STRATEGIC PATH

COCA-COLA
Franchise bottling system , reaching 370
franchises by 1910
During 1920s and 30s, introduction of opentop
coolers to storekeepers, automatic
fountain dispensers, vending machines.
Introduced Fanta (1960), Sprite (1961), lowcalorie
Tab (1963).
Purchased Minute Maid (fruit juice),
Duncan Foods (coffee, tea, hot chocolate),
Belmont Springs Water.
Coke countered Pepsi Challenge with
rebates, price cuts and price discounts.
In 1978, hike in concentrate price after
securing bottler approval.
In 1980, switched from sugar to lowerpriced
high fructose corn soup.
Increased advertising expenditure.
Sold off most of non-CSD businesses
i.e. wine, coffee, tea etc.
Introduced Diet Coke in 1982 huge
success.
Change in formula in 1985 major
setback. Reintroduced original formula
in the name of Coca-Cola Classic after 3
months.
In 80s, introduced 11 new CSD brands.
In 1980, refranchised bottling
operations-helped in expansion.
Created independent bottling subsidiary,
Coca-Cola Enterprises (CCE) in 1986.
Employed low-price strategy.
Marketing agreements with celebs -
Harry Potter .
Introduced PowerAde, Nestea, Dasani
in 1998, 1999 in response to Pepsi.
Started acquiring international markets in
more structured way.
SWOT ANALYSIS OF COCA-COLA

STRENGTHS
First mover advantage.
More loyal customer base.
Large market share.
Economies of Scale.
International Brand recognition.
Huge distribution network.
Strategic move during world wars.
Success of diet coke.
Efficient global operations

WEAKNESS
Moving away from core competencies.
Brand Failures
Product Recalls

OPPORTUNITIES
Entry into new developing
international markets.
Introduction of newer brands.
Innovative advertising strategies

THREATS
Barriers of entry in international
markets.
New age beverages.
Fierce competitors in local markets;
Private labels at low prices.
STRATEGIC PATH

PEPSI-COLA

Franchise bottling system , reaching 270

franchises by 1910
In 1920s, lowered the price for its 12-
ounce bottle.
Introduced Teem (1960), Mountain Dew
(1964), Diet Pepsi (1964). Worked with
bottlers to modernize and improve
services.
In 1963, launched the Pepsi Generation
campaign targeting the youth, which helped
narrow cokes lead to 2-to-1 margin.
In 1974, introduced the Pepsi
Challenge.
In 1970s, sold concentrate to bottlers @
20% lower than coke.
Merged with Frito-lay in 1965.
In 1978, 15% increase in price of
concentrate.
Emulated the move of fructose corn soup
in 1983.
Increased advertising expenditure.
In 80s, introduced 13 new CSD
products.
In late 80s, acquired MEI bottling,
Grand Metropolitans bottling operations
and General Cinimas bottling operations.
In 1999, created Pepsi Bottling Group
(PBG).
Employed low-price strategy.
Marketing agreements with celebs
Britney Spears, Jackson.
By end of 90s, reintroduced Pepsi
Challenge.
Non-Cola Beverages introduced
Aquafina (1998), Tropicana (1998),
Gatorade and SoBe (2000).
Started acquiring international markets in
more structured way.
SWOT ANALYSIS OF PEPSI-COLA

STRENGTHS
Guerrilla Marketing strategies.
More focus on young generation.
Economies of Scale.
International Brand recognition.
Huge distribution network.
Innovative advertising strategies.
More flexible franchise network.

WEAKNESS
Smaller market than Coke.
Slower take off in international
markets.
Imitation of Coca-Cola.
Falling Behind in All-embracing
Markets, namely Russia, Venezuela, and
South America.

OPPORTUNITIES
Introduction of Pepsi Health Drink.
Image of Total Beverage Company
Entry new developing international
markets.
Introduction of newer brands.

THREATS
Fear of losing market share due to
rapid market fluctuations.
Barriers of entry in international
markets.
Decreasing brand loyalty among
consumers.
New age beverages.
Fierce competitors in local markets;
Private labels at low prices.
PORTERS FIVE FORCE ANALYSIS SOFT DRINK INDUSTRY

Industry Competitors
Coca-Cola, Pepsi-Cola, Cadbury Schweppes and others.

Threat of New Entrants

High entry costs
High risk for entrants due to diversified nature of Coke and Pepsi.
Government Policy regulations.
Existing Loyal customer base.
Acquisition of major bottling units by existing firms, increases
the entry barriers.

Threat of substitutes
Non-CSD drinks like milk, alcoholic beverages, juices, sports drinks, tea-based, dairybased
drinks
Threat of saturation of consumption in US market thereby leading to increase in the
consumption of on-Cola beverages.

Bargaining power of suppliers

Low switching costs.
Huge number of suppliers.
Maintaining the quality and flexibility of supply chain through backward integration i.e.
acquiring bottling plants.

Bargaining power of buyers.

Higher buying power large grocers, discount stores and restaurants buy large volumes
demanding a lower price.
Choice of customers is high due to competition and variety in the market.

ISSUES TO PONDER for Pepsi

Hard to differentiate products in terms of taste as product variety is very much limited
within cola beverages.
Coca-Cola has much stronger loyal customer base.
Consumer market moving from carbonated drinks
towards functional soft drinks.
In US, Cadbury Schweppes competing aggressively.

RECOMMENDATIONS

For Pepsi to grab the major pie,

It needs to follow the Cost Leadership and Product Differentiation Strategies.
i.e. it needs to create a unique customer perception and differentiate one product from
another.
Rather than being a price follower, it must face the market by a leading strategy of Price
Setter, which can be made possible by improving the production efficiencies and reducing
the bottlenecks.

It also needs to focus on strengthening its core competency.