STRATEGIC ANALYSIS OF COCA-COLA COMPANY

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Strategic Analysis of Coca-Cola Company

Introduction

The Coca-Cola Company is a leading manufacturer, marketer, and distributor of syrups and non-alcoholic beverage concentrates throughout the world. The company licenses or owns over 500 brands and has its operations in over 200 countries across the world. The Coca-Cola Company “is a marketing model not just for mega multinationals that seek to share the best practices from around the world but also a case study for how upstart and midsize brands, of which a Coca-Cola has amassed many, can use creative stunts and strategic partnerships to get a lot done at a smaller budget”. This study has the main objective of looking into the strategic management process employed by the Coca-Cola Company in order to counter the external factors affecting the company. This study is meant to examine how the company is strategically positioned in the world market of soft drinks. Given that the company operates in over 200 nations across the globe, it is faced with the need to make a choice of whether to globally standardize their products and thus benefit from economies of scale operation (Grant, 2008, 102). It is also faced with the need to adapt their products to a specific market segment or adopt integrated approaches that simultaneously make use of both approaches (Coulter, 2013, 75-7).

Much literature has been produce regarding the external and uncontrollable factors that may impact on the company’s strategic positioning. This study is meant to look at the internal variables and the externalities in order to derive the “best fit” tactical and strategic approach. The paper seeks to illustrate how the company’s tactics and international strategy harmoniously work after a deep consideration of the external forces existing in the global market. Organizational and strategic effectiveness are very vital for the success of any business organization, although they are very different. According to Crossan, Fry, & Killing, 2002, 57-9, strategic positioning is unique in the sense that it seeks to integrate both organizational and strategic effectiveness in a manner that serves to differentiate a business organization in the market place and thus drive success. When looking at a product strategy, management in a borderless world does not necessarily mean managing by the averages. It does not also mean that to make a product appealing to the customers means removing the localization of the product. It rather means setting the stage for the management of the product to thrive locally and internationally (Coulter, 2013, 94-6).

Overview

Founded in 1886, Coca-Cola Company is the world’s leading manufacturer of syrups and non-alcoholic beverages and it currently in more than 200 countries globally. The company is famous for its innovative soft drink, “Coca-Cola” although it can presently boast of over 230 brands. The company is headquartered in Atlanta, Georgia and it employs almost 30,000 people across the world. It is noted that 80% of the company’s profit and 70% of its volume come from other nations other than the United States. It is presently one of the most visible world companies and its product is available in every part in the whole world. The former chairman of the company once said that the main strength of the company is its ability to expand globally. The other competitive advantage enjoyed by the company is that it deals in a popular, affordable product, and having a strong foothold in most of the countries across the globe (Crossan, Fry, & Killing, 2002, 67-9). The global market of soft drinks is majorly dominated by three household names: PepsiCo, Coca-Cola, and Cadbury-Schweppes. 47% of the global market is claimed by Coca-Cola compared to PepsiCo’s 21% and 8% for Cadbury Schweppes.

The international success of the company is attributed to a number of factors but the company’s former chief marketing officer, Sergio Zyman argued that thinking globally means acting locally and thus the company had to act locally in order to succeed. As much as the company is recognized globally, with their main brand leading in world recognition, they still have major local operations that ensure that the tastes and demands of local consumers are met (Fleischner, 2011, 88). The company has always strived to stay local even as it runs global business with individual businessmen in the native nations owning bottling and distribution operations. According to Hussey, 1999, 78-9, given location and personal references, consumers will always have different experiences. The company has ensured it adjusts to this approach (both at tactical and strategic level) so that it can be able to tap into the differences and offer the most appropriate marketing activities and at the same time connect with the consumers. Dobson, 2004, 78-9, says that a company’s profitability and effectiveness is basically supported by its strong market share and competitive position. It is stated that there is a very strong correlation between a company’s level of profitability and its market share. The greater the market share, the higher the level of profitability (Hussey, 1999, 46-9).

There are basically four reasons as to why market share is linked to profitability. The first reason is economies of scale in conjunction with learning experience brought about by an efficient and effective use of technology and production techniques. The second reason is that customers are normally unwilling to take risks but rather choose to stay with the main payer in the market because of the prevailing comfort factor. The third reason is that due to the fact that the market leader is able to dominate and influence the market, it is for this matter able to settle on lower pricing with the suppliers and at the same time command a high market price for its brand products. The fourth and last reason is that a market leader has excellent management teams and successful processes and procedures developed throughout the business (Normann, 2000, 89). In order to carry out a proper strategic management brand positioning, it is important to carry out a SWOT Analysis for Coca-Cola Company.

Coca-Cola SWOT analysis

Strengths

It is the best worldwide brand in value terms ($ 77,839 billion). This is according to interbrand placing the company as the most valued in the whole world.

Has the world’s largest share in the market in terms of beverage sale. Coca-Cola holds the greatest share in the beverage market; estimated to 40%.

It has strong advertising and marketing mechanisms. The company’s advertising expenses amounted to over $3 billion in the year 2012 and this increased the company’s volume of sales as well as the brand recognition (Almaney, 2001, 98).

It has the most extensive distributional channels for beverages. The company serves over 200 countries and over 1.7 billion daily servings (Dobson, 2004, 68-9).

It enjoys customer loyalty. The company’s customers have one of the most loyal groups of customers ever and are never willing to switch to other brands.

