...Your Strategy Needs a Strategy The internet software industry would be a nightmare for an oil industry strategist. Innovations and new companies pop up frequently, seemingly out of nowhere, and the pace at which companies can build—or lose—volume and market share is head spinning. Still, the survey found, in practice many rely instead on approaches that are better suited to predictable, stable environments, even when their own environments are known to be highly volatile or mutable. Here we present a simple framework that divides strategy planning into four styles according to how predictable your environment is and how much power you have to change it. Using this framework, corporate leaders can match their strategic style to the particular conditions of their industry, business function, or geographic market. How you set your strategy constrains the kind of strategy you develop. With a clear understanding of the strategic styles available and the conditions under which each is appropriate, more companies can do what we have found that the most successful are already doing—deploying their unique capabilities and resources to better capture the opportunities available to them Finding the Right Strategic Style Your choice of strategic style should begin there as well. Although many industry factors will play into the strategy you actually formulate, you can narrow down your options by considering just two critical factors: predictability (How far into the future and how accurately...
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... 1. The soft drink industry is a billion dollar industry that can turn a profit in less than a minute. There are many factors as to why this is such a profitable industry such advertising and promotions. The two biggest corporations being Pepsi and Coke (who both need each other in this relationship) have battled it out through the years but have always seemed to be level with each other. The reason being that both of these companies compete with each other on advertisements and promotions and not necessarily price. One company does not try to make their product cheaper for the other and vice versa. Also I think that it is very hard to have a substitute for cola. If you think about it, if you are craving some sort of soda, does milk, water, juice etcetera really quench the craving for a soft drink? I personally believe it does not and for this reason you can start to see how this industry has stayed profitable and relevant for so long. Lastly, I think that a big reason why the soft drink industry has been so profitable is because the ingredients to produce soft drinks include cheap commodities such as caffeine, syrup, sugar, water, flavoring and so on. Since the commodities needed to make soft drinks are so low, this gives everyone in the soft drink industry an easy way to turn a profit. All you would need to do is mix the commodities together, which you already get for dirt-cheap and then sell it to the consumer at a higher price, thus making the soft drink industry such a profitable...
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...Steven Dutcher Harvard Case: Cola Wars BUS 460 1 April 2014 Cola Wars 1. Why, historically, has the soft drink industry been so profitable? The soft drink industry has historically always been an extremely profitable industry since the beginning of it in the early 1900’s. There are many factors that have lead to the industry being so profitable but it is mostly contributed to the “war” going on with Coca Cola and Pepsi. Coca Cola and Pepsi have been around a very long time and have strong brand loyalty to each, which does lead to help profitability for each company but that’s a small factors into why they are so profitable. To get the real reason why profitability has always been there for Coke and Pepsi you have to start by looking at the concentrate producers and the bottlers for each company. These two parts of Pepsi and Coca Cola are extremely interdependent by which they, share costs in production and marketing distribution. There is also other parts of a concentrate producer and bottler that overlap and those are: sometimes concentrate producers do some bottling and sometimes the bottlers do promotional activities. When you look at the concentrate producers and bottlers you can see why it easy for these parts of the company to contribute to profitability. The concentrate manufacturing process involves relatively little capital investment in machinery, overhead or labor. A typical concentrate manufacturing plant, which normally will cover a geographic area...
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...Description: Examines the industry structure and competitive strategy of Coca-cola and Pepsi over 100 years of rivalry. New challenges of the 21st century included boosting flagging domestic cola sales and finding new revenue streams. Both firms also began to modify their bottling, pricing, and brand strategies. They looked to emerging international markets to fuel growth and broaden their brand portfolios to include noncarbonated beverages like tea, juice, sports drinks, and bottled water. For over a century, Coca-Cola and Pepsi-Cola had vied for the "throat share" of the world's beverage market. The most intense battles of the cola wars were fought over the $60 billion industry in the United States, where the average American consumes 53 gallons of carbonated soft drinks (CSD) per year. In a "carefully waged competitive struggle," from 1975 to 1995 both Coke and Pepsi had achieved average annual growth of around 10% as both U.S. and worldwide CSD consumption consistently rose. This cozy situation was threatened in the late 1990s, however, when U.S. CSD consumption dropped for two consecutive years and worldwide shipments slowed for both Coke and Pepsi. The case considers whether Coke's and Pepsi's era of sustained growth and profitability was coming to a close or whether this apparent slowdown was just another blip in the course of a century of enviable performance. A rewritten version of an earlier case by Michael E. Porter and David B. Yoffie. Essay: The case study “Cola...
