Cola Wars Case Analysis 1. The main way in which my case notes would be different for Cola Wars if I were to have a second try at writing them would be to include a breakdown of how they are able to apply to Porter’s five forces. For example, it is evident after reading this case that the soft drink industry is an extremely profitable one (especially for Coke and Pepsi). The reasons for this were discussed in class, and I will quickly explain each:
There are great barriers to entry when trying to dive into the soft drink industry, and because of this companies who have a competitive advantage will make it rather difficult for a new competitor to enter the market. Brand Equity is the first of many barriers, because large companies like Coke and Pepsi have become American icons. With that brings a certain culture that people are not willing to just let go by the wayside in exchange for a new brand (ie. The Pepsi Generation).
Secondly, shelf space is a huge concern for this new competition, because big companies create all sorts of new variations and varieties of their products to suck up as much shelf space as they can for maximum exposure of their product. Another problem with trying to enter this market is that bottlers for the concentrate producers have signed exclusive contracts in most cases so that they can only bottle, package, and distribute a specific companies beverages. Lastly, and perhaps the hardest barrier to overcome is that of advertising.
Coke and Pepsi are so well known, that even if a new concentrate producer starts up a top of the line factory and is producing great soda it could be all for nothing. The amount of advertising dollars that would have to be spent in order to obtain some of the market share from these goliath companies is so enormous that it is nearly impossible. On top of that, if the marketing schemes do not work for one reason or another those costs spent to promote are sunken costs. Substitutes are another concern, but at the end of the day carbonated soft drinks are consumer more than any other drink by Americans.
Substitutes for these soft drinks are not always convenient, and producers and bottlers have made it so their products are in fact an impulse buy a majority of the time. As previously mentioned, Coke and Pepsi are not just about buying a beverage, but more so about buying a mentality and way to live. Both suppliers and buyers also hold power within this industry. Suppliers have very low ingredient and start up costs, but they do in fact have something that is unmatchable that makes them very wealthy: their secret recipe for their syrup.
Buyers on the other hand (bottlers) deal with high switching costs, franchise agreements that have been previously negotiated, among other things. However concentrate producers do in fact offer significant benefits for them. Lastly rivalry is Porter’s final force, and it is important when it comes to Coke and Pepsi for many reasons. Because they are able to understand and know how each other works, they are less likely to want to start a price war in order to destroy one another.
However, since Pepsi did enter the market later than Coke, they have been fighting to catch up and gain an advantage in market share for a long time. This is the reason as to why they have been so aggressive throughout their history, with move like doubling the amount of product received and keeping the price stable, as well as things like the Pepsi challenge, and the Pepsi refresh product. 2. I feel that what I have learned from this case analysis that I can in fact apply some of the key points (especially Porter’s forces) to my actual life.
In the near future I would like myself entering the beer and wine industry with an emphasis in sales and distribution. The knowledge that I have gained through reading this case will greatly benefit me due to the fact that I have a decent understanding as to how bottling and distribution works alongside Concentrate producers (in my case actual brewers). Eventually I would like to become a brewer in my own micro brewery up in the northwest, and because I have been able to be exposed to some of the barriers to entry in a similar field, I feel that I will be able to plan accordingly and hopefully overcome some of these.
I know that it is a fierce industry, but at the same time like the soft drink world it can be very profitable as well. Hopefully I will be able to fully apply Porter’s five forces successfully in the long run to produce a strong business model which will in the end transmit into a successful venture. 3. Something that I have learned from the class discussion as well s reading the case is that, Porter presents a framework that not only analyzes potential markets, but is able to give a strong representation as to if they will be attractive business ventures.
Being able to correlate his framework alongside other popular business frameworks such as the SWOT analysis seem to be a good way to interpret an industry that one may be looking to enter into. They are able to breakdown piece by piece why some companies are so successful, and why some competitors fall out of contention in a rigorous market. There is much to learn from Porter and the Cola Wars case, but it is evident that competitive rivalry is what drives an industry.
As well as being able to create a competitive advantage one way or another is the way to success in business. 4. I have been able to learn a lot from this reflective case analysis, due to the fact that it has helped me to breakdown the competition between two large firms and analyze their competitive business strategies. It has given me the ability to think critically as to why Coke and Pepsi have been so successful, as well as how they are both able to stay in business in the long run without having destroyed one another.
This reflective case analysis has also opened my eyes to Porter’s framework which has in turn made me understand how real life organizations not only control market share, but also use their innovative tactics to best present themselves to the consumer. This case analysis has also presented me with the opportunity to identify with upper level management decisions, and discuss them with my peers in class. I feel like I have been able to dive right into the board room and actually take a firsthand look as to how they are able to analyze critically and make decisions.