Product Differentiation

Chapter 7, Product Differentiation, really had a lot of good information regarding this strategy.  But before going on with how this chapter relates to Pepsi, it’s first important to understand what this strategy is.  Product differentiation is a business strategy whereby firms attempt to gain a competitive advantage by increasing the willingness of customers to pay for the products or services they sell.  They do this by altering the objective properties of those products or services they sell each and every day.  This comes into play for sure in the case of Pepsi.  When looking at Pepsi, people think of soda.  To further that a bit more, people might think of their other products they offer, but when Pepsi or Coke come to mind, it’s hard to really differentiate the two.  With that being said, Pepsi’s goal is to definitively differentiate itself from its competition.  Whether it’s coming up with different tastes, different products, or even different entities such as snack foods, Pepsi explores all of its options.  Pepsi does all it can to differentiate its products so it can remain a market leader and can continue to attempt to beat out Coke.  Their ability to innovate is truly a competitive advantage to them.

Another interesting point that is mentioned in the chapter refers to distribution channels.  It explains how linkages within firms can effect how a firm chooses to distribute its product.  For example, Coke and Pepsi distribute their drinks through independent bottlers.  These firms make the ingredients for the drinks and then ship them to the local bottlers, who pretty much finalize the product.  After this is done, this bottler has the right to distribute whatever brand it wants to a specific region.  On the other hand, a brand such as Canady Dry does something much different.  Canada Dry packages its product in several locations and then ships them to wholesale grocers who distribute them to the local grocery stores and outlets.  This is a great example as to why Canady Dry is strong within local grocery stores, but why they are not present in vending machines like Pepsi is.  Furthermore, I found it really interesting that since the vending machine market is dominated by Pepsi and Coke, that Canada Dry actually has to be purchased in order to get into a vending machine; something that doesn’t happen too often. 

Lastly, one other thing product differentiation does for a company is reduce the threat of rivalry.  In Pepsi’s case, this is a good thing due to its intense rivalry with Coke.   However, Pepsi has launched so many different products that really help its cause.  Some of these products include AMP energy drinks, Aquafina, Gatorade, Lipton, Mountain Dew, No Fear, Propel, Ocean Spray, Sierra Mist, Sobe, Frito Lay, and Doritos to name a few.  There are definitely numerous products that are offered, and to further this, these products are even broken down into flavor and are offered all across the world.  Pepsi has done a great job of spreading its company all across the world and to come up with so many different products that would gain interest from all kinds of customers.  If Pepsi continues to be innovative rather than worrying about price, I don’t think it’ll have any problems within its market.  It’ll be interesting to see where Pepsi goes from here!

http://www.youtube.com/watch?v=HZoXYiacIcg&playnext=1&list=PL1E740D7562E64571

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