Cola Wars 2010

Scene the beginning of time or so it seem, we the consumer, have had the pleasure of enduring the “Cola Wars” between Coke and Pepsi. This has been an ongoing battle between the big two cola manufactures for over one hundred years. John Pemberton, a pharmacist in Atlanta, Georgia, invented Coca-Cola in 1886; pharmacist Caleb Bradham invented Brad’s Drink, later to become Pepsi-Cola, in 1893 in New Bern, North Carolina. In 1938, Coke filed suit against Pepsi, claiming trademark infringement. In 1941, the court ruled in Pepsi’s favor, thus ending a series of lawsuits and countersuits between the two companies. The Wars begin, in 1950 when Pepsi CEO Alfred Steele, a former Coke marketing executive, made “Beat Coke” his official motto. In 1955, Coke began advertising “American’s Preferred Taste”. This was only the beginning of all the marketing campaigns people have had to endure. Therefore, it continues to this day that the two cola giants are still trading punches in the advertising sector. We will now see how Coke and Pepsi used Porters’ Five Force Model to make decision within their companies to continue to be the two leading cola maker in the industry. Porter’s Five Force Model focuses on the five forces that shape competition within an industry: 1) risk of entry by potential competitors, 2) the intensity of rivalry among established companies within the industry, 3) the bargaining power of buyers, 4) the bargaining power of suppliers, and 5) the closeness of substitutions to an industry’s product.
The threat of the entry of new competitors The threat of entry for a new competitor within the carbonated soft drink (CSD) industry would be little as this would be a very expensive endeavor for any upstart company. In advertisement and marketing alone Coke and Pepsi invested approximately $2.58 billion in 2000 alone. A typical concentrated manufacturing plant, which could cover a geographic area as large as the United States, can cost anywhere from