Coca-Cola is a multinational beverage corporation that is involved in manufacturing, marketing and distribution aspects. The headquarters of the company are situated in Atlanta, Georgia. It manufactures beverage concentrates and non-alcoholic syrups on the international scene. Coca-cola is the primary product offered by the company. It is a carbonated drink that has the ability of being sold on vending machines, store and restaurants among other places. The company has initiated its operations in more than 200 countries. Along with this, it enjoys the presence of more than 275 bottling plants worldwide. This is the largest attribute of its kind in the soft drink industry (Hays, 2011).
Over the years of operation, Coca-Cola’s success has been brought about by its resources and capabilities. Resources include those inputs that the organization uses in the creation of its products. It entails both the tangible and intangible resources. Tangible resources include location, trademarks and patents while intangible resources include the knowledge of the market. Capabilities on the other hand, are based on how the organization uses its resources in the process of creating goods and services. They can range from placing orders, marketing and daily operations. On the company’s website, there is a detailed report on how their products are transported to different countries. This has enabled the company to remain as a global brand for a long time.
Capabilities are very important to Coca-Cola Company. Their presence has enabled the creation of competitive advantage in favor of the organization. There are several ways that the capabilities have contributed to competitive advantage. The company’s capabilities have enabled the organization to get bigger since the time of inception up to the current operations. This has resulted to increased market sales. Increased sales come along as a result of an increase in market share. The aspect of increasing the market share brings about a competitive advantage. When a company is big, economies of scale are realized (Hays, 2011). At this point, as the output increases there is a fall in average cost per unit. Cost reduction comes with several benefits to the organization. One is that it permits production of extra units with no extra costs. Another aspect is that it allows reduction of prices being charged on the products. Reduction results to increased demand hence an increase in sales revenue. Not many organizations will be able to meet these prices hence creating a competitive advantage to the organization.
Another importance of capability in creating competitive advantage is how the organization deals with its consumers. The industry experiences a high bargaining power from the side of consumers. However, this is an exemption to Coca-Cola Company. Over the years of operation, the company has been able to gain consumer loyalty through its offering and business strategy. The aspect has helped in eliminating price sensitivity. Once the prices go a notch high, consumers have the ability of switching to other brands being offered by the competitors. Nevertheless, this has not lived to be the case. The loyal consumers have preferred to remain with the products despite there being a rise in price. Their taste and preference goes beyond the prices being offered by different companies out there. This situation has reduced the buying power of other products significantly. It acts as a competitive advantage to Coca-Cola.
Another competitive advantage is derived from the organization’s reputation. This is the image that the stakeholders and the consumers derive from the company. Coca-Cola has used several ways in enhancing that its reputation remains as high as possible. One of the ways has been its involvement in community development in all the countries that it operates in. The company has been able to run successful charities and other developmental activities. This has brought a positive image to the organization. Many people want to be associated with the company as a way of saying thank you for the activities that they are doing to the community. This results to increased sales on the side of the organization. It also comes along as a form of advertising and forms a formidable bond with the consumers. This way, it is difficult for competitors to break and acquire a market share in this niche. Another way that the company has developed its reputation is by enhancing ecological sustainability. Nowadays, many people claim to be “green”. The ideology would lead them to praising Coca-Cola by being environmentally friendly. These attributes arise since the company is involved recycling of its materials. More of the recycling aspect comes in with the packaging materials. Exercising such attributes comes along to being a form of social responsibility on the side of consumers (Dahlén, Lange & Smith, 2010). They tend to feel that the company has their best interest at heart as they execute their daily routines. The capability of Coca-Cola enhancing social responsibility therefore helps in developing a competitive advantage. The loyalty established will not be easy to break by competitors.
Coca-Cola has resources that have enabled it to remain operational for a long time. These resources are both tangible and intangible. They include Robustness , value, non-substitutability, secret formula, parity and financial strength. Robustness emanates from how the activities of the company flow. The flow includes existence of tangible assets such as authorized canners and bottlers. Syrup that has already been fully prepared is sent to these plants and then combined with concentrated sweeteners to help produce the desired final products. The finished products are then packaged in authorized containers. All the containers that are used must bear the company’s trademark at all times (Tanner, 2009). The company has not had any difficulties in acquiring its sweeteners and fructose corn used in the syrup. This means that the company has no problem in acquiring its raw materials at any time. The process of supplying these materials to the desired bottling plants is also not hindered in any way. This makes the company robust and effective with its operations. With this in place, aspect of production tends to be smooth and all activities are executed in the best way possible. Efficiency is vital in enhancing that all consumers are served in the best way possible and hence have the ability to retain them.
