EXECUTIVE SUMMARY Introduction Coca-Cola and Pepsi are the two greatest competitors in the soft drink industry. A brief introduction and history of the two companies will provide a basis for understanding how the companies have come to be where they are today and how they run their companies. The company structure of each will also be briefly explained to provide an understanding of how management style is impacted. Marketing and Advertising The marketing skills that these companies possess are the reason both Coca-Cola and Pepsi are so successful. Our research will provide an in-depth look at the marketing tactics that these companies use and how they compare to each other. The use of new technologies, forecasting, advertising, and political environments will all be included when determining what affects the marketing strategies the companies choose to take.
SWOT Analysis To gain a better understanding of each company, we determined some strengths, weaknesses, opportunities, and threats of each company. Each company has brand recognition on their sides and threats such as foreign, political, and economic situations in countries that Coke and Pepsi are established in. Comparing these aspects of each company will provide a good idea of future successes. Conclusion After a detailed look into Pepsi and Coke's tactics for managing and successfully running their businesses, a summary of how each company manages its resources ties the research together and compares the overall management of the two companies. BACKGROUND INFORMATION The Coca-Cola Company is the world's leading manufacturer, marketer, and distributor of nonalcoholic beverage concentrates and syrups, with world headquarters in Atlanta, Georgia. Coca-Cola, the Company's flagship brand, and over 230 other soft-drink brands are manufactured and sold by the Coca-Cola Company and its subsidiaries in nearly 200 countries around the world.
The Company and its subsidiaries employ nearly 31, 000 people around the world. Dr. John Stith Pemberton first introduced Coca-Cola in Atlanta, Georgia in 1886. The pharmacist concocted a caramel-colored syrup in a three-legged brass kettle in his backyard.
The Coca-Cola Company's operating management structure consists of five geographic groups plus The Minute Maid Company. Other Coke products are: Barq's Root Beer, Cherry Coke, Power ade, Citta, Mello Yello, Mr. Pib b, Da sani, and Surge. Pepsi-Cola Company, headquartered in Purchase, New York, is the global beverage division of Pepsi Co, Inc. Caleb Branham, a New Bern, N.
C. druggist who first formulated the beverage, founded Pepsi-Cola at the turn of the century. Today, Brand Pepsi, Diet Pepsi, Pepsi-One, Mountain Dew, Slice, and Mug account for nearly one-third of total soft drink sales in the United States, a consumer market totaling about $56 billion. The Pepsi-Cola Company is the world's second largest beverage company.
Pepsi-Cola beverages are available in about 170 countries. Pepsi also makes and markets ready-to-drink iced teas and coffees via joint ventures with Lipton and Starbucks. Pepsi Co, Inc. consists of: Pepsi-Cola Company, Frito-Lay Company, and Tropicana Products, Inc.
, the world's largest marketer and producer of branded juices. Donald M. Kendall, President and CEO of Pepsi-Cola, and Herman W. Lay, Chairman and CEO of Frito-Lay founded Pepsi Co, Inc.
in 1965 through the merger of the two companies. Tropicana was acquired in 1998. MARKETINGStrategiesTelevision commercials for Coke and Pepsi bombard us with images of youth and beauty, fun and pleasure, family togetherness, and patriotism. Oh, and by the way, they make soft drinks too! Clearly, the "cola wars" have little to do with colas. They are wars of marketing and advertising. In the beginning Coca-Cola wanted three things: A Coke sign on every corner, bottles of Coke in every store, and put a Coke within an arm's reach of every possible customer.
However, Coca-Cola needed to focus on more than just the beverage; they needed to sell an image or a way of life. The image that management first focused on was the essence of all that America stands for. They wanted Coke to be the American dream in a bottle and "the Real Thing." Coca-Cola is considered an All-American drink. However, during the Vietnam War, the country was in turmoil and the American dream had died.
Coca-Cola introduced the "I'd Like to Buy the World a Coke... ." campaign to transfuse the consumer into a world of peace and harmony. On the other hand, Pepsi-Cola did not get off the ground until the times of the Great Depression. Their key concept was the 12-ounce bottle that would sell for the same nickel that would buy 6 1/2 -ounces of Coke.
