ASSIGNMENT

SUBJECT: PRINCIPLES OF MANAGEMENT

SUBJECT CODE: MB 601

BATCH: EE 2007-2011 ‘B’ BATCH

THE GROUP MEMBERS:

SN. NO. NAME ROLL NO.

1 ABHINANDAN SAHOO 07/EE/52
2 RASHMI RANJAN ROUT 07/EE/50
3. ASHISH KUMAR 07/EE/38
Objective:
On the basis of the information provided on Coca Cola, Pepsi and the beverage market
in India on the sheet provided, we try to vignette the significance and position of both
Coca Cola and Pepsi through some questions of strategic and operational importance as
below:

Q1. Porter’s five force analysis of The Coca Cola Company

Solution:
Company Name: The Coca Cola Company

Head Quartered at: Atlanta, Georgia, USA.

Global Workforce: 0.1 Million in the Year 2008 (Source: AC Nielson’s Best
Companies to work For Survey 2008)

History: The Coca-Cola Company is the world's largest beverage company, largest
manufacturer, distributor, and marketer of non-alcoholic beverage concentrates
and syrups in the world, and is one of the largest corporations in the United States. The
company is best known for its flagship product Coca-Cola, invented by pharmacist John
Stith Pemberton in 1886. The Coca-Cola formula and brand was bought in 1889 by Asa
G. Candler who incorporated The Coca-Cola Company in 1892. Besides its namesake
Coca-Cola beverage, Coca-Cola currently offers more than 400 brands in over 200
countries or territories and serves 1.6 billion servings each day.

The Porter’s Five Forces Analysis:

Porter’s Five Forces Analysis as founded by Michael Porter provides a comprehensive
framework tool for analysis of company’s position in a market relative to various
parameters that affect a particular business model. Porter’s five forces Model is
influenced by five forces namely; on horizontal axis- Bargaining power of Suppliers,
Bargaining power of consumers, and on the vertical axis- Threat of substitutes, Threat of
new entrant, Competitive Rivalry. Here we try to present a microcosm of Coca Cola’s
Industry position in the Non-Alcoholic Beverage market through a pertinent industry tool
i.e. Porter’s Five Forces Analysis.

I. Industry Rivalry/ Competition

Competitive or Industry rivalry is an important parameter to be considered in Porter’s
Five Forces analysis. An important parameter throwing light in this aspect is the
*
concentration ratio . The lesser the Competitive ratio, the intense is the
competition between the firms. We try to vignette the industry rivalry for Coca Cola
through various sub Parameters in these aspect.

Industry The extent of Ratin Action Required

Rivalry Competition g
**
Industry High but cyclical. HIGH
Growth Rate Beverage industry has its
gormandizers but its
growth rate (CAGR of 1.5
percent – Datamonitor
2005) though high is
cyclical in nature and has
high demand in all the four
months of summer.
Level of Inflation, Higher excise LOW
Fixed/ duties, etc have all led to
Variable the increase of raw,
Costs materials cost which can be
detrimental to Coca Cola’s
low Profit. Coca Cola has
coped up well by setting up
low cost can manufacturing
units but the increasing
prices of sugar, CO2, etc
can hinder the company if
it is not able to counter
attack the strategies of its
rivals.
Difference Coca Cola has wide array HIGH
between of brands viz- Coca Cola,
products Sprite, Diet Coke, etc. A
consumer can find almost
all kinds of substitutes of
products available in the
market in Coca Cola
product category which can
hinder the growth of other
Should continue to adopt
strong consumer acquisition
strategies through marketing,
brand building, etc.
Concentrate more on
distribution to tap the
upcoming market.(new target
audience)
Try to find substitutes of sugar
to add taste to the products as
increase in sugar prices can
lead to low profits. Try to find
measures to reduce the
logistics costs by proper
distribution measures.
Pertinent Incentive
distribution to bottlers.
Increase expenditure in
attracting and recruiting new
talent.
To innovate and sustain
innovation through
upgradation of existing flavors
and brands. Compensate the
excess sweetened flavor of
rival Pepsi by substituting raw
materials other than sugar.
 innovative brands in this
category.
Brand Strong Global Brand but Medium Try to come up with products
Strength/ has some negative concerning health and
Brand publicity as Centre of environment as most of
Preference Science and Environment population has diverted
banned Coca Cola in the towards health consciousness.
Year 2006. Some Health Strengthen its presence in
concerned issues against young Target Audience.
the brands were raised.
Diversity of Low diversity among top Medium Increase its presence in Non
Competitors market leaders Coca Cola cola drinks segment. Establish
and Pepsi but other itself as not a cola
competitors being Parle, manufacturer but a beverage
Nestle, etc stand weak/ leviathan. Try to obviate the
differentiated than Coca general cola brand to global
Cola. beverage brand that helps
Coca Cola leap ahead of
Pepsi. Increase it’s market
share in other countries like it
is in North America (almost
65 %)
Entry High. The heavy HIGH Create a loyal and strong
Barriers investments for bottling brand by setting up
plants, franchisee setup geographically beneficial
make it insurmountable for franchisees and effective
new entrant to enter to promotion strategies.
which makes it difficult to Aggrandize the entry barriers
lacerate the Duopoly of through its monopoly. Try to
Pepsi and Coca Cola. be the no.1 choice of bottlers,
distributors, franchisee
suppliers, etc
Overall Global Brand valued at Medium Strategic Acquisitions
$600 Million (KPMG and against Pepsi can reduce the
Business Week, 2008). pressures over this global
Major chunk of the Colossus in The beverage
market has the perception industry. Innovative brand
that Coca-Cola is a major promotion and product
global brand in beverages. launches can be beneficial.
*Competition Ratio (CSn =CS1+CS2+….CSn) is the sum of the market shares of some
forerunner companies in the same market segment. For e.g. CS4 = S1+S2+S3+S4 gives
the sum of market shares of top four companies in a market segment. Suppose CS4 is
less than 20, then the market is heavily competitive like the normal FTL (Full Truck
Load)/LTL (Less than truck Load) trucking industry in India with big players like TCI,
All Cargo, ARCC, etc having pismire shares. Similarly, if CS4 is between 80 to 95 then
market is less concentrated with four to five top market bearers just like the Express
 Surface transport sector in India with big players like Gati, Safe Express, TCI XPS,
VRL, etc constituting more than 90 percent of the market pie.

