Despite flattening demand for carbonated beverages such as Coke and Pepsi, the increased popularity of noncarbonated beverages, greater demand from emerging markets, and Coke and Pepsi's absolute and comparative advantages over competition, each continues to produce profits that meet and exceed industry expectations. In 2012, Coke and Pepsi posted profits margins of 18.78% and 9.42% (Cho, 2013), respectively, clearly utilizing their advantages over other players in the sector .
Coca-Cola and Pepsi have developed a wide range of products that can be used to penetrate emerging markets. They each sell the classic brands as well as geographically specific beverages. Populations from around ...view middle of the document...
The concentrate manufacturing process involves "little capital investment in machinery, overhead or labor" (Yoffie, 2004). Furthermore, bottlers must also invest in trucks and distribution networks, Both companies frequently reorganize their supply chain as a measure to improve distribution and customer relations; their established source and distribution channels are extremely fine-tuned. In addition, the two companies benefit from economies of scale in negotiating best rates for the majority of their needs.
Coca-Cola and Pepsi can sustain their profits in spite of a flattening demand for carbonated drinks by continuing to take advantage of their economies of scale, emerging market plans and development of substitutes and complements.
Cho, A. (2013, April 3). www.seekingalpha.com/article. Retrieved from www.seekingalpha.com: http://seekingalpha.com/article/1317121-coca-cola-is-an-investment-in-happiness
Coca-Cola Company. (2013, June 5)....