Coca Cola Management Strategy

The advent of Cola wars has drastically changed the entire scenario of this soft drink industry. There are different giants playing in this industry and Coca Cola is amongst them. The fierce competitors Pepsi and certain other brands are trying their level best to change the scenario of this industry by eating up market shares but Coca Cola’s management strategy is so updated and relevant that they are ahead of their competition. Originating from just one brand 125 years go the strategy of Coca Cola has strengthened so much that they have launched more than 500 brands. The company originated from selling 9 odd drinks in a day in 1886 to 1.8 billion a day in the current era. The company has grown at an enormous pace and starting from just a single city to expanding its operations to more than 200 countries of the world (Coca Cola , 2012). The product actually initiated from a pharmacy and gained so much success after a certain period of time that it is regarded as one of the biggest brand of the world. New brands were added by this organization in their company product line and after a certain period of time most of the brands flourished with time (Coca Cola, 2012). But Coke is considered as one of the biggest brand and flourished at an enormous pace. The brand has grown in such a way that a new terminology of Cola drinks actually came into existence because of this. Catering to the needs of the customer is the biggest success secret of this brand. They know what the customer is actually asking for and they provide the customer that in such a way that the needs are properly satisfied with it. The history of the organization is quite rich and they have travelled their way facing several leaps and bounds. Coca-Cola has the greatest appreciated product name globally and, as one of the greatest noticeable organizations globally, it has great prospect to outshine in every scope of corporate performance (Ferrell, Ferrell, Fraedrich, 2011, p. 308). The organization though has been confronted by many ethical problems in respect with their shareholders. Uncertain about the company’s widespread contributions to the society and educational aspects, numerous shareholders are losing faith in the 100 year old organization. . . . . . . . . . . . . . . . . . .. . .. . .

Limitations of research

Every research has certain limitations and the introduction depicts that the core research would focus on the strategy management process of Coca Cola and discusses the scenario that are utilized by the organization. The limitations of research are initiated by the usage of secondary sources in the research. The information are taken from these sources and it cannot be properly commented that the information presented in these sources are hundred percent right. Moreover, another limitation of this research is that this research should solely be utilized for academic purposes and it should not be used for the decision making process for organizational purpose. In the similar manner it should be noted that this research is prepared by an individual and all rights are reserved.

Organizational Strategy

Reviewing the strategic planning process that keep this organization competitive in this industry are several factors that are associated with this organization. The biggest aspect is the fact the formation of a well established mission and vision. In the similar manner one can easily say that all the strategic decision taken by the management are aligned with the vision and mission of the organization (Hill & Jones, 2012). The objectives are designed so professionally that they are achieved within the stipulated deadline in such a way that they organization achieves success in both the short and the long run.

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The mission of the organization revolves around the scenario that they should refresh the world in body, mind and spirit. In the similar manner their objectives focus on the scenario that they should create a difference in everywhere they engage (Sevenson, 2001). The values of this organization are based on leadership, diversity, passion, integrity, collaboration, quality etc. Strategists and decision makers usually claim that the global strategy of this organization is so enormous and gigantic because of the effective decision makers in the organization. Their strategy is up to the mark because the organization is responsive internally and externally. The achieve success in every form because they are aware about the culture of their organization and they generate an atmosphere in their organization which results in a win-win situation (Hill & Jones, 2012). The collaboration of all the stakeholders that are internal and external generates and great fusion for Coca Cola and that is the reason why it is regarded as the brand with the highest level of brand equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The competition in the soft drink industry is quite fierce because of two giant brands which are Coke and Pepsi (Dana 1999). The competition between these two brands is termed as the “Cola Wars”. Coca Cola is considered to be the leader of this industry and Pepsi is usually criticized by the marketing strategists as the brand that utilizes the imitating strategy. The current scenario is so confusing for both the brands because in order to attack the market leader Pepsi should have a distinctive plan or a sustainable competitive advantage (Mazze & Michman, 1998). The strategies with respect to target market and introduction of a sub brand in the market of both the organizations are relatively the same because both the organizations are striving hard to capture the market share so that they can become the leaders in the Cola industry. Pepsi’s market share in Asia is much more than Coke however, besides Asia Coke captures the entire world and this strategy of Coke has taken Pepsi by a storm. The Cola are virtually fought in nearly every country of the world and organization with an effective strategy wins the race (Boutzikas 2000). Each brand is fighting the battle with different brands and both possess several non-alcoholic brands to get a share in customer’s stomach. Since the competition is becoming more and more dynamic with the advent of time and that is the reason why the arena is become much fuzzier and because of this reason the rivals are much difficult to identify and anticipate (Day & Reibstein, 2004).

