Coca Cola vs Pepsi: Background

Research Proposal Student Number PROVISIONAL TITLE coca plant low-down Vs Pepsi how a competitive scrape proliferation has determined their dominance in the world(prenominal) soft drink industry? BACKGROUND It is not a foreign notion that some(prenominal) Coca sens and Pepsi have been competing with one another in the spheric soft drinks industry for many age.From the early symbolizes, of both(prenominal) the drink brands development from 1910, when Pepsi took on Coca green goddess in the Ameri support carbonated drinks merchandise franchising 24 states1. Too the current day in which Coca Cola this year celebrated, 84 years of being the official sponsors of the Olympic Games. As well as Pepsi wining the bid for sponsorship of the Superbowl halftime memorialise once more with extend years show being viewed by an estimated 114 million globally. 2 Their soda war has been raging for over a century. When Caleb Bradham created Pepsi in 1898, Coca Cola had already been incorporated for 6 years by Asa Candler who purchased John S Pembertons Coke recipe, and was selling a million gallons a year. By the time Pepsi had franchised 24 states Coca Cola had established bottling plants in Cuba, Canada and Panama and understood the power of advertising. Ploughing large amounts of profits into marketing with DArchy Advertising Company.Over the next 20 years Pepsi suffers cardinal bankruptcies the first in 1923, the start of World War I (WWI). When government policies on sugar rationing left the company with no other viable option and Pepsi Cola was sold to Craven Holdings Corp. After two years the trademark went bust once again in 1931. Here though good fortune comes in the form of Loft Inc a candy store chain, with its intuitive president Charles G Guth they initiate the first competitive pricing strategy between the two firms. Pepsi Cola introduced the 12 ounce bottle for 5 nickel in 1933.With profits rising Pepsi produces their first advertis ing campaign for radio and jukebox Pepsi Cola Hits The Spot, Twelve Full Ounces Thats A Lot, Twice As Much For A Nickel, Too, Pepsi Cola Is The Drink For You. During this time Coca Cola has established bottling operations in Bordeaux, Paris, Philippines establishing a global distribution network of resources. Resulting in a huge group investment of $25 million persuaded by Ernest Woodruff who would sire President of Coke in 1923. The investment spurs Coke to spread to Australia Norway and South Africa. By 1959 Coke is now a registered trademark under the name of The Coca Cola Company, their first ever television commercial has been advertised and the companys distribution network crosses coulomb countries and 1700 plants. From the 1940s onwards Pepsi have learnt from introductory events and at the beginning of World War II (WWII) purchase a sugar plantation in Cuba to avoid disruption to business. They have also positive their products container to a can, a more progressi ve and modern aversion from the traditional heavy glass bottle.By 1959 Pepsi was now available in a 120 countries differentiating their home run market the youth nicknamed the sociables. At this point, for the first time both Coca Cola and Pepsi Cola are equals. In the sense they have established equally strong global distribution networks and have similar levels of assets. Albeit in 1960 Coca Cola was not complacent with sharing the lime light with Pepsi Cola, and initiates a coalition acquiring Minute Maid Corporation in response.This ca manipulations a domino effect over the next few years with Coca Cola introducing faery and Diet Coke. Pepsi Cola merges with Mountain Dew adding to their trademark and then merging into the snacks industry with Frito Lay Inc creating PepsiCo Inc, as well as introducing Diet Pepsi. Both brands have proceed to develop and expand. To this day The Coca Cola Company is consists of over 400 brands3 and Pepsi consisting of 22 food and bever age brands4. Although Coca Cola and PepsiCo are prestige brands, they both remain global market powers in a vigorously competitive soft drinks industry, valued at total value US$30. 3bn by 20085. Their advantage is down too their strategic behaviour in response to changes in the market structure, changes in market demand and product development over the last 84 years. Both brands have practiced archetypal methods such as pricing strategies, mergers, product differentiation, in order to compete with one another for market dominance.To such an extent the market has developed into an oligopoly, in which they hold a large market share stifling other competition. This type of competition is discussed in great detail in the Journal of Economics and Management Strategy, where company strategic behavioural responses are explained by using various oligopoly competition theories such as Cournot, Bertrand competition and Pure strategy Nash equilibrium games. Some of the articles with in the Journal are specific to Coca Cola and Pepsi, proving that my topic is both coetaneous and relevant. 