John Pemberton founded the company in 1886. Initially, the company faced price wars from rival companies that produced counterfeit products. Most companies that manufactured soft drinks imitated cola-cola product that leads to loss of a large percentage of the market share. The company wars began when former marketing executive was recruited as the Pepsi chief executive officer. Pepsi Company took over some of the market territories of coca cola hence reducing its annual income due to decreased sales. By 1960s, Coca Cola Company was facing numerous challenges from Pepsi Company which saw the introduction of Fanta and Sprite brands. Pepsi countered the two brands from coca cola by the production of mountain dew and Diet Pepsi. The company has faced a lot of competition in the market because of new entrants. It needs to utilize the market strategy to improve its relevance in the market. Research is required to identify the challenges affecting the market of cola products. The paper seeks to analyze internal and external environment; the firm’s current business level and corporate level strategies; the firm’s current performance and finally, the formulation for feasible solutions.
Coca-Cola SWOT analysis
SWOT refers to strengths, weaknesses, opportunities, and threats. It is imperative for companies and other business organizations to conduct a SWOT analysis to identify the areas that need improvement for their success.
- Brand equity- coca cola was given the best brand equity brand award in 2011 due to its worldwide presence and unique branding. The company has the most expensive branding of all the manufacturers of soft drinks.
- Large global presence- The Company is present in 200 countries across the world. It has numerous outlets in both developed and third world countries; hence it serves the middle-class economy and high-class individuals. Its presence in the global society has promoted its brand name. Coca-Cola products are found in almost every country in the world hence covering a large market area.
- Company valuation- Coca C Cola Company is one of the most valuable companies globally. Research shows that the company is valued at 79.2 billion dollars. The valuation involves several factories, the value of branding and its operational costs as well as profits.
- Largest market share- The beverage market has only two main competitors, Coca-Cola and Pepsi. Statistical research shows that Coca-Cola has the largest share in the market. Market growth drivers in the Coca-Cola Company are Fanta, coke, sprite, and maaza. The above products have a great taste among the people across the world.
- Distribution network- The Company has a well-structured network across the globe. The excellent distribution network is necessitated by the high demand of the cola products in the market. The distribution network is very successful such that Coca-Cola has been in a position to command high presence in the general market.
- Good marketing strategies- For years, Coca-Cola has tried to satisfy the needs of customers unlike its rival company, Pepsi. Ideally, where Pepsi Company targets a particular group of people, Coca-Cola targets everybody regardless of their age. Celebrities conduct some of their marketing strategies with the high command to the public. The celebrities might be artists or footballers who are well-liked and known by all people in the world.
- Customer loyalty- The high-quality products from Coca-Cola company wins may people’s hearts hence building their loyalty. Arguably, people merely like Coca-Cola products unlike other products from rival companies such as Pepsi. Many people like Fanta and coke drinks especially during celebrations. Finding alternatives to coca cola products is difficult.
- Competition with its rival company, Pepsi- Pepsi Company threatens the existence of the Coca-Cola Company in the market. Pepsi has reduced the presence of coca cola products in the market hence reducing its sales volume. Nevertheless, Pepsi has regularly struggled to minimize the relevance of Coca-Cola products in the market for a long time and its evident it will not stop any time soon. This has led to Coca Cola Company to invest heavily in its advertisement thus overstretching its income.
- The absence in health beverages- Arguably, Coca-Cola products is deemed to contribute obesity to users. News has always pointed out the health risks brought by sugary products manufactured by the company. People have started to shift from the Coca-Cola products citing health problems.
- Water management- Coca-Cola is deemed to use vast volumes of water; thus many people are complaining about the issue. Many lobby groups have launched lawsuits to stop coca cola companies from operating in certain areas with asserting that they cause water depletion
- Developing nation states – developed nations are currently shifting to health beverages hence threatening presence of Coca-Cola products in the market. The company has a chance to open up factories for manufacturing Coca-Cola products since a large population is still enjoying the delight of carbonated beverages. India is a developing country, and therefore the market of Coca-Cola products have increased in demand. There are numerous opportunities for the Coca-Cola Company to capitalize on developing countries where the consumption of its product is high.
- Supply chain improvement- Supply chain is a major snag for the Coca-Cola company, and therefore it should devise ways of improving it to cut the transportation cost of its products. It should research the best supply chain which would save on cost to improve on the annual profits.
