The effects of competitive environment and people’s demand influence highly on every business. This case study puts light on the effects of domestic and global demands on the beverage industry and especially on the Pepsi and Cola industries. The situation discussed in this case study about the challenges faced by the both companies depicts a picture of highly competitive environment and a war like situation in which both are running to take a step ahead. Pepsi and Cola, both industries have their historical relations of rivalry. When businesses gets success and make its remarkable reputation among the public, it becomes challenging for it to maintain that standard and demand of its customers. This war is also based on this rivalry in which not only the struggle for maintaining the reputation is concerned but also the winning from the other strong participant in the race is involved.
Coca-Cola and Pepsi, both companies are amongst the popular brands of soft drink, which are highly demanded by the people internationally. This case study shows that how both companies faced the challenges to attain the highest position in the hearts of their consumers. Both companies are in a long run fighting for making their names popular than the others. This also shows that how the industry of beverage has grown so much because of these two rivals due to the competition they have. In the name of competition many new products, flavors and alternatives have been introduced which have given hype to the already hot-ironed competition.
In the global world, Coca-Cola is leading because of its sales as compared to other beverage companies. Pepsi is in long run struggle to face the competition with Coca-Cola. The changing markets conditions and the demands of people for different flavors and products have hyped the situation. Both companies have introduced different alternatives as well but still the competition is prevailing and the challenges have been increased.
• Pepsi Co. is the 2nd largest soft-drink brand.
• Biggest company among CSD liquid producing companies.
• Having variety of products and substitutes.
• Strong customer relationships. • Less loyalty than Coca-Cola Co. from consumers
• Declining market shares.
• Heavily reliant on U.S sales.
• Substitute products can earn a big repute as in 1979 it passed the Coke industry, which was three times more popular than it because of its substitutes products.
• Successful campaigns like ‘Pepsi Generation’ and ‘Pepsi Challenge’. • Biggest rival is the Coca-Cola Co.
• Aggressive strategies like of 2010, when huge marketing was done which ended up in vain, can be threatening in future.
• Decrease in beverage consumption as compared to previous years.
• Obesity ; health concerns
Every business keeps its strategies flexible because they can be needed to change any time. Pepsi Co. should have focused on the alternatives that could promise more sales and demand of consumers. Such as it could have introduced new formulas for taste making by intruding new products, which are not introduced by the others except for focusing on making those products that are already in the market. Such as if a version of ‘Sprite’ was introduced by the Coca-Cola Company then except of making alternate for sprite with similar taste and color, it should have focused more on making products of other taste and style.
Pepsi Company could have moved its strategy towards targeting different age grouped people and different genders. Such as the women are more attracted towards colored things except of transparent or black cola, children are more attracted towards colorful things, this way, by making analysis, the products should have been introduced keeping in view the targeted consumers.
Pepsi could have focused on the attractive promotional strategies more. They could have introduced new deals or promotional sales on the things, keeping the profit margin. The promotional activities such as testing the taste of the new products could have been introduced through which people may get attracted. The competitive strategy adopted by the company should have revived according to the need of the time.
Research always plays its positive role in any business, and it helps the businesses to prosper. Pepsi Company could have researched the most demanding products and the products, which are mostly likely, attract people. Different surveys should have been done and the suggestions from the consumers themselves could have been taken to improve the sales. Even if the people liked Cola more than Pepsi, it could have asked for their reasons to love that more. These strategies help the companies to improve their market conditions.
The above stated alternative strategies can be proved as helpful for the company. Among these strategies, the implementation of change in competitive strategy must have been applied. Competition means doing such activities in competition with others, which can mark a remarkable useful effect on your business. To give tough competition it should focus more on the products which are highly demanding, and which are most likely be part of people’s choice. The Pepsi Company should focus more on introducing different unique products and tastes except for introducing alternates to the similar taste as others.
Pepsi market should closely analyze the time periods when they gave tough competition to its rivals and to the strategies, which most likely attract the consumers towards its products. The discounts and deals on the products always attract people and introducing new things according to the demand and on that providing people with deals and discounts adds icing to the cake. Meanwhile it should also ensure that products are easily reachable for the consumers. Its availability and accessibility should be highly focused.
Marketing as a barrier:
Marketing is the biggest tool which businesses use to promote their products with the help of different techniques. These techniques are used according to the targeted audience, so that they attract towards the products. Almost every large business need marketing to introduce its new and already existing products to the audience. This tool proves to be very helpful for the growth of businesses but can also be a barrier for the companies who want to enter to the market. This tool requires high cost for the advertising and for other requirements that can be a barrier for the businesses especially in a case where there is already a huge competition in the market.
The successful businesses also use marketing techniques to maintain their publicity and popularity but they somehow same their revenue and profit out of it because of having huge capital by its successful sales. Whereas the businesses who are less in popularity or who are new to the business require much capital to invest in the marketing in order to compete with the large businesses. In the case study ‘Cola Wars Continue: Coke and Pepsi in 2010’ (2011, Exhibit 7 &8, p.9), it is mentioned that how Pepsi company survived because of the huge marketing it did in 2008 for World Cup. Cola company spent millions for the advertisements of its products and on the other hand Pepsi introduced its new brand logo in 2008 and spent billions to revitalize its brand and name, but it could not achieve its motive as the loyalty of the customers remained with the Cola company even after spending so much money and effort.
