Competitive Strategies Essay
Coca-Cola (Coke) and Pepsi-Cola (Pepsi) are two major cola companies competing for the number one spot in a substantial global cola market, and is known for the most notable ongoing battles between two major cola companies to date. Fortunately, for both companies, the cola beverage industry stretches to nearly every corner of the world. However, with such a vast market and immense revenue capabilities it is no wonder that the Coke versus Pepsi competition is still so intense (Coke vs.
Pepsi, 2012). In the paragraphs to follow this paper will determine how Coke and Pepsi’s corporate cultures are different from each other, review three ways the Coke and Pepsi culture have benefited each other when competing, and consider how Pepsi and Coke could continue to thrive if its current corporate culture would have to change in the future. Coca-Cola has a passion for success. Leaders strive to build a better future, and have the reliability to be real, and accountable.
In addition, leaders continue to seek, imagine, create, delight, and do what they do well by using principles that transform a desire into an accomplishment. There is no single formula needed to succeed, and Coke allows employees to explore his or her creative abilities, the freedom to research new ideas, and to have a setting which allows anyone to make his or her passion come to life (The Coca-Cola Company, 2009). Pepsi, on the other hand, likes to perform with a purpose, burn new trails, never settle to be second best, be bigger, better, and successful together.
Pepsi is committed to giving consumers the taste he or she craves, and meet nutritional needs. By dreaming globally and acting locally Pepsi is consistently seeking to innovate and sustain the people, the planet, the communities and business they serve. Fortunately, new markets make way for new ventures, new ways to focus on health issues, cultural, and ecological encounters. Every day is a journey, and a chance to grow personally and professionally (PepsiCo, 2012). Although there are countless similarities between Pepsi and Coke the history behind these two rivals are far from being the same.
For instance, in 1885, a pharmacist named John Stith Pemberton created Coke as a tonic. At the time, the key element being cocaine (thus the name “coke”) targeted the fact that it could essentially fight depression. However, because of the nature of the drug, users were becoming addicted to the drink. In 1904, Cocaine was eradicated in the United States by the Food and Drug Administration (FDA), which meant that this key ingredient would have to change. Still, Coke retained its name and continues to promote its beverage through aggressive advertising (Smith, 2012).
Even though it came along fourteen years later (1898), pharmacist Caleb Bradham, intends for Pepsi to be Coke’s main competitor. Like Coke, Pepsi also placed heavy emphasis on advertising, and continues to challenge its rival through advertising. Pepsi likes to use celebrities, presenting itself as a drink for sports fans, in addition to promoting an image of originality. Whereas Coke represents fun times only, Pepsi represents fun times, athletics, and custom made ideas (Smith, 2012).
Regardless of what many may think, both cola drinks are similar in color, use the same amount of carbon dioxide, and even the taste is quite similar. However, both companies used different natural extracts from the coca nut in the past, now each rely on artificial flavors and man-made components (notably, Pendergrast 87). Nevertheless, both Pepsi and Coke are intended to serve as recreational drinks notably identified with some sort of entertainment, parties, fun, and yes, sex, but the biggest difference between these two colas is history, and efforts, which have defined each of these brands (Smith, 2012).
Marketing and advertising are a vital part of the war between Pepsi and Coke. Both companies are smart enough to know that regardless of which beverage consumers choose to purchase may not always be based on taste preference. Although there are those who really do favor the taste of either cola, one has to wonder how the consumer’s emotional attachment comes in to play when making a choice. Both Pepsi and Coke spend a fair amount of money to sponsor music events, sporting events, TV shows, in addition to other high profile happenings.
Each company realizes that this can play a huge role in product selection with members of these audiences. However, it is no accident that Pepsi and Coke sponsor highly emotional events such as the Super Bowl or American Idol because it creates an emotional connection to the product (Coke vs. Pepsi, 2012). To date, Pepsi and Coke have had a long sordid history of abundant marketing which, in the end, has produced loyal customers as well as brand equity all over the world. This in and of itself makes it nearly impossible for any new cola
beverage to come close to this scale in the market place. Not to mention retailers receive a margin of 15 to 20 percent on the shelf space offered for these particular soft drinks, and since this will impact the bottom line competitors have a tough time convincing retailers to carry a new line of products. For new products to enter the market now could also lead to price wars which can affect the success or failure of a new comer to the soft drink industry (Vulpala, 2007). Nevertheless, Pepsi and Coke have benefited greatly from this ongoing competition.
Although Coke has been around longer, and is the original cola soft drink, Pepsi has been able to build its business by imitating its formula. Imitation can be critical when it comes to creating a constant competitive advantage. However, if alternate resources provide a similar product at no additional cost, then substituting through duplicating leads to driven equality in the long run (Barney, 1995). Even so, Pepsi and Coke face unique challenges in addition to new opportunities with globalization, and it has not put a damper on the intense rivalry between the two.
Although Coke did dominate the international market share in 1999, because Pepsi made its entrance into the market much later and Coke already had distribution and bottling networks set up in developed markets (Vulpala, 2007). Still, Pepsi has aggressively sought competition in economies where Coke is not as dominant, and due to lack of consolidation, international fountain and retail sales are somewhat weaker than that of the US markets.
This, by the way, gives Pepsi, and Coke better pricing power, as well as influence over other similar products. Unfortunately, carbonated beverage consumption is much lower in international markets compared to US markets. However, since there are cultural differences in international markets, alternatives are available, but Pepsi and Coke will have to spend more on advertising dollars to convince consumers in these markets to embrace carbonated beverages (Vulpala, 2007).
Regardless, Pepsi and Coke are able sustain profits because of the structure within the industry has been kept intact for several decades. Fortunately, there are no new threats on the horizon from new competition, and apparently no major changes are showing up on radar. Changes in technology will not play a major role for either company, and since both have been around long enough to gather brand parity, it can sustain and diversify their businesses for a very long time. However,
globalization has opened up numerous opportunities for Pepsi and Coke, and although consumption is not as big in international markets as it is in US markets, there are still endless opportunities for growth (Vulpala, 2007). References Barney, J. B. (1995). Looking inside for Competitive Advantage. Academy of Management Executive, 9(4). Coke vs. Pepsi. (2012). Coke vs. Pepsi: Who Gets Your Vote? Retrieved from http://cokevspepsi. net/ PepsiCo. (2012). Performance with a Purpose. Why Work at PepsiCo? Retrieved from http://www. pepsico.
com/Careers/Why-Work-at-PepsiCo/Culture. html The Coca-Cola Company. (2009). Our People, Culture, Vision and Values. Retrieved from http://www. europeancareers. coca-cola. com/en/home/our-company/our-people-culture-vision-values/ Smith, N. (2012). Coke versus Pepsi: Differences in Cultural History Rather than Taste. Retrieved from http://www. articlemyriad. com/coke-pepsi-differences-cultural-history-taste/ Vulpala, L. G. (2007). Cola Wars: Five Forces Analysis. Goutham’s Thoughts. Retrieved from http://goutham. wordpress. com/2007/10/18/cola-wars-five-forces-analysis/