- Packaged drinking water- The advancement of technology and quest for high living standards, packaged drinking water has found its way into the market. It has slowly started packaging drinking water unlike its rival company Pepsi. This is a potential for it to expand it to provide various brands of packaged water.
- Market the lesser selling products- Arguably, in any business organization, there is that product with least sales. Coca-Cola should advance its market strategy to sell the products with low sales volume. It incurs a lot of costs to launch new products in the market even the least selling ones and therefore it is imperative for Coca-Cola to concentrate on marketing them.
- Sourcing of raw materials- Water is a major challenge affecting the productivity of Coca-Cola. Extensive use of water and pesticide is a significant weakness of the company. Water scarcity derails the operation of Coca-Cola companies since they require vast volumes of water. Water sourcing has threatened to close off some Coca-Cola companies, especially where the community is faced with a scarcity of water.
- Indirect competitors- Arguably, chains of coffee such as café coffee day and Starbucks have increased. The market for Coca-Cola products is drastically decreasing due to healthy competition posed by coffee chains. People are shifting to drinking healthy beverages at the expense of carbonated drinks. However, health drinks such as Red bull and Tropicana have incessantly and indirectly stolen the market share for Coca-Cola products.
Arguably, a VRIO analysis is a system that assist managers in an organization to examine the resources it uses to ensure they compete favorably in the market. The resources should be identified in a manner that provides a competitive advantage is achieved. It establishes that competitive advantage will be maintained when they analyze the value of resources, the cost incurred by competitors as they try to imitate a company, its non-availability or rather rarity and the how the company would organize the resources to show a competitive advantage. Nonetheless, the VRIO technique is used by the Coca-Cola Company to analyze how its resources are suited as well as organized to demonstrate a sustainable competitive advantage. The VRIO analysis is done by explaining valuable, rare, imitability and organization terms concerning Coca-Cola Company
- Valuable- Coca-Cola has well established global distribution network which enables it to reach its global market hence maintaining its presence across the world. It has an extensive range of products thus providing consumers with different goods appealing to their eyes. The company has highly skilled human resources to help it manage its sophisticated systems, unlike other companies. Brand image is also widely known by everybody since it uses celebrities for global advertisement of its products. It has good researchers who conduct research and development who incessantly innovate products suitable for contemporary and dynamic market.
- Rare- The global distribution network enjoyed by Coca-Cola Company is very rare since it is owned by a few firms in the beverage industry and therefore it assists it to reach out large population across the world. The company possesses a secret formula of manufacturing its wide range of products which serve unique tastes and flavors to consumers. Also, the brand image is rare since it is not easy for other rival companies to build such a strong brand image. The company’s spending on research and development is unmatched since it has excellently trained personnel for conducting a thorough analysis of products.
- Imitability- Other firms in the soda industry cannot imitate the skilled human resources of Coca-Cola. This is because it spends vast sums of money in hiring as well as training to suit the company’s work. Additionally, it also spends immensely in paying back their professional work thus enjoying a competitive advantage since other companies might find it costly. It enjoys a competitive advantage since the marketing skills, and expenses cannot be copied by other rival companies. A company that aspires to imitate the marketing skills of Coca-Cola might experience huge losses, and therefore they opt to quit the behavior. The secret formula used by the company cannot be imitated by Pepsi Company as well as other firms in the soda industry hence the sustainable competitive advantage on Coca-Cola. Moreover, the brand image of Coca-Cola is not subject to imitation, but it depends on how strong a brand image is to the public. A company may enjoy a temporary competitive advantage over the other.
- Organized- Coca-Cola utilizes its high-quality products to enter into new markets thus maintaining market dominance. The brand of Coca-Cola is suitable for creating awareness of new products in the market. It has available capital to invest in large advertisement across the world. The secret formula is organized by employees for the company to enjoy a competitive advantage. Ideally, the secret formula of Coca-Cola makes its products to have high demand in the market.
Business- Level and corporate level strategies of Coca-Cola
This subtopic analyses the corporate level and business level strategies of Coca-Cola Company to establish the most critical approach which has led to its success. Porter’s five forces and corporate level strategy will be explored.
Porter’s Five Forces – Competitive Positioning
- The threat of new entrants- new entrants into the beverage industry might bring other innovation as well as new techniques of doing things. The innovations brought by new entrants put high pressure on the Coca-Cola Company. Ideally, the new entrants into the industry might offer products at low prices hence providing new value propositions to the consumers. They may experience losses and eventually quit the business because of the high operational cost. New entrants cannot steal the market share of Coca-Cola Company since it has loyal customers. New entrants are not a threat to the Coca-Cola Company since they enjoy a sustainable competitive advantage over them.
