Coke and Pepsi

Coke and Pepsi in the Twenty-First Century Threat of gatewaylow 1. Economies of scale High harvest-timeion vividness still virtuousness not clear (1st split up on page 2) 2. Product distinction Brand identification ( amply advertising expense, Exhibit 2) 3. Capital requirements bike small-scale capital investment (1st paragraph on page 2) Bottlers capital intense (2nd paragraph on page 3) 4. Cost disadvantages independent of size No 5. Access to distribution channels Food stores (35%) intense shelf berth pressure (2nd paragraph on page 4) Fountain (23%) CPs predominate first food chain (1st paragraph on page 5) 6.Government indemnity (N/A) Threat to entry is low because coca- green goddess Company, PepsiCo, and Cadbury Schweppes control 90. 1% of the mart deal 44. 1%, 31. 4%, and 14. 7% respectively. Although the growth rate of CSD consumptions fool been becalm at 3% a social class, the capital requirement to enter the food product store is too great of an obstacle. In order to service the entire US, a firm would need $25-50 million to build a plant for melt lavcelled producers, $6 billion ($75 million * 80 plants) to establish bottlers, verges associated to admit and maintain incentives to retailers, and the greatest cost to advertisings.Therefore, firms are deterred from entrance the CSD foodstuffplace referable to economies of scale couple with daub image that the firm must(prenominal) face. In order provide product differentiation, the entering firm would deem to invest heavily to develop a brand image for CSD deviation from the three market drawing cards. Access to distribution channels is intense in CSD industry as bottlers are fighting for shelf spaces in securities industry stores. In addition, PepsiCo is in the restaurant line of reasoning of owning Taco Bell, Kentucky Fried Chicken, pizza pie Hut by shutting down any opportunities for other CSD firms to cheat leak drinks in those restaurants.Other CSD f irms like coca-Cola has develop a relationship with stay market leaders of restaurant for their fountain distribution (i. e. , McDonalds and Burger King). In addition, semi kookie Drink Interbrand Competition Act in 1980 preserves the rights of Concentrate Producers to tolerate exclusive territories. Therefore, it would be safe to assume that there are not many challengers in the market vying for a new territory since the vivacious Concentrate Producers would hurt driven off competition push through of business through their rights of exclusive territories.Cost disadvantages independent of size is high as education brand image provide require high investments in advertisement and to develop a new differentiating acquired taste for CSD consumers. Substituteslow (Non-cola beverage? ) Substitutes of CSDs include water, juice, milk, and different types of alcohol. However, stellar(a) CSDs occupy branch out their products to water and juice to capture the market shares of CSDs substitutes. Other leaders substitutes to CSDs are milk, coffee, and alcohol beverages. These substitutes are generally different co-occurrence beverages than the CSDs.Coffee and alcohol beverages are geared towards adults only(prenominal) and milk is gear towards breakfast meal consumptions with cereal. Complements Complements to CSDs are food. CSD firms have make 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 every nonpareil consumes several(prenominal) times a day, CSD companies have a great opportunity to increase their presence in different distribution methods. Buyerslow 1. large volume?Some buyers might buy in large volume but not found in the case 2. standard or dedifferentiated? No 3. NA for this case 4. low profits? Food stores No, bonnie (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 powerful against CPs and bottlers. Therefore, there is no significant negotiate 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 adjustment 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 stipendiary 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 delin eate 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 retention price because bottlers can directly control. It also works in the expanse 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 private label CSD but they can not take the go into of Coke and Pepsi.Internal Rivalry high 1. numerous? roughly equal? numerous No, oligopoly roughly equal Yes price increase, oligopoly (4th paragraph on page 11) 2. fabrication growth p latelyau (Exhibit 3) 3. lacks differentiation? try to differentiate by merchandise (5th paragraph on page11) 4. High fixed costs? 5. contentedness augments? Capacity itself not clearly mentioned in the case but early mid-nineties Yes? incurred excess supply? (1st paragraph on page 11, Exhibit 1) late 1990s 6. High exit barrier? Yes? capital intensive? 7. rivals divers(prenominal) in strategies? No?Coca-Cola and Pepsis history of intense rivalry has resulted 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 past strategies, increase profitability heavily relies on their ability to cut costs, gain fountain contracts, globally expand product mix, and vertically shuffle bottler distribution channels. traditional strategic initiatives such as new product development, advertising, price reduction, and product differentiation will produce minimal results considering Coca-cola and Pepsi are uniform 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 stoloned. While it is important to continually maintain brand sentience and p ursue various market trends, large gains in profitability will ensue from strategies that create a sustainable competitive advantage. It is more beneficial 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, key 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 community can redefine their brand name as more then a cola. palmy 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 defend? (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 get by IN INDIABrief OverviewThe cas e 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 intrinsic for all marketers to take into considerationPepsi entered into the Indian beverage market in July 1986 as a joint venture with two topical anesthetic anesthetic partners, Voltas and Punjab Agro, forming Pepsi Foods Ltd. While Coca-Cola companioned become in 1990 with a joint venture with Britannia Industries India before creating a degree centigrade% owned club in 1993 and then ultimately aligning with Parle, the leader in the beverage industry.As both companies would soon 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, discuss their strategies to cope with the issue, and ultimately propose my own suggestions to improvement.Q uestion 1 The political environment in India has proven to be critical to company performance for both PepsiCo and Coca-Cola India.What detail aspects of the political environment have played key roles? Could these cases have been anticipated prior to market entry? If not, could developments in the political bailiwick 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 goods sectors. The regulation 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 move to enter into Indian market by joining with Parle and became Coca-Col a 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 agree to start new bottling plants instead of buying out Parle, and thus 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 precedent or later market entry?PepsiCoPros (1) entered the market before Coca-Cola and acquire an early entry was able to help Pepsi go so out-of-the-way(prenominal) 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 military unit at the time prohibited the use of foreign brand name calling on products intended 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 E merging Markets?PepsiCoBeneficial to defy 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