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...Case Summary of Cola Wars Continue: Coke vs. Pepsi in the Twenty-First Century The Soft Drink industry has been assigned as the vehicle for tackling the topic of industry analysis and competitive dynamics. The case covers developments in the soft drink industry through 1993. It describes how the industry evolved into its current structure largely following Coca-Cola’s leadership. What is particularly interesting is determining why the major competitors in the industry have been able to earn above normal returns for close to 100 years, and why the industry is organized the way it is. The case allows us to analyze how the actions and reactions of competitors over time work to create their own industry structure. The case also allows us to examine how prior strategic commitments to particular strategies create competitive positions, which in turn constrain the future competitive moves of firms. Since competitive positioning determines a firm’s long-run performance, we need to thoroughly grasp the essentials of what makes some competitive positions and competitive strategies more viable, and others not, and why. Case Analysis of Cola Wars Continue: Coke vs. Pepsi in the Twenty-First Century 1. Why has the soft drink industry been so profitable? a. Since 1970 consumption grew by an average of 3% b. From 1975 to 1995 both Coke and Pepsi achieve average annual growth of around 10% c. American’s drank more soda than any other beverage d. Head-to-Head Competition between...
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...Core B Session 4 - Case Notes 08/24/2006 Professor: Arvind Bhambri Case: Cola Wars Continued: Coke versus Pepsi in the Twenty-First Century Intro: Syllabus Page 16 The Soft Drink industry has been assigned as the vehicle for tackling the topic of industry analysis and competitive dynamics. The case covers developments in the soft drink industry through 1993. It describes how the industry evolved into its current structure largely following Coca-Cola’s leadership. What is particularly interesting is determining why the major competitors in the industry have been able to earn above normal returns for close to 100 years, and why the industry is organized the way it is. The case allows us to analyze how the actions and reactions of competitors over time work to create their own industry structure. The case also allows us to examine how prior strategic commitments to particular strategies create competitive positions, which in turn constrain the future competitive moves of firms. Since competitive positioning determines a firm’s long-run performance, we need to thoroughly grasp the essentials of what makes some competitive positions and competitive strategies more viable, and others not, and why. Discussion Questions: 1. 2. 3. Why has the soft drink industry been so profitable? a. Since 1970 consumption grew by an average of 3% b. From 1975 to 1995 both Coke and Pepsi achieve average annual growth of around 10% c. American’s drank more soda than...
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...will use the case to examine competition and strategy in the carbonated soft drink industry. 1. Why has the carbonated soft drink (CSD) concentrate industry been so profitable for Coke and Pepsi over many decades? * Soft drinks industries have so profitable because of their market strategies, the cost of the their products/bottlers, and competition with one another. * Pepsi mentioned they would not have been as successful without Coca-Cola and Coca-Cola without Pepsi. * Coca-Cola, was very popular during World War II, offering soldier soft drinks at lower prices. Soft drinks industries constantly adapt to changes with bottling companies, competition and different cultures worldwide. * They also grew the company from primarily CSD to include non CSD, diet soda with less sugar options, and eventually to snack foods. 2. Why was Coke able to dominate the U.S. soft drink industry through the 1950s? How was Pepsi able to catch up in the United States? * The reasons come from internal factors and external environments. Because of Coke’s secret formula and marketing strategy, Coke was considered as a good quality carbonated drink and you can always get a coke since 1920s (very good distribution channels). They quickly grew a franchisees network, this helped Coke ensure its leading position (including first mover advantage). Coke was never complacent and kept innovating new ways of delivering drinks such as fountain and vending machine. * The other key event which...
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...CASE: Cola Wars Continue Question #1 Why, historically, has the soft drink industry been so profitable? The soft drink industry has historically been one of the most profitable industries. Coke and Pepsi, the two most dominant players in the soft drink industry, were both originally created in the late 1800’s as “medicines” and were sold exclusively from drug store soda fountains. Over the years both companies have continued to expand and have more recently shifted focus to non-carbonated soft drinks as well. The reason for the soft drink industry’s profitability can be explained based on Michael Porter’s competitive industry forces framework, while strong marketing techniques and perhaps some luck of being in a growing industry played a role as well. While the industry could have supported several soft drink manufacturers, Coke and Pepsi were the only major players. Both companies had a big head start on the competition, and Coke prevented many early entrants by taking legal action against any imitating brands. Also, even though Coke and Pepsi were competitors they were not hindered by being established rivals since the industry was constantly growing. The former CEO of Pepsi, Roger Encino, even attributed the competition with Coke as a contributing factor towards Pepsi’s continued innovation and success. A lack of new entrants into the soda industry has also been a component towards the industries’ profitability as well. Over the past century, Coke and Pepsi’s innovative...