This more for less strategy hit the mark of those who went for quantity rather than quality. Coca-Cola felt that their bottle was their greatest strength. Pepsi's promotion turned that strength into a weakness because Coke's unique bottle could not be scaled up to 12 ounces. Coke had high bottle inventories and could not cut their prices. This edge made Pepsi number two by World War II.
Pepsi's new strategy was to reposition the competition as "out of date." The first expression of this concept was, "Now it's Pepsi for those who think young," and this idea was brought to life with the classic, "Come alive, you " re in the Pepsi generation." With Pepsi's new corporate spirit, based on quick-action philosophy known as "ready-fire-aim", Coke woke up. Another Pepsi strategy was the invention of the "Pepsi Challenge. The result: tasters preferred Pepsi three to two over Coke. This was a good strategy for Pepsi because it exploited a weak point in the competitive product - Taste. In response to Pepsi's challenge, Coke did its own taste tests and found out that Pepsi was preferred. This led Coca-Cola to do the one thing a leader should never do - change a product people consume a lot of.
The new formula was introduced to the entire market without any test marketing. Now the "real thing" was no longer the real thing; and in one stroke, Coca-Cola had undermined its own position. The "New Coke" led to an outburst from the public with their loyalties to the original formula. Management listened. The original formula was reintroduced as "Coca-Cola Classic," giving Coke a new life cycle. It is important for Pepsi to create an image that could never be confused with Coke's.
For twenty years, Pepsi positioned itself as the "leading edge" soft drink and called their consumers the "Pepsi generation." The overall effect of Pepsi's efforts was to steadily erode Coke's leadership. Coke still currently leads Pepsi in sales, but no one knows for how long. We do know two things: both companies have always targeted youth and both portray their products as providing pleasure. Political Environment World War II changed everything.
The Coca-Cola Company promised to put a Coke in the hands of every American soldier. This inspired the government to exempt Coke - but not Pepsi - from sugar rationing. The government also built almost a hundred Coke bottling plants overseas. Then, when the war ended, Coke not only had millions of grateful servicemen as consumers, it also had the makings of a worldwide bottling network. Pepsi, on the other hand, came out of the war as the prisoner of its "Twice as much for a nickel, too" slogan. That expression positioned Pepsi as a bargain drink.
And when the price advantage vanished because of inflation, so did many Pepsi drinkers. Pepsi was left with an inferior reputation, and so it changed its formula and took on the even tougher task of changing its image. In 1959, Coke declined a booth at the American National Exhibition in Moscow to avoid domestic implications. Instead, Pepsi took the risk. Using this opportunity, the national sales manager at the time was able to persuade Soviet Premier Khrushchev and Vice President Nixon to stop at the Pepsi booth to taste two kinds of Pepsi - one bottled in America, the other in Russia. Photographs of a Pepsi-refreshed Khrushchev with the caption "Khrushchev Learns To Be Sociable" went around the world.
However, by 1961 the Berlin wall was erected not only cutting out democracy but also shutting out Coke and Pepsi. Another turnaround for Pepsi-Cola came in 1971 when both governments allowed a Pepsi representative to go to Russia because of previous relations. Pepsi walked away with a monopoly in the Russian cola market. Pepsi even reworded one of Coca-Cola's popular sayings: "We want Pepsi in a hands reach of the Russian Consumer." Internet There is a growing need to keep up with the technological changes in the management system, knowing that tomorrow will be quite different from today.
As Internet popularity swells, Pepsi and Coke continue to make efforts to create effective web sites to advertise their products. Pepsi's site is geared more toward the young and energetic, whereas Coke's appeals to any generation. These two web sites follow closely the advertising patterns Coke and Pepsi have established over the years. Information at these sites is fairly limited, with concentration most focused on maintaining the attention of the web-surfer and luring him / her into the world of soda pop culture. Sales Forecasting Although neither Coca-Cola nor Pepsi come out and directly say what their sales forecasting method is at present, it has been known that Coca-Cola has used an automated sales forecasting system for time series analysis.
