WPC 480 “Four Cases” Esperanza Robles
Cola-Wars
The Coca-Cola Company and PepsiCo are the most recognized brands of soft drinks
known throughout the world. They have also established one of the most competitive and long-
lasting rivalries within the soft drink industry alone. Over the years, these two companies have
conquered immense customer loyalty that any new entrant faces numerous nightmares that
would need to be defeated before even seeing a penny in profit.
Coca-Cola and PepsiCo managed to create a force known as threat of new entrants in
order to keep other concentrate makers from entering the market. To create a soft drink, the
process begins with creating the concentrate material that then gets sent to a bottling facility
where carbonated water and high fructose corn syrup is mixed with the concentrate to create
the masterpiece of a drink. Coke and Pepsi both had “Master Bottler Contract” which allowed
for both companies to have total or some control of concentrate pricing. They also developed
franchising agreements with bottlers that prevented them from carrying competing brands.
Both companies have immense successful advertising campaigns that have led much of
the companies’ product differentiation success. Coke and Pepsi both had success with bottlers
managing their mass merchandiser and supermarket retail chains by battling for shelf space and
by inventing creative ways for customers to pick their products. Both companies also managed
success with fountain retail sales by having local bottlers sell their concentrate directly local
restaurants and national food chains like Burger King (Coke) and Taco Bell (Pepsi). This
contributed to both Coke and Pepsi to be the largest supplier in both vending machine and
fountain retail channels for years to come. Having two large companies maintain dominance
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WPC 480 “Four Cases” Esperanza Robles
over vending machines and “our favorite” fast food restaurants has really created a loyalty that
has set the stage for their product differentiation in perceived uniqueness from say store brand
soft drinks or other brands of soft drinks.
Coke and Pepsi being the largest of concentrate makers, meant the two competed
heavily for top preference amongst customers. In 1974 Pepsi launched the “Pepsi Challenge”
where customers blindly tasted Pepsi and Coke to prove that Pepsi was the better choice. To
counter Coke tried to lower prices and offer more incentive to its retail channel but Pepsi was
still able to beat Coke in terms of market share. To heat up the battle even more both Pepsi and
Coke began to introduce newer products on the market such as diet alternatives and flavored
drinks like cherry Coke and Lemon-Lime Slice (Pepsi). Since major health concerns started
arising over the unhealthy, to remain competitive, both Coke and Pepsi decided to add back
natural sugars over the unhealthy “high fructose corn syrup” in some of their products. In
addition, Coke acquired Glaceau which made the Vitaminwater drinks in its effort to remain
competitive with non-carbonated drinks.
Both companies throughout the years have managed to remain highly successful and
cannot continue to succeed without the other. Both have had their fair share of rises and falls
and have managed to strategically remain in the game by keeping up with the current times and
maintaining a highly competitive rivalry that created a barrier of entry with its product
differentiation, economies of scale, and even having the capital requirement necessary to drive
off any threat of new entrant in the beverage industry.
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WPC 480 “Four Cases” Esperanza Robles
AL Dunlap at Sunbeam
The appliance maker Sunbeam during the late 90’s was in much need of rescuing and at
the time Al Dunlap seemed like the perfect candidate to rescue the company after an apparent
success with other major companies that also needed rescuing at the time. There were a lot of
different factors that were not considered when Sunbeam hired on Al Dunlap and one of them
was that the value that Al was trying to create within the company was not in the best interest
to the company overall, but rather to the company’s shareholders. Having his own book, he
even went as far as writing “if you see a report with the term ‘stakeholders’, put it down and
run, don’t walk, away from the company.” Dunlap also believed that a company should be
strictly working to profit shareholders alone rather than focusing as well in creating customer
value for the products within the company.
The problems with Sunbeam began when Al began restructuring the company by first
cutting the workforce in half, closing 18 of the companies 26 factories, reduce the product lines
by 87% and closed 18 of the companies 26 factories. Al was reducing the capacity of the
company at an alarming rate and was expecting the company to produce new competitive
innovative products with those limited resources. In an already heavily saturated appliance
market, Sunbeam was facing resource problems and Dunlap wanted the company to double it
sales within a 3-year period to remain competitive with other appliance makers like Black and
Decker. Having cut down much of the company’s resources and selling off other divisions made
it almost impossible for Sunbeam to stay competitive as Al did not have any interest in
formulating a strategy that could be implemented to achieve these aggressive goals.
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WPC 480 “Four Cases” Esperanza Robles
Al Dunlap aggressive interest in increasing the shareholder wealth by any means is what
ultimately led the company to disaster. Ignoring other issues within the company, Dunlap signed
3 other troubled appliance makers after months of trying to sell off the company. He also tried
to show an “increase” of sales by sticking with the “bill and hold” program for merchandise that
counted as sales but were not yet on retail shelves nor fully paid for. This allowed for
shareholders and analyst to believe that Dunlap was really making a difference and turning the
company around and not just cutting costs left and right. These moves all led the company to
have an all-time high share value of $53 a share that masked the real financial problems the
company was having.
Al Dunlap really sought out to “pump” the value of a stock for a given company without
creating any value for the company. Dunlap was incapable of holding himself accountable for
the actions that led the company to its demise. In a market filled with so many appliance
makers, Sunbeam was unable to further establish its brand nor create newer better products
that could create trust that that a company could bounce-back after years of struggle.