II. The bargaining power of customers

Bargaining power of customers can be an important concept when considering a
company’s strength’s and weaknesses through Porter’s Five Forces Analysis. It
determines the amount of pressure the Buyer can impose on the product and the
position of Company in the market. Multinationals need to get a better perception
about this term before doing business. They need to understand the local market and
act accordingly. We have seen the impact of the Buyers on multinational products of
company like Häagen-Dazs®, which was unaware of the likes and dislikes of Indians
and was kicked off within few days of entering the Premium Niche of the Ice Cream
Market in India. Below we limn the same powers of buyers for The Coca Cola
Company:
Bargainin The degree of Rating Action Required
g power of Power
Buyers
**
Differentiation Most of the customers LOW Must promote other
of Outputs don’t find striking brands along with
differences among Coca traditional Coca cola and
Cola and Pepsi. But discernible differences
sweetened taste of Pepsi from Pepsi so that people
does make it stand are able to ask for Coca
different to Coca Cola. Cola as an alternative of
Pepsi makes a better Pepsi. Improve the taste
position among buyers not by sweetening but by
with a penchant for sweet other methods.
beverages.
Presence of Though Coca Cola has Medium The distribution system of
Substitutes wide array of product Coca Cola has to be
portfolio in Beverage maintained and made
Segment, there are robust enough to fight the
formidable substitutes ever increasing
available in the market too. competition. Brand
Buyers may tend to other awareness among potential
products available in the buyers like youth, Party
market. lovers, etc is equally
indispensable.
Industry Concentration in the HIGH Try to capture upcoming
concentration to industry is basically a virgin markets. Make a
buyer duopoly played by Coca better brand perception
concentration Cola and Pepsi with Coca which got deteriorated
Cola getting the better part slightly due to imputation
of bargain. Market size is of CSE, Bangalore in
continuously on a bullish 2004. Try to provide
 trend with new customers
entering every day which
throws greater challenges
to the marketing and
advertising team.
Threat of Almost a Non sequitur case HIGH
Backward as retail or industrial
Integration buyers may never find it
viable to start their own
supply with heavy
investments required for
setting up bottling plants
and distribution systems of
the processed goods
Switching Costs Practically no switching LOW
costs involved for retail
and institutional buyers.
Individual buyers can be
lulled anytime by the
competitor.
Buyer Most of the buyers still Medium
information believe Coca Cola to be a
about supplier single drink company
products although much exciting
and variety of different
brands in its array.
Overall Buyers can be imposing Medium
over the Brand Coca Cola
as pertinent substitutes
available in the market
with a lot of power and
options in the Hands of the
Buyers
products for all kind of
target audience. Promote
quality in diversity.
Try to impose Monopoly
and be an unbeatable
brand. To be the No. 1
Choice of everyone.
Give better value for
money to buyers. Provide
better incentives to all
those associated with sale
of each and every cola
bottle. Counter attack the
rival with swash Buckling
initiatives
Promote other brands with
Coca Cola. Leverage and
synchronize the other
brands with Coca Cola
Be a local taste with a
International Flair and
Legacy. Maintain and
leverage its strengths over
its rival. Promote its brand
and mitigate its historical
anathema’s and stigma’s

