Cola War Between Coca-Cola and PepsiCo

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Cola Wars Environmental Analysis 1. Introduction External environmental analysis of US carbonated soft drink (CSD) industry allows concluding that declining CSD sales call for changes in industry operations whereby market players can benefit from the fundamental shift in the industry development and maintain its leadership positions in beverage market. Analyses of macrolevel, industry, and competitive environments suggest that expansion, strong brand recognition, and changes in value chain will be key success factors in the future industry development. 2. External environmental analysis a. Macrolevel environment (PESTEL analysis) i. Political New federal nutrition guidelines identified CSD as the largest source of obesity-causing sugars in the American diet. Schools throughout the US banned the sale of soft drinks on their premises. ii. Economic People can afford to buy more soft drinks under current economic situation. Recessions do not seem to affect sales of CSD. Although produced by main market players soft carbonated drinks cost more than similar products of local and private label manufacturers, consumers are willing to pay an extra price for the name, particular taste, and image. Fierce competition in CSD industry forces Coca-Cola and PepsiCo to expand into new and emerging markets which present high potential for the company’s development. However, some foreign markets proved to be highly competitive. Coca-Cola Company’s operation in China faced antitrust regulations, advertising restrictions, and foreign exchange control. iii. Social Media and advertising are able to create a strong brand presence and a distinctive image of CSD that appeals to particular social/age groups. Therefore, some consumers perceive particul... ... middle of paper ... ...reness, led successful advertising campaigns, expanded successfully, and diversified its distribution channels and product line by creating new products. Its advertising spending is third largest in the industry. Dr Pepper enjoys 16% of the market share with fourth largest advertising spending. The company firmly holds the position of US third largest CSD industry player with its attractive product mix. ii. IMPLICATIONS Key success factors in the industry are a strong brand presence, maintaining customer loyalty as exploring new markets and distribution channels as well as offering a diversified product line. Implications of these factors are strong competition and dependency of company’s behavior and marketing strategies on competitors’ behavior. This is especially true for Coca-Cola and PepsiCo since their flagship products are very much alike in look and taste.

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