Cola Wars Threat of Entry of New

Cola Wars

Threat of Entry of New Competition: Low.

The economy of scale within the CSD industry requires enormous amount of capitol to enter into this market, making this threat relatively insignificant.

- Threat of Substitutes: High.

Colas are now part of many different selections of drinks. Health and medical experts also contribute to this theat.

-Threat of Customer Buying Power: Medium.

It appears the customer base will buy soft drinks with expendable cash, but harsh economic times will force consumers to cheaper options.

-Threat of Suppliers' Bargaining Power: Low.

Concentrate providers are significantly tied into the success of this industry and has few outlets with the buying power of this industry.

Threat of Intense Rivals: Medium.

The 60 years of cola wars between Pepsi and Coke explicitly demonstrate a relatively two sided battle.

This industry is both profitable and attractive for CP's due to the simple and minimal ingredients contained in the product and the willingness of the bottlers to absorb the packaging and higher labor costs.

1c. Coke and Pepsi have created barriers to this competition by buying and controlling all threatening products. When bottled water became a profitable product, both companies easily shifted to this new market demonstrating the power of controlling the industry.

1d. The bottlers do have power but only when it is combined. The widespread influence of the larger CPs make it hard to organize and combine efforts to lower costs.

2a. Since Coke and Pepsi have split the market between fountain and retail sales, it seems as if a gentlemen's agreement to not destroy the market has been reached. Their competitive advantage arises when consumers choose to drink CSD as opposed to free water or hard drinks.

2b. Coke and Pepsi choose not to compete when they ignored traditional pricing for attracting retail business. In aiming to attain market share of the store brand drinks both companies sacrificed and kept their prices in line with this strategy.

2c. The ability to monopolize through constant consolidation allows for these two enormous companies to continue to buy up their competition in a true capitalistic fashion.

3. Although it would be hard to resist the sheer opportunity a mega city like New York provides for any business, I would choose Oklahoma City to base my operations of bottling for either Coca Cola or Pepsi. There are significant advantages and disadvantages for choosing either, but my personal preferences lead me to select the smaller more remote location. The larger city competition, while providing for substantial growth opportunities, inserts too much competition.

4. In the period from the mid-1980's through the end of the century the structural changes Coke and Pepsi adopted focused on consolidating and buying up smaller brands of CP's. Certain brands were often sold back and forth several times. As the two giant companys continued to grow during this period, it became evident of this dual power structure within the CSD industry.