6 The journal also embarks on the effectiveness of constant research and development to maintain product differentiation in the market. 7 The journal contains articles relevant to the soft drinks industry8 and articles that can explain certain company actions like recipe patents9. Coca Cola and Pepsis century long soda war can be analysed stage by stage, each brands reaction to the other is a carefully thought out plan in which the sole purpose is ultimately to overcome the touch on brand last move in a continuingly competitive game. RESEARCH QUESTIONS AND OBJECTIVES The main objective of this piece of research is to examine the strategically competitive decisions make by both Coca Cola and Pepsi over the last 84 years that have developed both brands into establishing themselves as significant powers in the global soft drinks industry. My aim is to go through both brands commercial accounting identifying key events and competitive moves, such as the first pricing strategy instigated by Pepsi in 1933, and Coca Colas merger of Minute Maid in 1960.Using officially endorsed company literature to establish a thorough memoir since 1986 to the present day. Such texts as For God, Country and Coca Cola The Definitive History of the Worlds Most Popular Soft Drink10 and Pepsi ascorbic acid Years11 and each corporations global web sites (www. pepsico. com/www. coca-cola. company. com) will be essential to collating a empirical investigation. Once I have compiled a detailed history for both companies, it will be clear that there are certain strategies that have been used to increase either brands market power. I will use microeconomic theory with the aid of scholarly papers, journals and market records (some of which I have referenced in my telescope) to explain the reasoning behind instigating the strategies and why they were a victory to eit her Coca Cola or Pepsi brand proliferation.I have already outlined briefly a few key implemented strategies in my background the innovation of the Pepsi can, Nickel for a Nickel decade, Minute Maid Corporation merger, but there are other notable tactics. Each chapter will be based on an individual event or commercial decision which I will have identified after further investigation, with the chapters in a chronological order. In each chapter I will analyse the motive for the action, the economic strategy implemented and its direct effectiveness on the soft drinks industry.When cogitate my research, I hope to have a synopsis of how when the right strategy is applied in the right climate it can have a sullen effect on a companys demand and supply leading to increase in profits and market share too brand proliferation12. Although my research is focused on coca cola corporation and PepsiCo it may be prudent to research another leading corporation within the global soft drinks industry i. e. Nestle Sa or Suntory Holdings Ltd. An investigation may reveal a ype of industrial organisational strategy which has not been used in Coca Cola and Pepsis relationship. I could provide this strategy as a suggested forthcoming policy to deal with Coca Cola and Pepsis modern day feud such as the Olympic sponsorship dispute13 REFERENCES 1. Mark Pendegrast (2000). For God, Country and Coca Cola The Definitive History of the Worlds Most Popular Soft Drink. 2nd ed. US TEXERE (Thomson Corporation). ix-621. 2. Stoddard (1997). Pepsi 100 Years.US General Publishing Group U. S. 1-208. 3. Dhar, Tirtha 1 Chavas, Jean-Paul 2 Cotterill, Ronald W 3 Gould, Brian W 4 . (2005). An econometric analysis of brand-level strategic pricing between Coca-Cola Co. and PepsiCo. An econometric analysis of brand-level strategic pricing between Coca-Cola Co. and PepsiCo. 14 (4), 905-932. 4. J. C. Louis and Harvey Z. Yazijian. (1980). The Cola Wars The Story of the Global Corporate Battle Between the Coca-Cola Company and Pepsico, Inc. Business History Review. 5 (04), 386-590. 5. Dube, Jean-Pierre. (2005). Product differentiation and mergers in the carbonated soft drink industry. Product differentiation and mergers in the carbonated soft drink industry. Journal of economics and counsel strategy 14 (4), 879-904. 1 Kim Bhasin. (02/11/2011). COKE VS. PEPSI The Amazing Story Behind The Infamous Cola Wars. Available http//www. businessinsider. com/soda-wars-coca-cola-pepsi-history-infographic-2011-11? op=1. Last accessed 04/11/2012. 2 Sports Illustrated. (2012). Pepsi