Question

Pepsi and Coke have engaged in the Cola Wars since the 1980's competing for volume from customers driving profit margins down. Coke and Pepsi control 90% of the soft drink market. How can they increase profits? Explain under assumptions your proposal works, and when it fails.

Answer 1

Pepsi can increase profits through expansive distribution network, lower retailer margins, cutting administration and manpower costs, lowering marketing and advertising spends, pushing referral marketing initiative and positive word of mouth at loweer costs, economies of scale through higher production.

However this strategy can fail if competitors too imitate and have substantial competitive advantage and indulge in proce wars which shall erode profits of entire sector as whole.

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