Strategic Management: Analysis of Coca-Cola and PepsiCo

This report provides an analysis of Coca-Cola and PepsiCo's strategic management, including internal and external analysis, industry and competitive analysis, and SWOT analysis. It also examines the intensity of rivalry between the two companies in the global market.

Running Head: Strategic Management
Strategic Management

Strategic Management 1
Table of Contents
Executive Summary...........................................................................................................2
Literature Review...............................................................................................................2
Strategic planning..............................................................................................................3
External Analysis (PESTLE analysis)................................................................................4
Political factors...............................................................................................................4
Economic factors............................................................................................................4
Social factors..................................................................................................................4
Technological factors.....................................................................................................5
Legal factors...................................................................................................................5
Environmental factors.....................................................................................................5
Internal Analysis (SWOT)..................................................................................................6
Competitive analysis..........................................................................................................7
Industry analysis................................................................................................................9
Bargaining power of suppliers........................................................................................9
Bargaining power of customers....................................................................................10
Threat of new entrants.................................................................................................10
Threat of substitutes.....................................................................................................10
Industry rivalry..............................................................................................................10
References.......................................................................................................................12

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Executive Summary
Since a very long time, Coca-Cola and PepsiCo are selling various types of beverages
and fast food items. In this context, both companies are trying to control the whole
market along with gaining competitive advantage. This rivalry is since 1950s and yet,
both the companies are in constant battle in terms of controlling the market share.
Current scenario says that both the companies are constantly engaged in adaptation of
unique strategies in terms of attaining the largest market share in the soft drink industry.
As per researches and studies, it has been observed that amongst all leading producers
of soft drinks across the globe, Coca-Cola is an iconic brand and it has attained a huge
brand value in the international beverage industry. It has been observed that the Coca-
Cola brand is available in international market and its drinks are consumed more than
685 million times a day. Hence, Coca-Cola has made its effective and strong brand
image through delivering enjoyment and quality.
In order to determine the intensity of rivalry amongst these companies in the global
market, various analyses will be conducted in this report. With regards to this, strategic
planning, internal and external analysis, industry and competitive analysis will be
conducted.

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Literature Review
Strategic management is the process of evaluation and formation of effective strategies
performed by the management team on behalf of owners of organization along with the
stimulation of attainment of desired goals and objectives considering the internal and
external environment. This procedure develops certain plans in order to attain the
desires of the organization and these plans are developed on the basis of organizational
requirements, rules, regulations and policies. While developing the strategies for the
organization, it is necessary to consider some important points such as external and
internal marketing environment, current position in the global market. Coca-Cola and
PepsiCo are two big brands of soft drink industry and both of them plays effective role
for being each other’s competitor.
Strategic planning
Strategic planning is a combination of objectives, plans and policies which is done to
develop effective organizational strategies with regards to attain competitive advantage
in the marketplace. An organization’s efficiency could be determined with its strategies,
thus, it is necessary for every organization to consider every crucial aspects such as
external and internal business environmental conditions before developing strategies in
order gain competitive advantage. in terms of international market, Coca-Cola is
considered as strong because it holds almost 50% share of the overall non-alcoholic
market share in the global market whereas, PepsiCo holds approximately 25% market
share. This means, PepsiCo nowhere stands close to Coca-Cola in the international
beverage industry. But due to few companies’ engagement in this industry, PepsiCo is
considered as the direct competitor for Coca-Cola in the global market (Cassidy, 2016).
Rivalry amongst both the companies is bit old now but still competition between
PepsiCo and Coca Cola is considered to be the top rivalry between the two recognized
international brands in the world. Thus, PepsiCo tries to attain competitive advantage by
adopting unique and innovative measures in their strategies while Coca-Cola is doing
the same as defensive strategies in order to maintain their acquired image in the global
market (Ling, 2017).

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External Analysis (PESTLE analysis)
Political factors
Political factors such as government’s policies, interest of political parties, etc. influence
the performance of beverage industry. In relation with the smooth functioning, both
companies i.e. PepsiCo and Coca-Cola have fulfilled all the political factors. Coca-Cola
and PepsiCo both have developed its presence in most of the parts of the globe but due
to different political conditions and political stability, both the companies are still
struggling to enter into several parts (Shtal, et. al., 2018).
Economic factors
Same goes with economic conditions, these are also varies country to country. It has
been observed that some Asian countries have instable economic conditions due to
which adopting license for execution of operations related to beverage industry. GDP,
inflation rate, interest rate, exchange rates, etc. factors are some of the crucial factors
which affect the performance of PepsiCo and Coca-Cola (Salmons, 2012).
Social factors
Social factors such as target customer’s tastes, preferences, recent trends, affect the
demand of products. In terms of Coca-Cola, they have targeted the countries with high
populations which are mainly Asian countries. Apart from this, hot climates are other
major factors which are considered by Coca-Cola and PepsiCo in terms of increasing
demand of their products (Stone & Stone, 2013).
Technological factors
Technological advancement is necessary for every company in every industry as it
helps them to meet its customer’s demand in time. With the help of technological
improvements, production capacity could easily be enhanced. PepsiCo and Coca-Cola
have adopted recent technological advancements with regards to fulfil its target
demographics’ demand along with minimising the wastage of water and other natural
resources (Salar & Salar, 2014).

