Industry Analysis and Marketing Strategies of Pepsi Cola

Industry Analysis and Marketing Strategies of Pepsi Cola
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(June 16, 2011)
Company overview
In a hot and humid summer of 1989, a young pharmacist, Caleb Bradham came up with an astonishing formula of a beverage that revolutionized the face of beverage industry. That formula belongs to a drink which is today known to the whole world as Pepsi Cola. (PepsiCo, n.d)
PepsiCo started its business with a soft drink and now it has accumulated a major portion of snack food industry having products like Lays and Quaker Oats and juices section like Tropicana and Slice as well as a range of varied flavor beverages like Marinda, Team, and Mountain Dew etc. (Datamonitor, 2003) This paper is primarily focused on the marketing strategies of Pepsi-Cola.
Industry Analysis
Before moving to the marketing strategies of Pepsi, let`s have a look on the soft drink industry and its present scenario and future prospects. Soft drink industry analysis is characterized by four main factors; economic factors affecting the industry, porter`s five forces model, industrial norms, and the industry`s key factors. Economic factors constitute the size of the market in which company operates and industry attractiveness e.g. in case of Pepsi, industry attractiveness is governed by demand of soft drinks as against other non-alcoholic drinks. With the passage of time this percentage has been increasing rapidly. Other two economic factors, growth rate and profitability, show a stable trend in case of soft drinks due to saturation of market. Profitability is strong but the growth in profits is very minor (Deichert, Ellenbecker, Klehr, Pesarchick, & Ziegler, 2006).
Competitive forces of industry
Five competitive forces in industry also affect the growth prospect of any product/firm. These forces include rivalry, threat of new entrants, threat of substitute products, bargaining power of supplier and bargaining power of buyer.
For Pepsi the major competitor is Coca-Cola that occupies the largest share in soft drink industry. Other competitors having a small share include Cadbury Schweppes, Cott Corporation and National Beverage. (Deichert, Ellenbecker, Klehr, Pesarchick, & Ziegler, 2006).
More recently, Pepsi has lost its second position in the beverage industry which is now being occupied by the Diet Coke. The reported reason is that Pepsi has invested its advertising budget more on charitable purposes and the opportunity was immediately sought by Diet coke. (Gibson, 2011). Moreover the choice of Coke by the Obama team in White house placed high stress on the profitability of Pepsi (Scherer, 2009). Thus competitive pressure placed by counterparts in industry plays a significant role in shaping the marketing strategies of a company.
Threat of new entrants is very insignificant in soft drink industry as the major share is occupied by large players and this factor poses several critical entry barriers for the new entrants. These barriers include difficulty to compete with existing strong brands, access to distribution channels, high capital investment. This industry also poses some very harsh exit barriers as well including loss due to heavy fixed cost, high advertisement expenditures and penalties due to withdraw...