III. Bargaining Power of Suppliers

Buyers and suppliers form the different facet of the same coin, but we cannot play the
head tail story with it. Neither can we just focus on suppliers nor just on buyers. Both
are indispensable when it comes to great businesses. Suppliers can be formidable
when it comes to a various number of factors that influence the point of vantage in the
market. Family Dollar, Fiserv, (Source: Big Winners and Big Losers by Alfred A.
Marcus), etc have shown internationally that building businesses depend quite
importantly on how you deal with your suppliers. We try to vignette the same for the
Coca Cola Company.
Bargainin Degree of Power
g Power
of
Suppliers
Differentiatio Different Suppliers are
n in Inputs equipped with different
technologies; raw materials
that make them stand different
to a number of suppliers in this
beverage market of India.
Suppliers with better input and
consequently high degree of
output can be in the driver’s
seat sometime.
Switching High. Normally high amount
Costs of tendering and obligatory
processes involved in setting
up suppliers. Fruitfulness of a
switchover to a new supplier
can also make it a doubtful
decision to make. Geographic
location versus concentration
of consumers also influences
the above process.
Supplier Influential. The supplier can
Profit always be high margins from
top rivals as Pepsi. It can be a
Cul de Sac blow for Coca cola
if any top performing supplier
is taken away buy a rival
Threat of Low. Coca Cola has had big
Forward competitors in the past and has
Integration shown its agility to fight back
as an annihilator. Besides the
huge entry barrier, the high
amount of marketing and
distribution makes it difficult
for Suppliers to start their own
venture in the beverage
market.
Overall Suppliers form an intrinsic part Medium
of the business of Coca Cola. It
should be able to establish
Rating Action Required
**
Medium Provide better incentives
to the suppliers with
better business milieu.
Try to be the number
one choice in the market
which will eventually
make suppliers come to
better terms.
Medium Emerging field in the
beverage market.
Competition among
suppliers can play the
key for Coca Cola. Make
better decisions
regarding selection of
suppliers considering
different parameters as
geographic location,
concentration of
consumers, volumes etc.
LOW Provide better and
justifiable profit and
incentives to suppliers.
Provide a shield against
competitor trying to lull
the suppliers.
HIGH Aggrandize its brand
position in the market
and simultaneously
strengthen the entry
barriers
Be a loyal brand.
Provide better bandy
proposals and largesse to
 good communication with its suppliers
suppliers and keep them happy
and actuated

IV. Threat of New Entrants.

Threat of a new entrant depends on the industry in which the company operates. A
new entrant can sometimes be detrimental to a company’s existing market share. In
Indian Telecom Industry which was dominated by BSNL, Airtel, Vodafone, Idea, etc
until mid 2009, Tata Docomo entered the market and captured 9.92 percent
(Source: Money Mint 2009) of the new market upto the end of 2009 and now is all set
to make India a market like North Korea where it enjoys more than 51 percent market
share. But the Beverage Industry in India can hold a different scenario in view of the
threat of new entrant of which we try to purview in the following:
Threat Degree of Threat Ratin Action Required
of New
Entrants g **
Capital High capital requirement for HIGH An entry of new entrant looks a
Requirement initial setting up of bottling far fetched dream in this
plants, distribution and market of beverages in India.
marketing system, etc. The existing rivalry between
Though a big business Pepsi and Coca Cola has
group can acquire an already seen decline in margins
existing market player and and so the market is becoming
try to dominate the market less attractive in terms of
but lower profits in this heavy profit though it’s a
market these days market size is on bullish trend.
stereotypes the decision in
reality.
Distribution Needs to be robust to meet HIGH Try to get more franchisees
system the ever increasing demand under its belt. Reduce the
in the market. Very difficult distribution cost by better
to comply with the logistics planning, supply chain
exceptional set up of management, JIT Inventories,
distribution of either Pepsi etc
or Coca Cola.
Economies Coca Cola stands way ahead HIGH Concentrate more on bulk sale,
of scale in this aspect. The benefit of production, distribution, etc.
bulk sale, distribution or Try to get the full benefit of
production cannot be it’s huge network and business
fetched by a new entrant. organization
Government High restriction on entry, HIGH Huge government restriction
Policy sustenance, etc. High butters the bread of current
amount of quality check up market leaders in beverage
of products. Huge industry. The duopoly of Pepsi
government obligations to and Coca Cola is making it
 be fulfilled which also saw
the decline of Coca Cola in
1977 when it left India but
entered strongly thereafter.
OVERALL Strong Entry barriers, High
Capital Investments,
Government Obligations
make it difficult for a new
entrant to enter this market.
more difficult for new entrant
added by the strict government
policies.
HIGH Practically very few companies
have tried to venture in the
Cola segment over the years.
Threat from new entrant other
than new innovative product in
beverage category is
minuscule.