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...1. Why is the soft drink industry so profitable? An industry analysis through Porter’s Five Forces reveals that market forces are favorable for profitability. Defining the industry: Both concentrate producers (CP) and bottlers are profitable. These two parts of the industry are extremely interdependent, sharing costs in procurement, production, marketing and distribution. Many of their functions overlap; for instance, CPs do some bottling, and bottlers conduct many promotional activities. The industry is already vertically integrated to some extent. They also deal with similar suppliers and buyers. Entry into the industry would involve developing operations in either or both disciplines. Beverage substitutes would threaten both CPs and their associated bottlers. Because of operational overlap and similarities in their market environment, we can include both CPs and bottlers in our definition of the soft drink industry. In 1993, CPs earned 29% pretax profits on their sales, while bottlers earned 9% profits on their sales, for a total industry profitability of 14% (Exhibit 1). This industry as a whole generates positive economic profits. Rivalry: Revenues are extremely concentrated in this industry, with Coke and Pepsi, together with their associated bottlers, commanding 73% of the case market in 1994. Adding in the next tier of soft drink companies, the top six controlled 89% of the market. In fact, one could characterize the soft drink market as an oligopoly, or even a duopoly...
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...COKE AND PEPSI 1. Why, historically, has the soft drink industry been so profitable? 2. Why is the profitability of the concentrate business so different to that of the bottling business? 3. How has the competition between Coke and Pepsi affected industry profits? 4. Can Coke and Pepsi sustain their profits? Answers: 1. Market forces are promising for profits through the Porter’s five forces analysis. The soft drink industry has been profitable over the last couple of years for the following reasons. The soft drinks have become more available and with the addition of flavored and diet options which have made more Americans consume hence increasing the profitability of the industry. Revenues have also been extremely intense even with the bottling companies. We could also say that the soft drink industry has been controlled by just Coke and Pepsi which in return has given them positive economic profit. Also, the companies in charge of Coke and Pepsi started expanding their profits through collaborations and acquisitions of subsidiary bottled water and tea companies. For example, Coke and Nestea, Pepsi creating Orange Slice. The inputs for both products were mainly sugar and the packaging. And if sugar got expensive they could switch to corn syrup as they did in the earl 1980’s. Lastly, the soft drink industry were able to sell to buyers through five principal channels and the most principal suppliers were supermarkets. 2. There are higher number of bottler’s when...
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...1) Why, historically, has the soft drink industry been so profitable? Coca-Cola and Pepsi are 2 common soft drink companies that have been in existence for many years. Coca-Cola was founded in 1886 by a pharmacist, and the company grew from there. During World War II, soldiers were given reduced price Coca-Cola. Similarly, Pepsi (called Pepsi-Cola) was invented by a pharmacist in 1893. During the Great Depression, a 12 ounce bottle of Pepsi cost the same as a 6.5 ounce bottle of Coke, thus keeping it in business. Both companies have since capitalized on the booming industry. In 1970, Americans were drinking 23 gallons of soft drinks a year, on average, and that amount grew by 3% annually for the next 30 years. Soft drinks were the most popular beverage of choice for Americans. They were inexpensive to buy, and this was due in part to Coke and Pepsi’s cost strategies. Making soft drink concentrate required very few ingredients and very little equipment. They also coordinated with their suppliers to get fast delivery and low prices. Both companies offered significant funds to large chain grocery stores to help with marketing and promotion in exchange for shelf space and point-of-purchase displays, in order to boost revenues. Coca-Cola and Pepsi have historically had many of the same strategies, including the introduction of a diet option and a large variety of flavors. This was because having an aggressive and similarly matched competitor forced both companies to be focused, sharp...
