In this case, customers are not captive, they are free to exercise their desires, needs, and expectations and to choose the product that they feel most connected with. Usually, old customers will be loyal to either Coca Cola or Pepsi, they will not switch sides, on the one hand. On the other hand, is the new and potential customers that the two companies must fight over. Customers have great power over the two companies, over their strategies, and over the direction they will orient towards. Both companies' strategies should be determined by customers. The first thing to be considered for having a successful strategy is understanding the customer. Pepsi has been successful at this, while Coca Cola is still trying to figure out what their customers and potential customers really want. Regarding the bargaining power of suppliers, Pepsi seems to be one step ahead of Coca Cola in this field too, as Pepsi is promoting supplier diversity programs, that should help the company gain competitive advantage and to be less dependent of suppliers. Therefore, for Pepsi, "an integral part of our mission is a commitment to purchase from a supplier base representative of our employees, consumers, retail customers and communities" (PepsiCo, 2007).

There is little threat of new entrants on the market. The two companies are active worldwide, they are two giant corporations, and there is very little possibility...

The level that these two companies have reached allows then to be comfortable about dealing with new entrants.
Substitute products however present a certain degree of danger for the two companies. There are many programs and campaigns nowadays that are trying to encourage customers not to buy products like those issued by Coke and Pepsi. These aggressive campaigns might determine the two companies' customers to orient the budget destined for buying Coke and Pepsi products to healthier products.

As for intensity of competitive rivalry, the direct and strong competition between Coke and Pepsi is well-known worldwide. Regarding competition, the two companies seem to be handling it in the same way. Each of these two companies represents the main direct competitor. The companies do not seem to pay much attention to other smaller competitors.

Reference List

Foust, Dean (2006). Queen of Pop. BusinessWeek online. Retrieved August 29, 2007 at http://www.businessweek.com/magazine/content/06_32/b3996401.htm.

Brady, Diane (2004). Pepsi's Thousand and One Noshes. BusinessWeek online. Retrieved August 29, 2007 at http://www.businessweek.com/magazine/content/04_24/b3887061_mz017.htm.

Supplier Diversity (2007). PepsiCo Inc. Retrieved August 29, 2007 at http://www.pepsico.com/PEP_Diversity/SupplierDiversity/.