V. Threat from Substitutes

Substitutes form a formidable threat to any business environment. Products need to
meet the changing requirements of customers. One of the classic examples of
substitute threats can be vignette by the decline of Microsoft in operating system
market with the launch of Windows Vista. Vista was launched and Linux captured
the market due to the failures associated with Vista. Microsoft’s market pie blenched
from 91 percent to 65.5 percent in just six months. Let’s try to limn the threat for
Coca Cola Owing to its substitutes:
Threat Degree of Threat Ratin Action Required
from
Substitut g**
es
Relative Price Almost all the Cola Drinks HIGH Coca Cola’s “Paanch Ka
Performance are sold at the same price as Punch” and other value for
of Substitutes Coca Cola. Other indirect money combinations have
substitutes such as tea, given the brand a great
coffee, squash, etc are sold at chance to grab the attention
much cheaper rate but the of price sensitive
end benefit in comparison to consumers. It needs to
Coca Cola is differentiable continue to introduce such
and so makes a little packages that make it a
difference cheaper yet powerful brand.
Switching No switching costs LOW Brand Promotion is
Costs practically. Buyers can important. Distribution plays
anytime switch to different an important role in making
products category. The its products available every
decision is mainly dependent time at all places.
on availability and brand
perception.
Buyer Consumption of Cola drinks Medium Take advantage of the
Propensity to is influenced by the climate. summer heat in India.
consume People might opt for other Capture the tea and coffee
substitutes like Tea, Coffee, drinkers who might like to
 Squash, etc depending on the
climate. Summer season is
the time when people tend to
consume more soft drinks
and beverages
OVERALL Pepsi is one of the main
substitute threats for Coca
Cola. Other substitutes like
Tea, coffee, etc influence the
buyers but its hardly Coca
Cola can do to obviate their
Interests
prefer cold drinks to quench
themselves in the scorching
summer.
Medium India is a tea drinking
society but Coca Cola has
been able to influence the
quotidian etiquette of
victuals and viands of
Indians and has taken them
to an American and
Hispanic way of living.
Rural population is the key
to increase and spread its
influence.

** RATING: The above ratings column containing HIGH, LOW,

and MEDIUM suggests the Following-
HIGH: Coca Cola is in top position in the market for the
corresponding aspect.
MEDIUM: Coca Cola needs be vigilant on the corresponding
parameter and aspect but still gets the better part of the
bargain regarding the corresponding aspect.
LOW: Coca Cola is weak in the corresponding parameter and
needs to improve its position.
Q2. Identify the strategic questions facing Coca Cola?
Solution:
The strategic Questions facing Coca Cola are:
1. Expanding market share in non carbonated drinks (NCD) category. Non
carbonated drinks category grew around CAGR of 7.5 in 2008 and the popular
product Minute Maid showed double digit growth. So growth and focus in this
segment can be the raison de’tre of a global business leader.
2. Expanding in bottled and packaged mineral water segment. Nestle is a global
leader in bottled mineral water market with 32.5 percent market share and Pepsi
in the second spot with 10 percent, followed by Coca Cola with a 8.5 percent.
(Datamonitor 2008). Ergo, growth in this category should be one of the prime
focuses of Coca Cola.
3. Severe Water shortages in India. Manufacturing soft drinks involves a lot of use
of water in its operations and shortage of water is one of the gravest concerns of
Coca Cola.
4. Environmental issues, labor rights issue, food and quality measures, etc pose a
challenge to Coca Cola specifically in India. Lost its market in 2004 when Centre
of Science and Environment, Bangalore banned it from doing business in India.
The growing labor pressure can also pose a threat to Coca Cola.
5. Decision making, managing logistics and distribution of products to beat the rival
in its flagship product (CSD Cola Drinks) category is one the eternal challenges
faced by Coca Cola.
Q3. Assess the relative strength and weaknesses of Coca Cola and Pepsi under
different scenarios
Solution:
A. Strengths of Coca Cola and Pepsi
Parameter Coca Cola Pepsi Leader
Organization Globally strong, Huge Huge organization. Present Coca Cola
& workforce. It has bottling worldwide. Has a good
Operations plants almost in every distribution system and
country. Has a robust owns more bottling plants
distribution system. than Coca Cola
Brand Powerful Brand signifies Powerful brand with Coca Cola
hierarchy of brand building products other than soft
and strength. Identified as a drinks such as Aliva,
global beverage brand with a Kurkure, etc
wide array of products.
Management Performing management. Globally recognized Pepsi
Has been able to show robust management. Pepsi’s
revenue growth over three management is the most
decades. Led by efficient sought after management
Mukthar Kent, Atul Singh, in other market segments
etc too. Led by Indra Nooyi,
John Compton, Saad Ali
Latif, etc
Innovation It has products in every Innovative and thoughtful. Pepsi
category available in market. To start a new
Recently started a powder drink(patented) made up of
sachet of drink called Hibiscus plant and is all set
Vintigo in rural areas of flourish in this new market
Orrisa.
Mergers Acquired important brands Acquiring in markets that Pepsi
& from Parle and made are new or unexplored. For
Acquisitions strategic partnerships with eg: It acquired Brazil’s
bottlers, franchisees, etc Amacoco – a Company
that makes drinks from
coconut oil and so is
creating a new niche
segment in beverage

