Coca-Cola and Pepsi are both very profitable soft drinks. Inputs for these products include sugar, bottles/cans, and soft drink syrup. Coca-Cola and Pepsi produce the syrup themselves and purchase the other inputs. They then enter into exclusive contracts with independent bottlers to produce their products. Use the five forces framework and your knowledge of the soft drink industry to briefly explain how Coca-Cola and Pepsi are able to retain most of the profits in this industry.
How Coca-Cola and PepsiCo are able to retain profit:
Coca-Cola and PepsiCo are major players in the soft drink industry and the two companies are in constant intense rivalry with each other over market share and in performance. The companies are venturing into new markets in a bid to maintain growth and are also launching new products with new flavors and are also looking into non carbonated drinks as avenues to generate growth (Deichert et al, 2006). The soft drink industry has recorded massive profits over the years and profitability is said to be solid. However, market saturation in markets such as the United States is expected to cause reduced growth in the industry.
The soft drink industry is highly competitive and this is how Coca-Cola and PepsiCo are able to retain profit. Together the two companies account for about 80% of the market share thus they wide mechanisms to ensure success (Deichert et al, 2006). The companies have enormous resources that they utilize to ensure that company operations are as effective and efficient as possible thus minimizing wastage of ...
The five forces framework knowledge for Coca-Cola and Pepsi are examined.