Question

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Do an economic analysis of two giant competitor brands, Coke and Pepsi, in the context of them being rivals in the "Twenty-First Century" and use all the knowledge you have gathered over the last several weeks. Please do not make it a financial case. It is to be an economics case study, utilizing the economic model of pure competition, monopolistic competition, oligopoly or monopoly.

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Answer 1

There are two major or giant companies which are having the leading position in the cold refreshment industry at present can be seen in the form of Coke and Pepsi. If we look practically, the products produced by these companies are the perfect substitutes for each other. As the market has been dominated by both of these organizations for many years this market can be seen as an Oligopoly.

Both of these companies really took the advantages of making this industry as an Oligopoly if we look form the perspective of cartelization. If any other organization tries to enter the industry, the price of the products of both of these companies is reduced to overcome the competition this is to create the market strength.

Although the products of both the companies are a perfect substitute for each other, at present the market share of Coke is quite large than Pepsi. The main reason behind this is that in comparison to Pepsi, the products of Coke are accessible at almost every location. For instance Subways, McDonald’s and so on. On the other hand Pepsi is sold mainly in KFC. In contrast to that, the availability of Pepsi is quite limited such as oil stations, general stores and in fact, these stores also sell Coke. Thus rather than looking for Pepsi, a normal customer will buy a Coke.

This advantage which is gained from the distribution extensiveness provides an advantage to Coke and thus the sale of Coke is also high. With the increased number of customers buying the products of Coke, the stores will also store the products of Coke rather than Pepsi.

Apart from this, the marketing strategy, advertising campaign, and event sponsorship are quite high for Coke as compared to Pepsi. In fact, if Coke has to be replaced, it can be done by Pepsi only as both the products are perfect substitutes.

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