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Legal factors
Soft drinks are part of FMCG (fast moving consumer goods) market. Thus, regulations
imposed by every country with regards to the production and distribution of FMCG
products needs to be considered while developing strategies.
Environmental factors
Major environmental issues which Coca-Cola, PepsiCo and other soft drink
manufacturer face are over-utilisation of ground water and other water resources. Along
with this, disposition of waste, imposing control over excess utilisation of natural
resources, etc. are some other issues which affects the whole beverage industry’s
performance. With this regard, both the companies have developed sustainable
development policies under which various projects have been executed to save
environment as well as other natural resources.
Internal Analysis (SWOT)
Strengths Weaknesses
Coca-Cola PepsiCo Coca-Cola PepsiCo
 Strong
brand
reputation
 Creative
and solid
brand
marketing
 Growing
product
portfolio
 Global
experience
 Brand Equity
 Customer
Loyalty
 Less
diversified
portfolio
 Value
addition
 Competition
 Product
dependency
 Failed products
Opportunities Threats
Coca-Cola PepsiCo Coca-Cola PepsiCo
 Various  Improve  Intense  Competition

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successful
brands to
pursue
 High brand
recognition
 Healthy
drinks
brand image
 Improve
customer
relations
 Research
and
development
competition
from PepsiCo
 Imposition of
taxes
 Health factor
from Coca-Cola
 Economic
slowdowns
 Government
norms and
regulations
 Health factor
Competitive analysis
Competitive analysis is the method under which primary competitors’ positon is being
evaluated by effective measures. This could be done in various forms such as by
evaluating the revenues, strategies, brand reputation, value, etc. Coca-Cola and
PepsiCo are one of the biggest rivals in the global market and their rivalry is continued
since a very long time. They both have been compared lot of times on various aspects.
The major factors on which success of soft drink is based on are availability, cooling,
visibility, and range. Under this, availability determines the availability of products at any
store. Visibility means that if Coca-Cola is present at any store but it is not visualised
then availability will be of no use at that particular store. Cooling plays crucial role in the
success of soft drinks because until and unless, soft drinks are not chilled, they are of
no use. The last factor is range and it impact over the revenues of the companies.
Availability of all flavours in all sizes is known as range availability (Muzumdar, 2014).
With the help of competitive analysis, current position could be determined along with
the determination of strengths and weaknesses of direct competitors. Competitive
analysis plays vital role in corporate strategy. In terms of Coca-Cola and PepsiCo, they
both are primary competitors for each other. In terms of gaining competitive advantage
over each other as well as to maintain the acquired position in the market, following
strategies have been adopted by them:

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PepsiCo: Being a global leader in soft drink, organization focuses over meeting
customer’s needs and enhancing brand value by synchronizing with local and traditional
events. In order to enhance demand of their product, PepsiCo launches discount and
attractive offers time to time along with attractive slogans and mission statements
(Nganga, 2012).
One of the solid weapons Pepsi have in their armoury is internal flexibility provided to its
employees. In this manner, PepsiCo has given freedom to every manager, salesperson,
etc. to promote PepsiCo at their own in order to enhance the demand as well as
consumption in the market to gain competitive advantage over Coca-Cola (Bonnet &
Requillart, 2011).
Pricing strategy also plays crucial role in terms of enhancing the demand of the
products, thus, PepsiCo has adopted several promotional and discount offers in terms
of attracting audience. Due to fewer margins in this industry, both the companies
compete with each other at very less rate of profit margin. For example: if Coca-Cola is
selling a 500 ml bottle at $0.10 then PepsiCo will reduce its prices to $0.09 in terms of
raising demand of their products. Current revenue of PepsiCo is US $ 63,525 million.
Coca-Cola: They set up brand image and reliability amongst the target audience by
synchronising with mega and popular events such as Cricket World Cup, FIFA World
Cup, etc. Apart from this, Coca-Cola has also entered into local markets and with the
motive of making customer relations, various local events have also been promoted and
sponsored by them (Cuganesan, Guthrie & Ward, 2010).
In terms of flexibility, Coca-Cola requires approval from its headquarters before starting
any promotional or marketing campaign.
The same pricing strategy has also been adopted by Coca-Cola but due to huge market
share in the global soft drink industry, Coca-Cola focuses over product diversification,
maintaining its brand image and on improving quality of its products rather reducing the
prices of soft drinks to increase sales. Current revenue of Coca-Cola is US $ 35.410
billion.