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...1. Why is the soft drink industry so profitable? An industry analysis through Porter’s Five Forces reveals that market forces are favorable for profitability. Defining the industry: Both concentrate producers (CP) and bottlers are profitable. These two parts of the industry are extremely interdependent, sharing costs in procurement, production, marketing and distribution. Many of their functions overlap; for instance, CPs do some bottling, and bottlers conduct many promotional activities. The industry is already vertically integrated to some extent. They also deal with similar suppliers and buyers. Entry into the industry would involve developing operations in either or both disciplines. Beverage substitutes would threaten both CPs and their associated bottlers. Because of operational overlap and similarities in their market environment, we can include both CPs and bottlers in our definition of the soft drink industry. In 1993, CPs earned 29% pretax profits on their sales, while bottlers earned 9% profits on their sales, for a total industry profitability of 14% (Exhibit 1). This industry as a whole generates positive economic profits. Rivalry: Revenues are extremely concentrated in this industry, with Coke and Pepsi, together with their associated bottlers, commanding 73% of the case market in 1994. Adding in the next tier of soft drink companies, the top six controlled 89% of the market. In fact, one could characterize the soft drink market as an oligopoly, or even a duopoly...
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...Pepsi-Cola Introduction The soft drink industry has been a profitable one in spite of the “cola wars” between the two largest players. Several factors contribute to this profitability, and these factors also help to show why the profitability of the concentrate production side of the industry has been so much greater than the bottling side. Over the years the concentrate producers have experimented with different levels of vertical integration, and although it has not necessarily been clear which have been more successful historically, some decision criteria can be developed to help determine if and when complete vertical integration is necessary. Profitability in the soft drink industry As analysis using Porter’s five forces shows why the soft drink industry has been so profitable. Suppliers and buyers have not had more power over the industry than it has had over them. Internal rivalry, while seeming intense, has not eroded the profitability of the industry because of its concentration and the fact that the two major players have primarily competed on the basis of advertising and promotion and not price. Entry is difficult both for reasons of scale and the strong brand identity of the current major players. Substitutes have not been close enough to take away significant market share, although the emergence of new substitutes may pose the largest threat to the industry’s profitability. Suppliers and Buyers Suppliers to the soft drink industry are, for the most part...
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...Case Study, Coke & Pepsi Shuang Li Integrated Marketing, Section 008 September 12th, 2015 1. Why, historically, has the soft drink industry been so profitable? Customer High consumption need in the market. Since 1970 consumption of CSDs grew by an average of 3% per year for 30 years. Compare to other beverage, Americans drank more soda. Market Environment The soft drink industry just likes an oligopoly market, and Coke and Pepsi have too big market share to affect the industry. Therefore, other companies are very difficult to entry this industry Little capital investment and material cost The soft drink producers do not need much investment in machinery, labor, and overheads, so they can save their capital investment. Substitutes Although there are lots of substitutes, like beer, milk, coffee, but they do not have huge marketing. However Coke and Pepsi spend a lot on advertising and brand building, so they got brand loyalty. 2. Compare the economics of the concentrate business to that of the bottling business: Why is the profitability so different? Bottlers need huge capital to invest in their manufacturing processes, while concentrate companies do not need that much costs. 3.How has the competition between Coke and Pepsi affected the industry’s profits? The competition between the Coke and Pepsi often led to price war, which are companies offering products at discounted prices. This activity always makes lower price, and it weaken the industry’s...
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...Chapter 2 Chapter 2 Strategy Analysis Discussion Questions 1. Judith, an accounting major, states, “Strategy analysis seems to be an unnecessary detour in doing financial statement analysis. Why can’t we just get straight to the accounting issues?” Explain to Judith why she might be wrong. Strategy analysis enables the analyst to understand the underlying economics of the firm and the industry in which the firm competes. There are a number of benefits to developing this knowledge before performing any financial statement analysis. 1. Strategy understanding provides a context for evaluating a firm’s choice of accounting policies and hence the information reflected in its financial statements. For example, accounting policies (such as revenue recognition and cost capitalization) can differ across firms either because of differences in business economics or because of differences in management’s financial reporting incentives. Only by understanding differences in firms’ business strategies is it possible to assess how much to rely on a firm’s accounting information. 2. Strategy analysis highlights the firm’s profit drivers and major areas of risk. An analyst can then use this information to evaluate current firm performance and to assess the firm’s likelihood of maintaining or changing this performance based on its business strategy. 3. Strategy analysis also makes it possible to understand a firm’s financial policies and whether they make sense. As discussed later in the...
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