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Cola Wars

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Cola Wars
BUAD497 Strategic Management Fall 2011 Session 3:
Cola Wars Continue: Coke and Pepsi in 2010
Sun Hyun Park, Ph.D. Assistant Professor Marshall School of Business University of Southern California

“Cola Wars”

Blind Test “Can you tell the difference?”

Student A 1: Coca Cola

Student B 1: Big K Cola (Kroger) 2: Pepsi 3: Coca Cola

Student C 1: Pepsi

2: Pepsi 3: Big K Cola (Kroger)

2: Coca Cola 3: Big K Cola (Kroger)

Agenda for Today
• Recap - Value chain analysis - Five Forces Model • Case Discussion: Cola Wars - Industry profitability analysis using five forces model - Rivalry of CPs: Who is winning the cola war? - Can the war continue?

Industry Profitability: 1975-1995
Industry Pharmaceuticals Printing & Publishing Food & Kindred products Chemicals & allied products Petroleum & Coal products Instruments & related products Industrial chemicals Paper & allied products Aircraft, guided missiles ROA 11.8 7.1 6.6 7.5 6.5 7.2 6.2 6.0 4.1 Industry Fabricated metal Motor vehicles, equipment Rubber & Plastic products Electric & electronic equipment Machinery, except electrical Stone, clay & glass products Textile mills products Nonferrous metals Iron & Steel ROA 5.7 5.6 5.1 5.4 5.8 4.8 4.3 3.9 1.5

Profit Margin Structure Across the Value Chain
Oil Suppliers Gas Stations
End Customers

Big Oil Companies
(Chevron, Exxon Mobil, Shell)

Gas Retailers
Independent gas retailers (Sheetz) Big oil company’s outlets (Shell) Big box discounters (Costco)

You and Me

* souce: http://energyalmanac.ca.gov/gasoline/margins/index.php

Attractiveness of the Gas Station Business
Oil Suppliers Gas Stations
End Customers

Big Oil Companies
(Chevron, Exxon Mobil, Shell)

Gas Retailers
Independent gas retailers (Sheetz) Big oil company’s outlets (Shell) Big box discounters (Costco)

You and Me

• •

•

Few suppliers Distinctive Products (no chance of substitution) Threat of forward integration

• •

No power over suppliers /
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