Pepsi, on the other hand, used bottoms-up sales estimation that was accomplished through the Pepsi Challenge. COCA-COLA SWOT ANALYSIS Strengths Coca-Cola's greatest strength is its brand name. People are willing to buy Coke regardless of their choices in blind taste tests, simply because of its reputation. Coca-Cola is considered to be the world's number one soft drinks company and is the world's most recognized trademark. This strong reputation helps the company when competing with others in the soft drink market. Recently, Douglas Daft became the company's CEO, which has added great strength to the company.
Daft started out as a sales person and was a marketer overseeing operations in the Middle East and Asia. This is an excellent advantage for the company because Daft's experience within Coca-Cola will help guide the company's future. Weaknesses Past CEO, Douglas Ivester created a huge weakness within Coca-Cola. He took over in 1997 when CEO Robert Goizueta passed away. Unfortunately, Ivester was not experienced nor well prepared for this position. Ivester had experience as an accountant and little or no experience as a marketer.
In a major marketing company such a Coca-Cola, having a leader that understands marketing concepts is required in order to produce optimal results. During Ivester's term as CEO, the company's strong reputation has suffered. During this time, Pepsi Co took action and began realizing Coke's strengths. Pepsi Co started adopting Coke's advertising tactics and developed bottling operations similar to Coke.
Coca-Cola has been very exposed during these trying times. Opportunities Many "alternative" drink companies are open to the possibility of making a deal with a major soft drink maker like Coke. Such companies include Nantucket Nectar's and Arizona Beverage Co. Should Coke make a deal with one of these companies, Coke will be exposed to a rapid growth market that could help achieve long-term growth targets.
Coke also has great opportunities awaiting it in the global industry. As the company continues to grow in the global mark et, the company's sustainable profit continues to grow. This strength in the global market has led to relationships between other companies to help Coke grow. Thunderbird Magazine is just one example of their international success. Their partnership was formed to help protect each other in a global economic crisis in which both companies would be equally hurt.
Pepsi has very little invested in the global market compared to Coke, therefore, less protection is offered to Pepsi. Coke has more protection for gaining a stronger hold in the global market. Threats While waiting for bank negotiations, Coke lost a deal with Sobe to Pepsi. This loss could be a major one for Coke because Pepsi now has a part of beverage sales experiencing phenomenal growth compared to carbonated drinks.
Coke currently does not have a share in the market of non-carbonated drinks, which could cause Coke to lose some of its competitive edge against its biggest competitor, Pepsi. Having such a large share of the global market has threats as well as opportunities for Coke. The company is vulnerable to economic and political conditions in international markets. Any increase in taxes or other negative impacts on the foreign economy could cause harm to Coke's profitability and competitiveness. PEPSICO SWOT ANALYSISStrengthsThe primary strength Pepsi has is its brand name. Pepsi is known all across the world by its name and red, white, and blue circle.
When a consumer is looking for a drink they look for something familiar, and Pepsi has the name that most people recognize. The structure of the company is another key asset for Pepsi. When Pepsi's president introduces a new policy it is clearly defined and becomes the foundation of Pepsi's efforts. This is a huge success for Pepsi because having statements and policies that are clear, consistent, and reliable are the stepping-stones for achieving the goals set forth for the company. Pepsi knows that establishing goals and measures for success is necessary to achieve any objective, and that is why the goals that are set within this company are measurable. But it does not stop there; strategic management styles within the organization make sure that after implementing a new objective there are still significant areas that must be covered.
Monitoring progress and ensuring success is a crucial goal and Pepsi's management has designed its style to make sure that reporting on the progress of the goal is just as important as implementing it. Already being an established company, Pepsi can focus on its company objectives: profit, growth, and market share. These are the goals of all organizations, but Pepsi differentiates itself from the others because it attempts to succeed at these goals through meeting customer needs. The customers are what make Pepsi what it is and they try to meet the customer's needs through empowering and supporting their employees.
The culture at Pepsi is informal and entrepreneurial with an open work environment that respects and promotes both personal and professional growth. It is proven that an employee that has achieved personal success is more willing to provide their insights and efforts into their professional environment. Pepsi has been recognized for the diversity within the company and has understood that their success depends on the teamwork and creative spirit that is drawn out of its employees. Pepsi's foundation for each employee's success comes from achieving long-term goals and real accomplishments, not just short-term gains.