B. Weaknesses of Pepsi and Coca Cola:
Parameter Coca Cola
Organization It has less than 18 percent of
& its bottling plants under its
Operations leadership. It does not do
any bottling on its own
though. Prone to pressures
from bottlers, suppliers, etc
Brand Many buyers are still not
aware of it huge array of
brands other than Coca Cola.
It has been helpless to find a
counter attack to more
sweetened flavor of Pepsi. It
also has some negative
publicity due to its ban in
2004. Some health conscious
people disapprove.
Management It has shown stupendous
growth but the management
is not highly qualified. Only to beat Coca Cola. For eg:
23 percent of the top
management of Coca Cola is
MBA’s or Post Graduates.
Innovation Is stubborn when it comes to Innovation in the Cola
innovation of the internal
features of product. It is not with Coca Cola such as
able to compensate for the
excess sweetened flavor of
Pepsi by any Means except
Coke Vanilla. It has not been competition to Coca Cola
able to explore unidentified
markets
Mergers No significant Mergers &
& Acquisitions except parle
Acquisitions products, in recent past to
acquire markets other than
market. In talks with Tata
Tea to make a tea based
drink(patented)
Pepsi Loser
It has witnessed high Coca Cola
attrition in workforce over
the years with top people
leaving the organization. It
has not adopted any
measures to reduce the cost
of cans, manufacturing, etc
Brand is strong but has not Coca Cola
been able create its market
leader niche in Cola
Segment. It tries to build
its brand through products
like Frito Lay, Aliva,
Kurkure, etc as it has not
been able to beat Coca
Cola in Cola Segment.
Highly qualified but Pepsi
incompetent when it comes
Indra Nooyi saved her
position as CEO by
launching a product called
Aliva, as it was not able to
beat Coca Cola in Cola
Segment.
Pepsi
Segment is in sidelines
Diet Pepsi as that of Diet
Coke. Pepsi has not been
able to provide any
in beverage segment
through the use of
innovation.
Significant acquisition but Coca Cola
not thoughtful in its
acquisitions. It bought
Amacoco for an excess of
 cola segment. It is not
focused enough to beat
Players like Nestle, Kraft,
etc in markets other than
Carbonated Drinks.
Q4. Set of Recommendations for Coca Cola by taking into account the offensive
and defensive strategies of Pepsi
Solution:
Coca Cola’s Recommendations
Bring more bottling plants under
its own leadership.
Find new technology for
manufacturing cost reduction,
better distribution, etc.
Launch new sweetened product
like that of Coke Vanilla to abolish
Pepsi’s extra sweetened flavor.
Acquire new global companies
and bring them to India to explore
unidentified markets
Show more concerns over Product
Quality and safety measures
Involve itself into Corporate Social
Responsibility Schemes to make
its brand more loyal and friendly
$2.5 Million dollars
(source: Forbes 2010).
Lost an Important merger
of Gerber Foods, USA
which was won by Kraft
Foods.
Pepsi’s retaliatory moves
Increase the number of bottling
plants which are already under its
leadership
Upgrade its technology to make
better benefit than Coca Cola
Sweetened Pepsi or make an
addition of ingredients or raw
materials for increase taste and
flavor.
Aggressive acquisitions and better
operational strategies according to
the steps taken by Coca cola
Show better food and water
quality in its products.
Show more interests in its ethical
practices and CSR initiatives.
Make Pepsi a youth brand.