Non-substitutability on the other hand, is brought about by the nature of the trademarks. These trademarks are usually tested on an annual basis. The company’s trademark is unique and stands out in the market. It has seemed to form part of the key competencies in the organization. Impairment value and goodwill are measured as part of the trademark. The aspect also includes the analysis of independent appraisal, cash flow and estimation of sales proceeds. Based on the fact that these factors are favorable, it becomes difficult for competitor to pose threat (Dahlén, Lange & Smith, 2010).
Parity on its part comes in through Coca-Cola’s active involvement with the business community. These include governments, local individuals and merchants. Their involvement with these stakeholders is aimed at improving prosperity, favorable environment and good economy. The company also has a responsible marketing team that enhances child nutrition. This is policy that has been set forward by the relevant bodies. There is also the encouragement of schools and other developmental institutions necessary for improving healthy lifestyles. Value on the other hand is created through the number of bottling plants that the company enjoys. There is no any other competitor in the industry that has been able to come up with such an operation (Petretti, 2011). This creates value to the company’s products hence attracting more consumers. It also acts as a form of brand recognition in the market.
Coca-Cola also enjoys the ability of having a secret formula that cannot be copied by any other organization. This formula has been kept as a secret for a long time since the inception of the company. It has been asserted that even the high level management team is not aware of the detailed contents of the formula. The formula brings out the unique taste that is found from any other organization out there. Many companies have tried to devise a similar formula but their efforts have been futile all along. Coca-Cola has declined the prospects of getting patents to the formula since it does not want to disclose it its contents. The formula has been a huge resource to the company and has contributed a lot in creation of a competitive advantage (Young & Witzel, 2012).
Financial strength also comes along as a beneficial resource to the organization. During the years of operation, the company has immersed massive profits. Its financial strength has continued to grow as a result. This has made sure that the company has sufficient funds in running its operations. More funds are been used in advertising activities. Coca-Cola has been named among the high spenders when it comes to advertising. This has been able to bring favorable results in term of sales and market diversification.
Along with the resources, the company also has several capabilities in its disposal. Among the core capabilities is consumer marketing. Several marketing investments have been designed to improve consumer awareness. This increases long-term growth in per capita consumption, market share and unit case volume (Tremblay & Tremblay, 2009). Through the company’s relationship with the sellers and bottling partners it becomes possible to develop marketing programs that tighten the market appeal. Coming up with this programs is done through packaging and product research, developing efficient consumer communication, soliciting consumer feedback and enhancing brand positioning. It has been the responsibility of the organization to ensure that the appropriate message reaches the people.
Coca-cola also has the capability of operating in the global economy. Running of international businesses is not an easy task in any industry. This is based on several stumbling blocks that present themselves along the way. It was not easy for Coca-Cola too as it initiated its operations. Taking an American brand and trying to sell it to the entire world was faced by several rejections. Competition from the local firms was very intense based on their knowledge of the market and consumers. However, this has not derailed the company’s operations in the international scene. Operating in the global economy brings a lot of advantages to the organization. One is that it helps in creating diversification aspects. When there is a failure in one market, it is complemented in the other markets (Lopez, 2012). International operations have also helped in segmentation prospects. This ensures that maximum profits are derived at all times. According to report released by the company’s CEO, there are four forces that have attributed to the shift. They include the favorable democratic capitalism, desire for determination, influence of regulation investment and success of the institution.
Another capability is commercial leadership. The organization has millions of customers that are involved in selling or serving its products to the consumers. Coca-Cola provides solutions to these customers in helping them grow their businesses. The process begins by understanding the nature of their business and needs. It entails an analysis of whether the customer is a kiosk owner or a sophisticated retailer in a market that has already developed. Objectives of the company include ensuring that the customers have the right promotional tools, package offering and the appropriate products. These are aimed at bringing enhanced value to both the company and these customers. The company is also trying to develop new beverage consumption events through innovative consumer experiences, delivery systems and product availability. Desire to achieve this has resulted in joint brand building activities with the customers. Commercial leadership has led to development of better execution of activities at the point of sale.
