Rivalry among existing competitors: ( HIGH )

Degree of rivalry among existing competitors takes familiar forms like Price discounting, New product
introduction, advertising campaigns, and service improvements. Its a fact that profitability of industry goes
down with high rivalry. The rivalry is of high intensity in this industry as 1.The two major competitors (Coca
Cola and Pepsi Cola) are roughly equal in size and power. 2. The industry growth is low as the industry has
already reached the plateau of the growth curve. And 3.The rivals are highly committed to the business and
want to grab highest market share.
Previously the two rivals were involved in price wars and inevitably it reduced the profitability of the industry.
As the products were almost similar initially both the competitors found price war to be the only way out.
Later they focused on other dimensions of rivalry ,like branding , acquisition ,new product launch etc.
The History of Cold war between the two rivals :

The war started more than a century ago.

Both achieved average annual growth of 10% previously
The $66bn US soda industry was dominated by these two rivals.
At late 90 both went through ups and downs.
Coke suffered from operational difficulties
And Pepsi became aggressive and launched new alternatives
Both the rivals started working on bottling, advertising campaigning, promotional strategies.

Both Pepsi and Coke went into fierce competition by product diversification
Coke introduced

Fanta in 1960
Sprite in 1961
And low calorie cola Tab in 1963

Pepsi introduced

Teem in 1960
Mountain Dew in 1964
Diet Pepsi in 1964

Followed by this, both the firms took up acquisition as their core strategy to compete against each other. Coke
purchased Minute Maid and Duncan Foods, whereas Pepsi formed PepsiCo By merging with Frito-Lay.
The rivalry also involved ad campaigning against one another. Cokes advertising campaign Americans
preferred taste and No wonder Coke refreshes best brought direct attack to Pepsi , Pepsi on the other hand
handled it through demonstrations that consumers prefer Pepsi.Both focused heavily on marketing and
advertising. They doubled their advertising expenditure.
It is a capital intensive industry. Where entry barrier is high whereas exit barrier is low. Market is majorly
dominated by two large players Coke and Pepsi, whereas other brands like Dr.Peepers ,RC Cola also take some
share in the market ,however small that is.