ough distribution efficiency (Murphy, 6). With this in mind,each company is undertaking strategic efforts designed to bolster theirshares of the Mexican market. Pepsi is moving in on the Coke-dominatedYucatan peninsula while Femsa, the Coca-Cola franchisee, is planning toinvest $600 million more for 3 new Coca-Cola plants next door to Gemex'sMexico City facilities. The parent companies have joined the battles as well.Coca-Cola has made a $3 billion long-term commitment to the Mexican market,and Pepsi has countered with a $750 million investment of its own. Coke andPepsi in China: Coca-Cola originally entered China in 1927, but left in 1949when the Communists took over the country. In 1979, it returned with ashipment of 30,000 cases from Hong Kong. Pepsi, which only entered China in1982, is trying to be the leading soft-drink producer in China by the year2000. Even though Coca-Cola's head start in China has given it an edge, thereis plenty of room in the country for both companies. Currently, Coca-Cola andPepsi control 15% and 7% of the Chinese soft-drink market respectively. TheChinese market presents unique problems. For example, 2,800 local soft-drinkbottlers, many of whom are state-owned, control nearly 75% of the Chinesemarket. Those bottlers located in remote areas have virtual monopolies (TheEconomist, 67). The battle for China will take place in the interior regions.These areas are unpenetrated as most of the foreign soft-drink producers haveset up in the booming coastal cities. China's high transportation anddistribution costs mean that plants must be located close to their markets.Otherwise, in a country of China's size, Coca-Cola and Pepsi risk pricingtheir products as luxury items. In China, it is easier and politically saferto expand through joint ventures with local bottlers. It is expected that, inChina, the company that wins the cola war will win based on the locations oftheir bottling plants and the quality of the partne...
