Market competition- one of the major problems of most of the companies has been experiencing since their advent. But for the market itself its healthy especially for the consumers (Nichols, 2007). The battle for market dominance and customer loyalty has pushed the industries to their limits to the extent of exploring new things beyond their product lines. Being able to see opportunities in this unstable economic condition that we have for the past few years is really an ability that business minded inpiduals must posses in order to survive to market competition. The fact that there are a lot of companies out there that shut their operations down due to tremendous amount of losses from competing with other companies is something that multinational companies don’t want to happen to them.
A great example for this great battle for market survival is the undying competition between the two of the most successful beverage companies in the country- Pepsi and Coke. This two market leaders of carbonated drinks started their rivalry by the time carbonated drinks starts to become popular in the market. Since then, they become voracious in searching for ways of overtaking one another to attain market dominance and to gain more profit out of their operation to fund their expansion plans. The expansion plans that I am referring here is not expanding the size of their plant size or increasing the number of their production, but rather expanding their product lines in order to give their market with more of different product lines to choose from.
With this, they could instill their name into the minds of their target consumers and to give them the impression that they are one who dominates the market. The recent acquisition of Coca Cola Company with Fuze, producer of tea and energy drinks, while Pepsi with Izze, producer of all natural fruit juices, proves that the battle between the said two beverage companies reached up to the extent of exploring the noncarbonated drink industry which at first is not their forte (McKay, 2007). Both Coke and Pepsi believe that they could run over the other by expanding their beverage products to gain more sales and market. Well, that is correct for they would now acquire the sales of these companies that they acquired. But the question is; can they handle the product well?
The fact that these two giant companies start acquiring the production of products that are alien to them is something that is mind bugling. Now, one way of determining the capacity of these companies on handling their “non-core” products is the method called PTSTP which is being used in determining the significance of a certain product to the target consumer. In this regard, we are going to find out if whether Coke and Pepsi will have to use this method or not in obtaining sustainable competitive advantage against their competitors. To start with, let us first examine the current status of these two companies and the market standing of their products against with their competitors as well as on how it performs in the market. This would guide our evaluation in the latter part of this paper.
Coca Cola Company
Despite the back lags in the economic condition locally and internationally, Coke still manages to hold its position of being the market icon in the beverage industry. This company still comprises the major supply of carbonated drinks not only in the U.S. but also from other countries abroad. So far, they pretty good in handling their carbonated drinks like Coke Diet, Coke Light, Coke Zero and a lot more. In short, they lead the production of carbonated drinks and there is no question about it. But the problem now is their noncarbonated products from the companies that they acquired to expand their product lines from the recent years. It is said that their noncarbonated drinks fell behind of those of Pepsi and that is odd for most of the people are expecting that they would be handling the promotion and improvement of the products that they acquired. This is one of the biggest problems of the CEO of Coke that he has to face with. The idea that they are being overtaken by Pepsi is really an alarming one.
It is said that during the first years of exploring noncarbonated beverages as a source of reinforcement to increase their sales and market dominance, Coke execs were skeptical about the said idea and that is the reason why they are the one who’s having a hard time of catching to other companies who already mastered the management of products that are of new to them, like Pepsi (Foust, 2004). This serves as the root of their problem with handling their “non-core” products. “We just didn’t see the opportunity [of exploring into noncarbonated beverages]” is the statement of the president of Philadelphia Coca Cola Bottling Co.
according to an article published in a magazine which I find every inexcusable for it is their responsible to always seek for new opportunities in the market if they want to become the market leader in the industry that they belong. This is the reason why Odwalla Inc, Mad River Traders Inc and Barq which were acquired by Coke to enhanced it portfolio starts having a hard time in performing well in the market. If Coca Cola wants to maintain their position on top of the competition, they must try to find a way in making their noncarbonated products to at least “appear good” in the eyes of their target consumers and find a long term solution to this problem.
Pepsi Company
Compared to Coke, Pepsi has less sales volume and market shares but they have the capacity to grab market opportunities which Coke was not able to achieve during the previous years. This is the reason why there is no doubt that they are handling their noncarbonated products well which can also be classified as their “non-core” products since, just like Coke; they are in line with producing carbonated drinks. But the problem that Pepsi is experiencing right now is their lack of “sensitivity” with regards to the changes in the pattern of tastes of their customers (Brady, 2004).
This is the reason why they have been experiencing some losses in terms of sales volumes and revenues for the past years. Even though they have been performing pretty well as compared to Coke, but still, in a macro sense, they have been lacking innovations into their products not just in noncarbonated but also into their core product lines. Innovations are one of the “x-factor” that customers have been searching in choosing products to purchase. If only Pepsi could posses this quality along side with their other efficient and effective marketing strategies, there is a possibility that they could par with Coke or surpass Coke in the long run.
Evaluation
Based from the given information and arguments above, I could say that the said two major beverage companies should use PTSTP in order to uplift their performance in terms of promoting their product lines into their target market, may it be their core or non-core products. Product is the main factor in this issue and this element encompasses almost all of the functions that lead to the attainment of sustainable competitive advantage in the market. In the first place it is the prime reason why these companies are operating in the market- to provide products into the market in order to generate profits out of it.
Through PTSTP, they would be able to know how customers value their product. It’s like, determining the possible importance of this product to their target customers. Like, if whether buying energy drink is more important than buying fruits in the market. Pepsi and Coke must be able to know if whether their energy drink would make an “impact” on the demands of their target customers. If they found out that their product do not have any “value” to their customers, then, search for flaws in your product that makes it less valuable to their customers.
I’m pretty sure that Coke and Pepsi did not have enough market study regarding the market status of the product lines that they are acquiring today which is pretty obvious in the current performance of their noncarbonated products. PTSTP would guide Coke and Pepsi in assessing products that they will plan to acquire in the near future or would guide them in developing new product lines. PTSTP somehow similar in determining the willingness to pay of a customer to a certain product, like, if the customer say that he/she is willing to pay $100 for your product and you only spend $40 in producing a unit of your good, then, more or less you already have the idea how your target customers value your product since they are willing to pay high in order to purchase and consume your product.
References
- Brady, D. (2004). Pepsi’s Thousand and One Noshes- How it deftly adapts products to changing consumer tastes. Retrieved October 20, 2007
- Foust, D. (2004). Things Go Better With…Juice. Retrieved October 20, 2007
- McKay, B. (2007, February 2). Coke Buys Fuze to Light up Its Lineup. Wall Street Journal. Pg. B.3
- Nichols, M. (2007). Four Reasons to thank the Competition. Retrieved October 20, 2007