- Bargaining power of suppliers- Beverage firms buy raw materials from several suppliers across the world. Dominant suppliers can influence what the Coca-Cola Company can earn in the market territory. Negotiating power is high in powerful suppliers, and therefore they can exploit beverage firms by charging high prices on raw materials. The high bargaining power of suppliers reduces the annual profits made by famous beverage companies such as Coca-Cola and Pepsi. Coca-Cola is better placed in terms of bargaining power; therefore they will acquire raw materials at a reasonable price. The suppliers do not want to inflate prices to the Coca-Cola Company because they fear to lose prospective customers.
- Threats of substitute products- a company might suffer reduced profits when a new product is introduced to the market by other firms. Close substitutes might be a threat to Coca-Cola products since they may offer a value proposition. Pepsi, which is its main rival in the soft drink industry has a variety of products for customers to choose from just like Coca-Cola. Therefore, Coca-Cola has close substitutes that serve the same purpose as its products do. The company has addressed the threat of substitute products by understanding what its customers need. Also, it can reduce their prices in case the rival companies have substitute products.
- Rivalry among the existing competitors- Rivalry among competitors may lead to lowering of prices thus decreasing the annual profits of companies. Research shows that reducing of prices of products cannot affect Coca-Cola because it enjoys a competitive advantage in the soft drinks industry. However, the company receives a lot of pressure from Pepsi which almost provides cheaper products thus threatening its presence in the global market.
- Bargaining power of buyers- Buyers or rather consumers are demanding to pay the lowest possible prices for products. The high bargaining power of buyers is a challenge to Coca-Cola Company since it means that they have to lower their annual profits to offer its products at prices suggested by its potential customers. The higher bargaining power of buyers makes Coca-Cola increase their offers as well as a discount on products to attract as many customers as possible.
Corporate Level Strategy
- Diversification- Coca-Cola provides a variety of products to its consumers. Moreover, its products are packed into different sizes that address the needs of buyers. Drinks are packed into from 200mls, and therefore customers buy the quantities they wish. The bottles are also made of different materials such as glass, plastic, and aluminum. They have chosen to diversify its products and services to meet the requirement of the market dynamics.
- Vertical integration- The Company has engaged in many relationships with bottlers, wholesalers, distributors, marketing teams and retailers to ensure they retain its competitive advantages. The vertical integration helps the Coca-Cola Company to produce high-quality products to the market.
- Expansion of geographical area- The Company operates in more than 200 countries across the world which makes it secure a sizable market. Precisely, all states have coca cola industries except North Korea and Cuba.
Analysis of Coca Cola’s performance
- Controlling the bargaining power of buyers- The company can adequately address the feasibility solution on the bargaining power of buyers. The company should build a vast base of customers to assist it in reducing the ability of bargaining exercised by customers. The large customer base will also help the Coca-Cola Company to streamline the production process and sales. However, coming up with an innovation in manufacturing new products would reduce the bargaining power of buyers. The bargaining power of buyers is limited when the company regularly introduces new products into the market. The idea of producing new items would also prevent customers from defecting to products from rival companies like Pepsi. The company should ensure the switching cost is significant to prevent potential customers from finding substitutes to Coca-Cola products. When the prices of Coca-Cola are relatively lower than those of other firms, the high bargaining power will not make customers find alternative products, and therefore it will maintain a competitive advantage. The bargaining power of buyers could be reduced by keeping the financial documents with confidentiality to prevent the consumers from knowing the operational cost or rather the cost of production which might others result in increased bargaining power.
- Combating threat of substitute products- substitute products bring about competition in the market and if not correctly managed might cost an organization its market share. For example, Coca-Cola has found it difficult to control its market due to close substitutes from Pepsi. The issue can be combated by concentrating on service orientation than product orientation. Coca-Cola should also comprehend what the customer needs instead of what he or she can buy. It should increase the switching cost by reducing its prices. When the rates of rival companies are higher than those of Coca-Cola products, the buyers will not look for substitutes. Ideally, alternatives of products happens when products are of the same quality and quantity with the same price thus serving the same purpose. High threat of substitute product of Coca-Cola means it has to invest in research and development immensely.