Cola Wars Continue: Coke and Pepsi in 2010
In 1923, Robert Woodruff, one of Coca Cola’s company leaders, initiated “lifestyle” advertising for Coca Cola, emphasizing the role that Coke played in a consumer’s life. Little did he know how much of an impact carbonated soft drinks (CSD’s) would have, not only on American but Global consumers, concentrate producers, bottlers, retail channels and suppliers. In the past, what made Coke and Pepsi so profitable was their corporate strategy and their ability to become worldwide leaders of the beverage market. From 1995 through the mid 1990’s, both Coke and Pepsi achieved average annual revenue growth of around 10%. Increased availability, decreasing prices and product innovation (like introducing diet and flavored CSD’s) fueled this growth. In the early 2000’s CSD consumption and cola sales started to decline. The emergence of non-carbonated drinks changed consumer purchasing behaviors. As the Cola Industry is faced with various challenges: how can a century old strategic rivalry adopt new strategies that would make their current industry more attractive and lead to increased profits?
Successful strategies are dependent on effective implementation. Through the years we have seen that Coke and Pepsi have not always been successful in new strategy implementation. The good news is that the Cola Industry was able to maintain their competitive advantage. Competitive Advantage is defined as a firm’s ability to create value in a way that its rivals cannot. From an internal perspective Coke and Pepsi possess resources and capabilities of different qualities. From an external perspective, competitive advantage comes from a firm’s positioning within the competitive business environment. Michael Porter’s 5-Forces model of industry will show how the Cola Industry configuration, in particular that of Coke and Pepsi, can help determine the industry’s future profit potential. The strengths of these five...