies and low market share but competitive juices, coffee and other companies to increase market share.
References
Coca Cola. (2014) Sustainability Report. [Online] Available at: http://assets.coca-colacompany.com/29/0b/1c0121a84941aa46b9c9f6201ac9/2014-2015-sustainability-report.15_080415.pdf [Accessed May 30, 2016]
Dvorak, D. (2013) Build Your Own Brand. 1st edition. USA: Pelican Publishing.
Hill, C., Jones, G. and Schilling, M. (2014) Strategic management: theory: an integrated approach. 9th edition. Cengage Learning.
Hubbard, G., Rice, J. and Galvin, P. (2014) Strategic management. 1st edition. Australia: Pearson Australia.
Ireland, R.D., Hoskisson, R.E. and Hitt, M.A. (2010) Strategic Management: Concepts: Competitiveness and Globalization.12th edition. Cengage Learning.
Kapferer, J.N. (2008) The New Strategic Brand Management: Creating and Sustaining Brand Equity. 4th edition. UK: Kogan.
Katsioloudes, M. (2009) Strategic management. 1st edition. USA: Routledge.
McGuigan, J., Moyer, R.C. and Harris, F. (2013) Managerial economics: applications, strategies and tactics. 13th edition. USA: Nelson Education.
Moran, A. (2015) Managing Agile: Strategy, Implementation, Organisation and People. 1st edition. USA: Springer.
PepsiCo. (2014) Sustainability Report. [Online] Available at: http://www.pepsico.com/docs/album/sustainability-reporting/pep_csr14_sus_overview.pdf [Accessed May 30, 2016]
Stead, J.G. and Stead, W.E. (2013) Sustainable strategic management. 2nd edition. USA: ME Sharpe.
Appendices
Appendix A
Source: Coca Cola (2014)
Appendix B
Source: PepsiCo (2014)