Organizations usually learn from their past mistakes and that is the reason why they develop a learning habit to face any external and internal issues (Vrontis, 2003). Coke made a marketing research blunder which dipped the competitive graph of their brand and they were sinking in the competitive battle with other brands. Coke, due to blind tests changed the taste of the Coke and developed a formula to make it sweeter. This strategy backfired quiet badly and people started to dislike the name new coke and after a certain period of time they started to dislike the taste too. About $ 4 billion were spent on this campaign and it came out to be a blunder for the company (Axson, 2011)

Review of the Literature

The current objectives of this organization are to use the formidable assets of the company that is their brands to its full potential and attain a sustainable competitive advantage through globally reaching the maximum customers. There are several different strategies that are opted by Coca Cola to attain sustainable growth.

For analyzing the effectiveness of employed business strategies by the management at Coca Cola Company, critical analysis of current market status of the company has been discussed subsequently.

SWOT Analysis of Coca Cola Company

For strategic evaluation of the Strengths, Weaknesses, Opportunities, and Threats which any organization, project, or a business venture comes up with, SWOT Analysis is commonly used. Primary aim behind the conduction of SWOT Analysis is to exhaustively identify what internal as well as external factors are favorably or unfavorably influencing the growth and development of any business (Champman, 2007). In this section, Coca Cola is the undertaken company for the description and evaluation of SWOT.

Strengths

Globally, the Coca Cola Company has following key aspects as its business strengths:

The brand image and equity allied with the company is internationally recognized

The brands and products of the company are strategically distributed all over the world by means of strong and efficient distribution network

The overall financial performance of the company is relatively higher than its competitors

Coke is globally recognized, acknowledged as well as the most preferred brand for soft-drink lovers.

The product-line associated with the company’s brand is extensively diversified

Strong and reliable corporate identity.

Continues innovation and improvisation in business plans and strategies

Weaknesses

Coca Cola has following weaknesses on international grounds:

Despite of having tremendous financial performance of the company, it has high rank in credit ratings

Continuously diverging customer concentrations due to other brands in competition, specifically in US.

Customer loyalty towards Pepsi products, which is the biggest and the strongest contender of Coke around the world.

In Asian countries, like India and Pakistan, Coke failed to acquire #1 position in soft-drink industry.

Opportunities

Coke Company has following significant opportunities world-wide:

The tremendously escalating demand of soft drinks all over the world.

As company has expanded its covered market areas by introducing brands of mineral water, juices, soft-drinks etc, it can reach almost every market segment.

Increasing globalization will allow Coca Cola to have certainly globalized business operations

Health Conscious People are being catered

Drastic growth in mineral water demand

Smaller market players’ acquisitions.

Threats

Following business threats are being faced by the company:

Since soft-drinks are considered to be unhealthy; in such scenarios, healthy drinks usually manufactured by the Fruit Juice Companies are imposing business threats to the Coca Cola Company, worldwide.

Customers’ increasing inclinations towards critical competitors (like Pepsi, etc)

Growing financial crisis and thus, prices of products

Biased image perceptions in different countries of the world.