Franchise leadership is also another capability found within the company. There is a lot of effort being intrigued to ensure that all the parties involved in the chain perform in the best way possible. Coca-Cola is enhancing good relationships with its partners for mutual benefits. The franchise leadership aspect has enabled the company to leverage acquisitions and expand the volume base hence improving the margins (Ferrell & Hartline, 2008).
Several tools and frameworks can be used to analyze the company’s strategic capability. Value chain analysis can be used to evaluate the company’s capability of operating in the global scene. The analysis helps in understanding how the company creates shareholder value and competitive advantage. Its value chain entails suppliers, operations, consumers, marketing & sales and service. Suppliers provide the company with materials such as packaging, ingredients and machinery. Several standards have been put forward to ensure that these materials are in accordance to the stipulated regulations and laws. Clear stipulations on the payments procedures of supplier have been outline to prevent any shortcomings. Operations entail the process of combining the desired sweeteners with the syrup to bring forward the final products. There are clear guidelines of the amount to be used of each component. This helps in enhancing healthy standards for the products being developed. The consumers on the other hand are the focal point of this chain driven by pervasive market penetration, superior price ratio and brand preference (Idowu & Filho, 2009).
Another framework that can be used analyze the capabilities is the balanced scoreboard. The company’s balanced scoreboard has four perspectives. These are customer perspective, learning and growth perspective, internal business and financial perspective. The organization’s financial perspective is for assessing the profitability aspect of various strategies. Key initiatives under this scope entail cost reduction by enhancing mass production to bring about economies of scale. It focuses on how return on capital employed tries to reduce cost by selling extra units. Customer perspective on its part identifies the different market segments. The objectives are increasing customer satisfaction and market share. On the other hand, internal business perspective is concerned with the activities that are taking place in the organization. This includes the production of syrup that is shipped to different bottling partners all over the world. There is also enhancement of various safety standards of the products being manufactured so as to attain a certain health threshold. Learning and growth on its part ensures that there is the process of developing skills and empowering the workers in different departments (Ryals, 2010).
Some benchmarks can also be used in the analysis. Between 2000 and 2010, the company’s calorie levels on its products have reduced substantially. Reports indicate that the levels dropped by 9% during this period. The aspect is good since it shows how the company is concerned with the health of its consumers. It becomes easy to convince the masses to consume certain products when they are certain that their health in good hands. In 2011, 2.26 liters of water was used for every one liter of a product. This was about 16% less compared to 2004. In some parts like North America it has dropped up to 1.72 liters for every one liter of product. It is an indication that consumers are now getting more quality products. Carbon emissions for every one liter of product have dropped by 14% between 2004 and 2012 (Kimmel, Weygandt & Kieso, 2012). This is a good indication of the company’s environmental friendliness perspectives. It is a great sign of showing social responsibility to the consumers.
On ratio analysis, the debt to equity ratio currently stands at 0.983. In December 2012, earnings per share were 1.96. This slightly more compared to 2011 which stood at 1.85. The profit margin is 18.78% which is 0.36% more than what was there in 2011. Return on equity and assets were 27.86% and 10.81% respectively. This was more compared to 2011, which stood at 26.85 and 10.72 respectively (Wahlen, Bradshaw, Baginski & Stickney, 2012).
When using the VRIN to analyze Coca-Cola three suitable resources and capability can be used. They include the secret formula, consumer marketing skills and worldwide distribution networks. All these are valuable, costly to imitate, rare and non-substitutable. They have helped the organization in creating a competitive advantage and staying ahead of competitors at all times.
Coca-Cola has the ability of remaining viable for a very long time. There is a recommendation that can help in this realization. The company should make innovation its pivotal tool in all operations. This will result in introduction of new products that would bring about competitive advantage. Definitely the product derived will not have any substitute and many people would want to try it. The company’s brand recognition would help in selling this product since people already have loyalty toward the company. Lack of substitutes would help the company operate as a monopoly for a period of time. This would increase the sales levels hence generating more total profits. Having no substitutes would provide the organization with an inelastic demand. Here, the demand is not sensitive to price meaning that the consumers would still purchase the products even when the prices are high. Providing a product that is not being offered by competitors would also result in consumer loyalty.
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