Cola Wars Continue: Coke And Pepsi In 2010 Case Study
This assignment requires applying one of the most incredible tools of the strategic management “Porter’s Five Forces Analysis” related to the Beverage Industry known as Cola Wars. Porter’s Five Forces is a tool that usually works through five different angles which are as follows
Rivalry among the Competitors (High)
Beverage Industry is one of the matured and most lucrative industries of the United States (Barton, p.34). The market size of the Carbonated Soft Drink Industry of the United States (U.S.) is US$ 74 billion (Yoffie, p.2). Carbonated Soft Drink usually referred as Colas, and the wars among the companies which are trying to jumbling up with each other to have the highest market share is known as Cola War. Apparently, there are two companies which are Pepsi Co. and Coca Cola Co. and both of these companies have a significant market share in this particular industry with lots of potential. There are other companies found in this particular industry as well, but it is n next to impossible to compete with these giants.
Bargaining Power of Consumers (Medium)
As per estimation, Americans consumed 23 gallons of CSD in the year 1970 which grew by an average of 3% annually (Yoffie, p.2). There are numerous options are available for the consumers to have the product from different places, however they don’t have much options to deal with. The taste that developed by Pepsi Co and Coca Cola for the people are amazing and no one want to switch from the products of either of these companies. Therefore, consumers in the United States (US), as well as other markets of the world are now confused that for which product they should go. Pepsi Co. and Coca Cola Co. know that they are the market leaders in the beverage industry and they are not in the mood to decrease their prices in future. Therefore, the power of bargain among the consumers is on a medium term.
Bargaining Power of Suppliers (Low)
After the phenomenal growth of beverage products in different markets of the world, the demand for Black Syrup increased consequently (Yoffie, p.6). This particular escalated demand increased the values of the suppliers to supply relevant products to the companies who are in the manufacturing stance like Coca Cola Co. and Pepsi Co. to continue their Cola Wars. With having lots of existing and new suppliers, the bargaining power of the suppliers in this Beverage Industry is Low.
Threats of New Entrants (Low)
Pepsi Co. and Coca Cola Co. have now captured almost all the market share in the Cola Industry, and made it very difficult for a new company to enter and flourish their market, hence the threats of new entrants is very low in this industry.
Threats of Substitute Products (Medium)
People are becoming more and more aware with the Health Issues and consciousness, and concentrated syrups and beverages are always harmful for their health. This particular trend may paddle up the propensity of consumption to some other products in the future that may bring a new turn in the Cola wars. Currently, this threat is on a Medium Scale.
The strength of this industry forces is its high profitability, and both of the companies which are already doing an exceptional job to retain their position are trying to mobilize them accordingly. Any competitor who becomes able to compete effectively on the other has the chance to get the maximum share of profit in the industry. Currently, Coca Cola Co. is having a definite edge over Pepsi Co. as far as Cola war is concerned, because they are more towards customer centric than Pepsi Co.
Threats of Substitute Products are the force which is changing dramatically in the current scenario. According to the case, the people are diverting their intentions towards healthy products like Milk and Juices and changing their attitudes from Carbonated Soft Drinks and Beers. Currently, the force is on a Medium Scale; however it will increase in the near future. The consumption of Carbonated Soft Drink in the year 2009 actually decreased to a level of 46% from 47.4% as evident by the case study, while the consumption of Milk and juices increased by 0.1% and 0.5% respectively as compared to 2008 (Yoffie, p.13).
Barton, Dennis J. Cola Wars. Lincoln, Nebr.: iUniverse, 2002. Print.
Yoffie, David. 'Cola Wars Continue: Coke And Pepsi In 2010'. Harvard Business School 1.9-711 (2011): 1-20. Print.