We want to understand HOW Coke & Pepsi have managed to maintain very high profitability over the course of their existence.There are 2 tools I want you to use to show.

Porter's 5 forces

Game Theory

1)Analyze buyer power.Use Porter's framework & definitions.

2)Analyze seller power.Use Porter's framework & definitions.

Note: for 1 & 2 above, it is helpful to look at current (2006) buyer & seller power and historical buyer & seller power.Actions taken by the firms are based on the historical level of power, so it is they dynamic path of these that are important to look at.

The two firms have followed very similar historical paths.Think about Profit = Total Revenue - Total Cost.At different stages in their development the firms aimed at one or the other of the two components of profit.These stages can be (generally) differentiated.

For example: in the 1970s Coke & Pepsi tried to ___________________ (either increase revenue or decrease costs) by doing ______________________ (strategy) which is based on the economic theory of __________________.

While there was a lot of imitation by the rivals, there are also instances where the rivals chose not to imitate or tried a strategy different from their rival.

We are concerned with VERTICAL CHOICES here