This scenario discussed in the case study shows that spending money on advertising and marketing proved to be a wrong step for Pepsi but that does not mean that it should not advertise or should stop marketing. Previously, the campaigns have been proved as beneficial for the Pepsi-Co., so it must not stop marketing but for marketing it must focus on the targeting audience, their interests, attractive products and the demands of the customers. It should spend its money on the things, which guarantee the fruitful outcome for it except for trying something new and spending so much capital for that. Before spending huge capital on marketing, Pepsi-Co. should first build loyal relation with the customers. It should encourage its customers to give their feedbacks to improve the sales of Pepsi. The existing customers spend more money on buying the products than the new customers, so it must focus on the demands of the already existing customers and should struggle to retain their loyalty with the products. Any business must focus on doing best in what potential it has and should shine in it.
Porter’s five Forces:
Porter introduced his five forces analysis related to the market which can be used, to check the level of competition in the market and also to analyze that which products can be a substitute to the products of a company which a buyer can switch to. This analysis focuses on the five factors including the knowledge of competition that how much competition is prevailing between the companies and how many companies are involved in this competition, in the case of beverage industry the main rivalry is between Pepsi and Cola which puts more pressure on the both rivals. Secondly this model focuses on analyzing the power which suppliers have in term of increasing or decreasing the prices because the prices of the products also effects highly on the growth or reduction of the sales. So, this point helps the company in determining that substitutes can be more useful for them in terms of profit and demand. Third it focuses on the power of the consumers that what is their buying power, which products they favor and on what ground they can switch to another substitute. Forth focus of analysis is on the new entries that what are the chances of new competitors to join the market and take part in the competition. Lastly it focuses on the most important factor that what are the chances of consumers to switch to the products of other competitors and what uniqueness can the competitors provide to them, so those unique characteristics should be opt by the companies (Porter, M. E., ; Michael, 2001).
Through the analysis of the surveys mentioned in the case study, the main rivals are Cola and Pepsi in which Cola is leading as a powerful brand in the beverage industry. The level of the substitute products for the Pepsi-Co. was high due to its competitor Cola company. Other small companies suffered a lot because of the high competitors involved and those companies continued to get shifted from company to another. As they could not compete the higher competitors involved.
As a substitute of Cola, the Pepsi’s products include Diet Pepsi, bottled water and non-carb products such as sport drinks and tea-based drinks. These three substitutes were the most demanding products of the market. These all drinks are highly demanded by the people and give a high-level competition to each other. It can be viewed that in by 2009 the non-carb products of Pepsi were far more than the products of Cola, in the market. The analysis of consumption of beverage products also shows that the consumption of CSDs in 2009 was 63%, consumption of bottled water was 20% and that of non-carb products was 17% (Yoffie, B. D., & Kim, R., 2011, p.10).
Consumption in Gallons:
Throughout the history of beverage industry, we can see that the consumption of beverage products either increased or remained constant but in very few cases it declined. Even if the consumption decreased, it was maintained by introducing the varieties which raised the consumption again. One more factor which maintained the consumption of the beverage products was lowering the price according to the margins the companies had. The data in Exhibit 1 of ‘Cola Wars Continue: Coke and Pepsi in 2010′ (2011, p.13), shows that among the consumption of beverages, the consumption of coffee was high at the start since 1970 till 1980s. after that the consumption of carbonated soft drinks increased remarkably. From 1970 it was the second most consumed drink after coffee till 1980 but after that its consumption increased every year and from 1981 it outclassed the consumption of coffee and became the first most consumed drink in U.S. throughout the period of observation it is the most consumed drink than other liquids.
From the data given in the case study we can see that the consumption of beverage products remained high till 2000 as the number of gallons consumed till 2000 had increased from the previous year but the consumption level changed after the year 2000. Since the year 2000 till 2009 in the data collected, the consumption of beverage in gallons has dropped such as in 2000 it was 53 gallon/capita of consumption whereas till 2009 it is only 46 gallons/capita. This figure shows that there is decrease in the per capita consumption of beverage consumption since 2000.
Market share data:
Market share data reveals that how much a company or companies are holding their control and popularity on the market. This shows that how much a company or industry is powerful in the company and giving tough competition to others. From the data collected in this case study the market shares of all the three companies are fluctuating through the time period. Sometimes they are going downward and on other time they are increasing. If we comparatively analyze the data of trends of market share from 1970-2009, the Cola-Co. is leading others as it has more market shares ratio than others. The Pepsi Company is on the second related to the market share it is holding (Yoffie, B. D., & Kim, R., 2011, p.14).
By carefully analyzing the trends within the data share record, the market share of Cola company has increased throughout till 2000 and afterwards it has shown little slowed down in its market share holding. Similarly, Pepsi Company has also shown progressive report till 1990 and after that its hold is fluctuating. Whereas Dr. Pepper group is holding low shares in the market, but its shares are showing progressive period throughout the data collection time period.
The data shows that the market is moderately concentrated as it is leading by the Coca Cola co. and the Pepsi co. is also holding the huge shares in the market as compared to others. These two companies mostly dominate the whole market, which shows that the market is highly concentrated.
For me unofficially getting help from other business’ persons is not ethical at all. In case of beverage industry and its companies if a formula is the main cause of someone’s progress then taking it from someone else unofficially is a kind of cheat and fraud with that company. It is highly unethical and illegal to do such activities as these are against the rules and ethics of business. It can earn money and reputation for the company, but it can also cause a big trouble for the company too if it gets detected. For ethical business I think the companies should believe in their products and uniqueness, it is highly unethical to use someone else potentials illegally and unofficially. Analyzing the case of Pepsi company in this case study, it seems quite provoking for the company to buy that formula and marketing plan from the person but as per the reputation of Pepsi is concerned which is the second largest company in beverage industry, it should rely on its own potentials.
Porter, M. E., & Michael; ilustraciones Gibbs. (2001). Strategy and the Internet.
Yoffie, B. D., & Kim, R., (2011). Cola Wars Continue: Coke & Pepsi in 2010, case study, retrieved from ‘Cola Wars Harvard Business School Case Study’.