Sunbeams bad corporate governance is a prime example of why it is important to elect board of
directors who can oust ineffective incumbents that fall at the hands of bad leadership within a
company such as what Al did with acquiring struggle companies and “increasing” sales with a
faulty program.
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WPC 480 “Four Cases” Esperanza Robles
Tesla
Tesla motors Inc. has been prized as a successful innovator that has the capability to
disrupt many business industries for years to come. Having dominated the electric car industry
with their release of their roadster in 2008 to be sold online, Tesla began its journey in
disrupting the gasoline car industry and is currently in line to disrupt car buying dealerships with
its strategic business model that allows customers to purchase their vehicle online. Most of
Tesla’s success is owed to the brilliant engineer Elon Musk.
Tesla’s main competitive advantage is in its technology. Tesla initially targeted
environmentally conscious wealthy individuals who would value Tesla’s mission and with the
cost of lithium batteries, it allowed for their cars to be sold at a higher price point than average
cars. Tesla created value by standing by its belief that their cars could last longer since electric
vehicles have fewer running parts and no residue like the ones created from a gasoline powered
car. This belief allowed Tesla to extend their warranty to eight years and allow a three-year
buyback program. These additions with each purchase, aside from saving the environment, are
significantly important to consider the value that Tesla is creating with each vehicle purchase.
Customers not only experience the innovative technology each car embodies, but also feel that
sense of responsibility in protecting the environment.
Lithium batteries are what primarily power a Tesla car and Tesla was able to take
advantage of the fact that other automotive companies were waiting on the cost of lithium
batteries to be reduced, so that the company can dominate the electric car market to control
any cost reduction. Tesla decided to open its own lithium battery factory in 2016 that is located
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WPC 480 “Four Cases” Esperanza Robles
in Reno, Nevada and helps reduce the cost of batteries significantly creating not only a costly
imitation plan for any potential new entrants, but also making it rare that other automotive
companies can create their own lithium batteries.
Tesla Motors Inc. also has deals with Toyota and Panasonic which allowed Tesla to secure
the availability of its standard parts. Tesla also acquired another organization aimed at clean
energy named SolarCity. This acquisition allowed Tesla to gain an even bigger competitive
advantage as SolarCity had the biggest solar-power market share in the U.S. Both companies
produced both solar power energy, power storage and electric cars and having the major
advantage of holding a big market share, the trust of its customers, and the ultimate positive
goal of protecting the environment, we can expect that Tesla Motors Inc. will remain the top
company to provide sustainable resources in a world seeking to heal the planet from the long-
term damage created from the CO2 emitted from the outdated fossil fuel technology.
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WPC 480 “Four Cases” Esperanza Robles
Trader Joes
Trader Joes is nationwide phenomena that takes the grocery shopping experience to a
whole new old-fashioned level. For starters, Trader Joes is a friendly neighborhood grocery store
with an impressive amount of popularity and growth despite its lack of technological advances,
lack of social media presence and lack of loyalty program. Trader Joes is “comfortable being
different” and are not afraid to voice as it is mentioned in their company’s website. There is no
doubt that Trader Joes is a fan favorite who gained popularity by classic business strategy “word
of mouth” and sticking by it.
The customer’s who do shop at Trader Joes, tend to be those individuals who value
quality over quantity. They have a specific focus strategy targeted at “educated” individuals with
a thirst for an adventure. Part of the reason why Trader Joes has become such a successful
company is because they do not necessarily follow the same business model that most other
mass merchandisers and grocery stores follow. They also pay their employees more than your
average grocery store and find that working for the company is actually great because the
culture is great. Happy employees, happy service, meaning that Trader Joes really paid attention
to detail when it came to its values, as it holds an expectation to its employees to WOW their
customer’s rather than focusing on a specific process for them to follow.
The products sold within the grocery stores are also another reason why Trader Joes is
so successful. They don’t sell your major brands and you won’t be able to find household items
like other stores sell. They also often “switched-up” their merchandise making it feel like
something new and trendy would be sold the next time you could visit Trader Joes. The
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WPC 480 “Four Cases” Esperanza Robles
company really sought out to turn their store into a brand without much need of promotion
over how satisfied their customers really are. Their targeted customers really are the type of
people who are more educated than the average and who also pay close attention to detail.
Having so many unique products, Trader Joes requires the vendors to keep the company
and vendor relationship a secret so that their products are that much more difficult to imitate.
Although most of their products are unique to them, they tend to price some organic products
at a lower price than other major grocery stores like Whole Foods. Switching up the products
every so often and offering lower prices for higher quality items is what really crowns Trader
Joes at the tope of the organic food industry.
With so much success, comes many challenges with one being technology. We are in an
increasingly innovative world where technology makes things easier. Although Trader Joes
currently doesn’t invest much in technology to allow their customer to have actual
conversations, this can eventually catch up to the company. While the generation that currently
is old enough to shop at Trader Joes has seen the world with and without many advanced
devices, eventually those generations will be replaced by those who grew up with technology all
around them. This can potentially be a tough decision that the company will need to consider if
they would like for the grocery stores to remain in business for years to come.
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