Answer for Question 1

Qi Li  Mon &Wed 10:45-12:00  Case: Cola Wars Continue

1.The soft drink have been so profitable because of three reasons. Firstly, in 1886 the coke come out as "potion for mental and physical disorders.” a new kind of beverage received a wide public welcome. Until 1910, Coca-Cola’s franchisees reach 370. The second reason is because the decade of fierce competition between Coke and Pepsi. In this tense competitive environment, the two companies have used all available marketing tools to sell their own goods, which makes soft drinks sustain popularity in the constantly changing consumer's concepts. The third reason is cola has accumulated a considerable consumer groups since 1886. The cola has been the most popular drink during World War II.

2. First of all, the cost structure of the two approaches is different. For concentrated producer, the capital investment on machines is $50~$100 million to build. The bottler’s bottling and warehousing could reach $100 million. The concentrated producer’s most significant costs are promoting, advertising, market research, and bottle support. However, for bottlers, the costs are concentrated and syrup, and include packing, labors, trucks and distribution network as well. Moreover, bottler is more likely to encounter intensive competitions than concentrated producer, because the concentrated producer’s formula is not easy to imitate, so their entry barrier is higher than bottlers.

3. The competition of Coke and Pepsi have great impaction to the industry’s profit, which mainly performance in four aspects. Firstly, American became the largest consumer groups of soda in the world. The consumption has grown average 3% since 1970. Secondly, the intense competition between Coke and Pepsi encourage them achieve success in term of innovation and marketing. Thirdly, Coke and Pepsi have taken around 70% market share of soft drink. Finally, the decreasing heat of CSD allow Coke and Pepsi to see the potential of the international market.