Assignment Guide: Coke and Pepsi Case

To answer the assignment question, you should apply Porter$$s Five Force Model analyzing

the industry, using the following guides:

a$.$ Concentrate manufacturing

i$.$ Barriers to entry $$ what are they?

ii$.$ Substitution $$ How do the soft drink companies get away with charging

$$1\mathrm{.}00$ for a product when the $$healthy$$ substitute $($tap water$)$ is free?

iii. Suppliers $$ Do suppliers have any real power to the concentrate

manufacturer? Who are they?

$$

Not sugar $($added by the bottler$)$

$$

Not water $($added by the bottler$)$

$$

Then what really goes into regular Coca$-$cola?

iv$.$ Buyers $$ How much power do they have? Who are the buyers for the

concentrate manufacturer? You have to separate immediate customer and

final customer of concentrate products.

v$.$ Rivalry $$ How can companies make so much money in the middle of a

$$war$?$ Who are the major players of the $$war$?$ What are largely focused

in the competition? Who has been winning the war?

b$.$ Bottlers

i$.$ Barriers to entry $$ what levels of barriers to entry of bottlers?

ii$.$ Substitution $$ Any substitutes for bottlers?

iii. Suppliers $$ Who are suppliers of bottlers? Do they have power?

iv$.$ Buyers $$ Who are the buyers? $($fountains$,$ vending, food

stores$/$supermarkets$,$ and then warehouse$)$

v$.$ Rivalry $$ competition among bottlers?

After you have done Porter$$s Five Force analysis on both Concentrate business and Bottler,

draw a summary on the profitability of each business, Coke and Pepsi$$s position in the

industry and market, then write down what we can take away from this case as a conclusion.

Questions

$1.$ What are the gross margins and pretax profit margin of Concentrate Producers $($CPs$)$ and Bottling Business respectively? Compare the economics of the concentrate business to the bottling business: Why is the profitability so different?

$2.$ Summarize the history of the Cola Wars, spanning $100$ years. Who has been winning the war? Who has been losing?