BCG Matrix for Coca Cola

BCG Analysis is an acronym for Boston Consulting Group Analysis. The concept of BCG Matrix was firstly put forward during 1970 by Bruce Henderson for the Boston Consulting Group with the intentions of helping companies in their business evaluation practices on the basis of their business units or product lines (Middleton, 2003). BCG analysis is considered as an analytical tool for marketing of brands, product management, strategic management, and portfolio analysis. All in all, it helps organizations to allocate their business resources.

Components of BCG Matrix: To better understand the analytical techniques used in BCG matrix, its core components are described in the segment below:

1. Stars

Representing the highly developed business with strong market position and financial performance as compared to its competitors. Businesses rated under this category are considered to be ideal with high shares points.

2. Cash

Businesses having low growth rates but higher point shares are recorded under this category of BCG Matrix. It is assumed that the businesses recorded in this category were initially stars but somehow failed to maintain their attractiveness over time.

3. Question Mark

Businesses having high rates of growth and development but, their point shares are low, are recorded under this category of BCG Matrix. This category is the reflection of certain potentials that business has for future growth and development but, at the same time, indicates the requirement of extensive efforts to increase point shares.

4. Dogs

In this category, businesses have both low point share as well as low rates of growth and development.

A general representation of BCG Matrix is given in the figure below:

Figure 1: The BCG Matrix (Source: Middleton, 2003)

As far as Coca Cola Company is concerned, the BCG Matrix analysis for the company is based upon following statistics:

Figure 2: Coca Cola’s Performance from all over the World (Source: Ahmad et al 2007)

On the basis of afore-mentioned statistical analysis of Coca Cola Company, created BCG Matrix for the company is given below:

Figure 3: BCG Matrix for Coca Cola Company (Source: Ahmad et al 2007)

Porter’s Five Force Model for Coca Cola

For carrying out industrial analysis, The Five Force Model presented by Michael Porter in 1979 is being used as the de facto framework since the time of its introduction. The competitiveness of market is analyzed by Porter’s five forces. The current or potential risks that a company can have from its associated industry are concluded by the experts after employing this model. Following five forces are included in Porter’s model (1) Threat of New Entrants, (2) Threat of Substitute Products or Services, (3) Bargaining Power of Buyers, (4) Bargaining Power of Suppliers, (5) Competitive Rivalry among Existing Firms.

The industrial analysis of Coca Cola Company and its brands on the basis of this five-force model is discussed below:

Threat of New Entrants/Potential Competitors: Median Pressure

As far as beverage industry is concerned, the barriers to the new entrants are relatively low because the cost of consumer switching in this particular industry is approximately zero with quite low requirements for capital investments. A number of new products have been introduced in the market at relatively lower prices than that of the products and brands of the Coca Cola Company.

Threat of Substitute Products: Median to high pressure

The consumer markets have a range of alternative products for soft-drinks, energy-drinks, juices and mineral water. It is an open fact that Coke products lack any unique flavor because its flavor is 97% similar to that of Pepsi as concluded during a blind taste test, in which people failed to distinguish Coca-Cola coke and Pepsi coke.

The Bargaining Power of Buyers: Low pressure

As far as bargaining power of consumers is concerned, Coca-Cola and Pepsi, which is Coca-cola’s biggest rival, have almost same market price thus, it has very little or even 0 pressure on the company. However, newly introduced, low-priced beverages are available in markets which can be preferred by the consumers but at the risk of flavor and quality. Fruit juices are the most preferred drink for the consumers these days as most of the consumers have become health conscious and thus are aware about the adverse impacts of carbonated beverages.

The Bargaining Power of Suppliers: Low pressure

In case of Coca-Cola supplies all over the world, its suppliers are not concerned about the adverse impacts of such carbonated drinks as they can’t afford losing Coca-Cola, which is considered as their fundamental client.