Weaknesses The weakness that Pepsi has had since its introduction is that it must compete with the most recognized brand name in history, Coca-Cola. Pepsi had to try and offer something better than Coca-Cola had offered its customers and then get people to switch. Coca-Cola has many loyal customers and through assertive global expansion and marketing Coca-Cola has held on to its dominant share in the market with Pepsi constantly trying to find a way to overcome them. Opportunities Pepsi supports Global expansion because it produces more revenue, recognition, opportunity, and keeps the brand young. Today Pepsi is sold in more than 190 countries and provides Pepsi with a new market and a chance for more people to fall in love with its product. The environment plays a crucial role in the way that Pepsi views in light preservation and responsibility.
Pepsi believes that being a premier company also involves having corporate social responsibility. Pepsi encourages conservation, recycling, and programs that clean the air and reduce landfill waste. Being a huge supplier to the grocery industry, Pepsi became an active supporter of recovery and recycling programs in the United States. Sponsorship of local programs and the support of employee volunteer activities are also major activities that Pepsi Co and its employees are proud to be a part of to improve the surrounding communities they work in.
Threats Pepsi's biggest competitor is The Coca-Cola Company. In the early 1900's Coca-Cola was considered a cash cow and many imitators were trying to cash in on this immense opportunity. After Pepsi was introduced as a competitor for Coke, Coke was thought to be the "all American brand" and the beverage that was consumed on the front porch, while Pepsi was the "street brand" and consumed on the back porch. Coke has a familiar shape and name, the Coke drinking polar bear, and the belief that it leads to life's special moments, which are key features that distinguish Coke from Pepsi. But Coca-Cola is not all that Pepsi has to be worried about. In this health conscience society that we live in, people are trading in their colas for juices and bottled water.
For Pepsi this is a critical event because if consumers are looking towards other products that are considered better for their bodies, Pepsi's management and marketing have to fabricate a need for their product to generate future sales. CONCLUSION Once upon a time, in a simpler more innocent world, one could order a cola without being asked "Which one?" That world is no more. Over the years, companies like Pepsi and Coca-Cola have spent a great deal of time and energy encouraging people to choose soft drinks more than any other beverage because soft drinks have become part of American life. Coca-Cola is a 100-year old soft drink that started out as anything but soft. It was, first and foremost, a medicine. However, as a result of Robert Woodruff's brilliant perception, Coca-Cola evolved into an experience that captured the spirit of America.
Around the world, the history of the Coca-Cola Company is one of great brands, tremendous consumer enthusiasm and innovation. Management has been dynamic, always moving to anticipate and meet the present and future desires of customers and consumers; bold, always innovating for success; and diligent, with long-standing ability to listen, learn, and understand the nuances of the world. Because the world is changing with blinding speed in countless ways, executives continually think about such changes and what modifications and adjustments will be needed to assure Coca-Cola is optimally positioned for continued success. Like Coca-Cola, Pepsi was invented in the South and was originally heralded as a cure for dyspepsia.
Coca-Cola's thirteen-year head start, some astute decisions by Coca-Cola executives, and some bad ones by Pepsi's owners, gave Coca-Cola such a commanding lead. Pepsi executives believed they had to be smarter, shrewder, faster and more attuned than Coca-Cola. Their aggressiveness and brilliant strategies paid off, forcing Coca-Cola to be on their toes. Pepsi management is committed to constantly changing the rules of the game - to think and plan and act like number two - no matter how successful Pepsi is. But they have a goal -- leadership in the soft drink industry - that can be achieved through focus, investment, teamwork, and reinvigorating their business year after year. Given that, it is crucial for Pepsi not only to deliver refreshment that America prefers, but also clever and amusing surprises that America comes to love.
Both Pepsi and Coca-Cola have actively participated in their local communities and are committed to corporate social responsibility. Throughout the 1990 s, the two soft drink giants have tried to expand more internationally. They have also been exploring a new facet of campus domination since youth continues to be the colas' vital market. As the World Wide Web's accessibility has increased, both cola companies have taken their marketing attempts online, each site featuring multimedia interaction and splash page graphics.
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