Strategic Analysis for Coca Cola (Individual Paper) Since its beginning in the spring of 1886 Coca-Cola has become the most popular and biggest-selling soft drink company in history. The Coca-Cola Company is the world's leading manufacturer, marketer, and distributor of non-alcoholic beverages in the world. As a global leader in the beverage industry, the Coca-Cola Company further indulges in enhancing their value propositions as an instrument to create ‘virtuous cycles of geographic expansion’ and thus greater advantage.
Coke, owns the most important elements of the value chain or the “globally leverage able intangibles” such as the brand, the technology, the management, the marketing expertise and the relationships. Being a primary advocate of value-building in the beverage industry, Coke converged with different value-added activities. Within the Coca-Cola system that is consists of suppliers, bottling partners, customers and consumers, one of the primary value-added activities which is the Coca-Cola Retailing Research Councils, such contributes largely on the value chain of the company especially on the aspect of innovation and product development.
Soft drink industry is divided into two segments namely production of soft drink syrup and manufacturing and/or distribution of soft drinks in retail level. Coke chose to concentrate their operation on the first segment while intimately depending on independent bottlers companies. Basically, the company is engaged into blending raw material ingredients (product planning), packaging in plastic canisters (market research) and shipping to bottlers (advertising). Rivalry condition is concentrated on two main players – Coca-Cola and Pepsi Cola – thus, the emergence duopoly competition or the “Cola wars” .
Existence of substitute products is wide and thick and substitute products for Coke reached the market where Coke has a strong presence. Apart from the primary rival (PepsiCo), the company finds intensified competitions on companies that produce market and sell teas, beers, milk, coffee, wine, powered drinks and other refreshments causing a significant decline in Coke prices. To reduce threats, Coke embraced the idea of bottling and concentrated on product diversification.
Penetrating the soft drink industry is hard because of the established name of Coke; hence, new entrants must first overcome the remarkable marketing muscle and marketing presence of Coke. Coke has long-term relationships with their retailers and distributors making possible the defense of the position by means of discounts and other tactics, and regulation make it impossible for new bottlers to enter areas where an existing bottler operates. Bargaining power of suppliers is low due to producing the two main inputs (Sugar and packaging) and direct negotiations from concentrate producers to suppliers.
Bargaining power of buyers depends on the marketing channel used. For Coke, there are five core channels such as food stores, convenient stores, fountain, vending machine and mass merchandisers. The bargaining power of buyer is high for fountain supermarkets and mass merchandising because of the low profitability and strong negotiation power of retail channels but for vending bargaining power is non-existing caused by high profitability. Coca-Cola is currently going through the maturity stage. Management has to pay special attention to products during this stage of the product life-cycle.
The Coca-Cola Company understands that in today’s business world technology is very essential to run such a big company like Coca-Cola. Therefore, the Coca-Cola Company uses different types of technology such as creating databases and data warehouse about their customers and suppliers, doing business with consumers and other businesses through more innovative sources. Coca-Cola Retailing Research Councils provide research concerning issues that have significant impacts on the food retailing industry. Within the company, there exists collaborative customer relationship process.
The purpose of this collaboration is to improve shopper marketing and supply chain collaboration. Acceleration of innovation in order to provide superior beverage selections to every customer is another aim of the collaboration. Sustainable growth is needed to meeting Coca Cola’s short-term commitments as well as their long-term goals. The goal of The Coca-Cola Company is 'to be the world's leading provider of branded beverage solutions, to deliver consistent and profitable growth, and to have the highest quality products and processes.
For the organization to deliver its plans, the strategy and the structure must be woven together seamlessly. To achieve this goal, the Company has established three strategic directions. These plausible directions can be integrated in every aspect of its business: 1. Broaden the family of products, to include alcoholic beverages Positives- Entering into the alcoholic beverage market Negatives- Black eye on overview brand image Uncertainties- Potential increase in revenue 2. Focusing on the consumers, at a Local level Positives- Assistance in community initiative and more consumers input Negatives- Relatively high initial costs
Uncertainties- Communities might oppose big corporations such as Coke 3. Drive efficiency & cost effectiveness by using technology and large scale production Positives- Long term benefits, sustainability Negatives- Increase in R&D allocation Uncertainties- Costs might exceed potential benefits So while Coca-Cola is probably the only product in the world that is universally relevant in every corner of the globe, the recommended strategic direction of the company is to ensure that with bottle of Coca-Cola sold and enjoyed, individual connections are made with their consumer. That can only be achieved at a local level.
The strategy of The Coca-Cola Company has for a long time been best characterized as follows: global marketing and local manufacturing. However, the global marketing approach has been changed to local marketing because of the differences in consumer demands and experiences. To implement their “think local, act local” philosophy, the following key areas are considered: Consumers – by using innovative and tailored marketing programs based on local consumer insights, The Coca-Cola Company will keep growing its core brands while also leveraging its distribution system to capture other growth opportunities.
Communities – local offices around the world ensure that the Company is a respectful corporate citizen and participates as an integral part of each community. Customers – the Company provides value to customers through every consumer purchase, through superior customer service and through great value creation programs. The commitment of the company to become a world class leader in customer and distribution services which are reflected in the continuum of building value chain excellence. Consumers and customers are the focal points of the value chain driven by brand preference, pervasive market penetration and superior price/value ratio.
Coke, in addition, addresses that value chain as drivers of increased profit, enhanced ability to invest more into gaining greater geographic access and penetrating existing markets more deeply as well as more confidence in investing on intangibles like intellectual property and talent, and increased sale and specialization advantages. We are building on our fundamental strengths in marketing and innovation, driving increased efficiency and effectiveness in interactions with our system and generating new energy through core brands that focus on health and wellness.