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Industry analysis
It is a tool which facilitates a company’s understanding regarding its position in the
market in comparison to the other companies of the same industry. It helps the
companies to develop their strategies in an effective manner considering all factors. It
also helps the companies to identify the threats and opportunities as well as to analyse
their strengths and opportunities to gain competitive advantage. Industrial analysis
could also be evaluated with the help of Porter’s five forces (Adeoye & Elegunde, 2012).
Bargaining power of suppliers
This force has low impact over both companies’ performance and this is because large
numbers of suppliers are available in the market and switching costs is also low. In the
same manner, it is bit easy for both the companies to switch suppliers at one call while,
it will be bit difficult process for suppliers to switch from such companies in one move.
Main factors which plays crucial role in bargaining power of suppliers are availability of
large number of suppliers, and switching costs for suppliers are also high.
Bargaining power of customers
Induvial bargaining power of customers is also low because sale of one bottle will not
impact organizational overall sales. But there is slight difference between PepsiCo’s soft
drinks and Coca-Cola’s soft drinks. Thus, this factor could affect both companies’
performance in negative manner. Coca-Cola’s customers do not focus over price.
Threat of new entrants
Due to several factors such as huge investment required, existence of big brands, etc.,
newcomers fears to enter into beverage industry. This is because large investment is
required in every part i.e. from operations to marketing. Apart from this, customer loyalty
of customers for existing brands is also high (Dorfman, et. al., 2012).
Threat of substitutes
Major substitute product for Coca-Cola and PepsiCo is each other’s products. Due to
large products product offerings, availability of substitute is high for Coca-Cola in
relevance with PepsiCo. Quality factor also plays crucial role in terms of making threat

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of substitute bit strong. Switching costs for customers is also low. Thus, this factor has
bit huge impact as compared to other factors.
Industry rivalry
Rivalry amongst Coca-Cola and PepsiCo is intense and both are considered as vital
players for the beverage industry. There are some small companies also exists in the
beverage industry but they does not have much potential to impact Coca-Cola’s or
PepsiCo’s business. So, it could be said that rivalry between the existing firms has
strong impact.

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References
Adeoye, A.O. and Elegunde, A.F., 2012. Impacts of external business environment on
organisational performance in the food and beverage industry in Nigeria. British Journal
of Arts and Social Sciences, 6(2), pp.194-201.
Bonnet, C. and Requillart, V., 2011. Does the EU sugar policy reform increase added
sugar consumption? An empirical evidence on the soft drink market. Health
economics, 20(9), pp.1012-1024.
Cassidy, A., 2016. A practical guide to information systems strategic planning. CRC
press.
Cuganesan, S., Guthrie, J. and Ward, L., 2010. Examining CSR disclosure strategies
within the Australian food and beverage industry. In Accounting Forum (Vol. 34, No. 3-4,
pp. 169-183). Elsevier.
Dorfman, L., Cheyne, A., Friedman, L.C., Wadud, A. and Gottlieb, M., 2012. Soda and
tobacco industry corporate social responsibility campaigns: how do they
compare?. PLoS medicine, 9(6), p.e1001241.
Ling, X., 2017. Customer Relationship Management: Case study Coca-Cola Company.
Muzumdar, P., 2014. A Study of Business Process: Case Study Approach to PepsiCo.
Nganga, C., 2012. Coca-Cola Company. History, SWOT analysis, maketing strategies.
Salar, M. and Salar, O., 2014. Determining pros and cons of franchising by using swot
analysis. Procedia-Social and Behavioral Sciences, 122, pp.515-519.
Salmons, A., 2012. The Role of Marketing Auditing and Planning for Coca-Cola
Corporation. Carpe Diem, The Australian Journal of Business & Informatics, 5(1).

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Shtal, T.V., Buriak, M.M., Amirbekuly, Y., Ukubassova, G.S., Kaskin, T.T. and
Toiboldinova, Z.G., 2018. Methods of analysis of the external environment of business
activities. Revista ESPACIOS, 39(12).
Stone, R.J. and Stone, R.J., 2013. Managing human resources. John Wiley and Sons.

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