COLA WARS case study

This case study analysis has; the introduction, the body which will involve detailed analysis, and a conclusion which will offer recommendations. Information will be obtained from case study on Coca Cola and Pepsi, and also outside sources found in scholarly articles and publications. Introduction Coca Cola and Pepsi have been in constant competition involving product differentiation and price wars. This has been in an effort to secure larger market share at the same time attaining better profit margins. These two key players; Coca Cola and Pepsi have been able to dominate the CSDs industry for more than a century. From consumer buying behaviour perspective, it is explicit that consumers have greater freedom to selecting certain items especially if those particular commodities have closer substitutes.

There has been limited choice in the soft drinks industry because what compels shifts in consumer buying behaviours or consumption patterns is the availability of strong perfect substitutes. According to porter`s five forces the soft drink industry enjoys desirable market forces such as; excess demand for soft drinks which makes industry prices and quantities supplied to rise in favour of the firms in the industry. This implies that the market has been profitable all along, (Yoffie, 2011) Additionally, production costs in this industry are relatively low since only small volumes of additives are required to make beverages and these additives are cheaply acquired. Low production costs are in relation to volumes of quantities produced against the value for additives required for production.

This leaves these key players with the opportunity to control the market as they wish due to the fact that through diversification they are able to widen their profit margins. Additionally they are able to enjoy economies of scale with lower production costs per every unit. Firms of this kind could decide to actively participate in price wars by selling their products at the lowest prices which in return makes it unfavourable for smaller players with weaker financial muscles to remain in the market. These key players; Coca Cola and Pepsi have secured the biggest national accounts as well as pouring rights, with Coca Cola top in the list with more pouring rights. This nearly dictates Coca Cola to be the market leader, Pepsi the debatable challenger and Cadbury the follower, implying that this industry is seemingly completely a no go zone.

In the same manner, these two players should also take advantage of the growing and emerging markets outside US. These markets outside U. S and firms targeting these markets will be in a position to enjoy untapped market potentials by identifying market niches. Additionally, they could consider adopting penetration strategies as proposed by the Ansoff`s matrix. This matrix is a quadrant which consists of four sets of strategies; diversification can be done through; exploring new markets with new products, or it could also be done through; exploring existing markets with completely new products, or by exploring new markets with existing products, or finally through; exploring existing markets with existing products. The ultimate goal is attain better profit margins and at the same time to sustain current profitability levels.