It enjoys the bargaining power over its suppliers. Being that it is one of the largest world wide beverage producers, it exerts pressure on its suppliers and get the lowest pricing from them.

Effective practice of corporate social responsibility. The company increasingly focuses on CSR programmes such as packaging/recycling, active healthy living, climate change/energy conservation, water stewardship, and so on. According to Normann, 2000, 90-4, this helps boost the company’s social image thus giving it a competitive advantage over its competitors (Almaney, 2001, 76).

Weaknesses

It has a significant focus solely on carbonated drinks. The company focuses on selling fanta, sprite, coke, and some carbonated drinks. This strategy can only work in the short run as the consumption of carbonated beverages will grow but it will reach a point where it will prove to be weak when individuals will move towards consuming healthier drinks and food in an aim to fight obesity (Dobson, 2004, 98-9).

It has undiversified product portfolio. The company is put to a competitive disadvantage since it only focuses on selling beverages while its competitors have diversified their production. It is observed that there is an average stagnation in the consumption of soft drinks and this implies that it may be so hard for the company to penetrate into other markets in order to retain its current growth level (Jenster, & Hussey, 2001, 78-9).

Accumulation of huge amounts of debt due to acquisitions. The company’s debt level has been increased significantly due to the CCE’s acquisitions.

Suffers negative publicity. The company is presently criticized for using harmful ingredients in the production of their drinks and high consumption of water in regions that suffer from water scarcity.

Brand failures in the market and some brands producing revenues that are quite insignificant. The company presently sells over 500 brands but just a few of the brands results in sales amounting to $1 billion. The company also has a weak strategy of introducing new brands.

Opportunities

Growth of bottled water consumption. There is expected rise in the consumption of bottled water in the United States and in the whole world.

Increased demand for beverages and healthy food. Demand for beverages and healthy food has drastically increased due to the increased need to fight obesity (Jenster, & Hussey, 2001, 68-9). The company has the opportunity to expand in its range of products and drinks that contain low levels of calories and sugar.

Increased beverage consumption in the emerging markets. There is a significant increase in the consumption of soft drinks in the emerging markets, specifically the BRIC countries. Coca-Cola could maintain and increase its beverage market share.

Growth through acquisitions. With the current product portfolio, it will prove hard for the company to maintain its current level of growth and also penetrate into the new markets.

Threats

Change in consumer tastes. Consumers all over the world have become more conscious of health matters and are likely to reduce their consumption of drinks containing large amounts of calories, sugar, carbonated drinks, and fat. This poses a great threat to Coca-Cola Company that mainly serves carbonated drinks.

Water scarcity. Coca-Cola normally uses large amounts of water in their production and the fact that water is becoming scarcer all over the world poses a great threat to the operation of the company.

Strong dollar. Over 60% of the company’s income comes from outside the United States and the fact that the dollar performs strongly against other currencies may make the company’s revenue to fall (Jenster, & Hussey, 2001, 56-8).

Legal requirements necessary to disclose the product labels negative information. Some of the company’s carbonated drinks have serious health consequences. This has made many governments to put legislations that require the company to disclose information concerning the product labels. This may pose a threat to the company.

Decreasing net profit margins and gross profit. The company’s net profit margin has been declining over the past few years and it may continue to decline due to the high cost of water and other raw materials.

Competition from PepsiCo. PepsiCo is a fierce competitor of the company over the market share, majorly in the BRIC countries such as India.

Saturated market of carbonated drinks. The company majorly relies on the sale of carbonated drinks. This poses a threat to the company since the market of carbonated drinks is neither growing nor declining across the world (Normann, 2000, 98).

Conclusion

Coca-Cola Company has a vision statement serving as a framework for the company’s roadmap and guideline for the company’s plan of action in order to accomplish its strategic positioning and achieve a sustainable quality growth. The company’s objective is to become the best place of work where people are inspired to achieve their best and also nurture a winning network of suppliers and customers. The company has also set up a portfolio beverage brand that ensures that all needs and desires of the customers across the world are satisfied (Jenster, & Hussey, 2001, 45-8). In order for the company to achieve its strategic objectives, there is need to enhance productivity and put in measures that would ensure profitability and long term returns to the shareholders.

References

Almaney, A. J., 2001. Strategic analysis: An approach to building distinctive competencies. Salem, Wis: Sheffield Pub.

Coulter, M. K., 2013. Strategic management in action. Boston: Pearson.

Crossan, M. M., Fry, J. N., & Killing, J. P., 2002. Strategic analysis and action. Toronto: Prentice Hall.

Dobson, P., 2004. Strategic Management: Issues and Cases. Oxford: John Wiley & Sons.

Fleischner, M. H., 2011. SEO made simple: Strategies for dominating the world’s largest search engine. Charleston, SC: Michael H. Fleischner.

Grant, R. M., 2008. Contemporary strategy analysis. Oxford: Blackwell.

Grant, Robert M., 2010. Contemporary Strategy Analysis and Cases 7th Ed + Strategic Management. John Wiley & Sons Inc.

Hussey, D. E., & Hussey, D. E., 1999. Strategy and planning: A manager’s guide. Chichester, England: Wiley.

Jenster, P., & Hussey, D., 2001. Company analysis: Determining strategic capability. Chichester [u.a.: Wiley.

Normann, R., 2000. Service management: Strategy and leadership in service business. Chichester [u.a.: Wiley.