Rivalry Among Existing Firms: High Pressure

Pepsi is the biggest competitor of Coca Cola in recent times as it also has variety of beverage products with strong international network. More or less Pepsi and Coca Cola are rated similarly in all over the world. However, the target market of Coca-Cola, as per its classical brand image, is the adult community primarily; however, youngsters are being focused by the Pepsi group. Nonetheless, the share market of the US is slightly dominated by Coca-Cola rather than Pepsi due to its historical business setup. On the other hand, beverage brands, like Dr. Pepper, have also become popular in US for the reason of their unique flavors.

Discussion

If Coca Cola Company manages to make the most innovation for creating relations and gaining market reputation, the company can easily left all the competitors behind and can stay ahead of them in one way or other.

Innovation can be the first and foremost option for the company to avoid severe market competition. By employing innovative ideas, the company is expected to have strong competitive advantage with respect to its rivals. As a matter of fact, Coca Cola has certain market reputation as well as strong brand image; so, with appropriate innovation in products by keeping customer needs at front, the company can generate certain curiosity among its potential consumers in such a way that people will definitely want to go for it. If Coca Cola comes up with innovative products, consumers will leave with no substitutes and thus, they will happily purchase the commodity even at higher prices. With this strategy, Coca Cola can create a range of loyal customers as well (Covering S1, S2, S4, S5, S7, T1, T2 and T3).

After innovation, marketing is the most important factor to be mulled over by the administration of the company to maintain its prominence around the globe. Marketing is considered as the backbone for any business success and thus, is extremely significant factor for the company. Coca Cola can affirm its long-lasting market prominence and reputation by marinating strong brand image through strategic marketing and advertising of allied products. This strategy will also help the company in maintaining strong consumer loyalty towards its brands and can gain consumer preferences over its competitors (Covering W2, W3, W4, O1, O2, O3, and O4).

Marketing in an environment friendly attitude can definitely help the company to impose certain barriers to the new market entrants and thus can decrease the risks and threats of growing competition in the relevant industry all over the world (Covering T1, T4, T5, S2, S4, S5, and S6).

If Coca Cola brands manage to sustain their quality and taste in such a way that these two factors emerged as unmatchable for rival companies, Coca Cola will be able to reduce severe threats of being substituted (Covering S1, S4, S2, O1, O2, and O3).

Coca Cola Company miss-utilized resources of rare water in various Asian countries, like India and Pakistan, which serve as the primary reason of company’s declining market reputation in this particular region. This mis-utilization adversely impacted the brand image of the company, as the reducing water levels in cola plant are certainly making the lives of the natives miserable. To gain positive reputation in the Asian countries Cola Company can follow the measures listed below:

Land inspection before starting any project

Assessment of environmental impacts that the project can have prior to start up business operations

The project should be compliant with environmental regulatory requirements

Say “NO” to refrigeration equipments containing CFC

Efficient treatment of waste water

Adequate operations for bottling

Commencement of certain programs for energy conservation

Latest technologies for water recycling system should be used by the company for saving 50% of water requirements for the operations (Covering W3, W4, and T4)

With recycling of plastic bottles, costs and resources could be saved. By employing various innovative recycling ideas in company’s business along with appealing advertising of Coca Cola brands can open new market segments for the company. In due course, company will have higher revenues and improved credit rating (Covering W1, W4, T1, T3, and T4).

Conclusion

This paper attempted to analyze the strategic business planning of the Coca Cola Company exhaustively. The study affirms that company is in its booming stages and is enjoying profitable success and reputation all over the world. However, from a superficial overlook, the afore-mentioned fact might be considered as “true;” but, in-depth analysis of what business strategies the Coca Cola company has, evidently reflects the existence of certain loopholes due to which the company is exposed to certain risks and market threats. Even though company has god market reputation, but innovative and unique brand ideas are required to be practiced so that the credit rating of the company could be improvised. In addition, it was also concluded that owing to severe market competitions, the company should put much emphasis on its advertising techniques so as to make its market prominence even more visible. Last but not the least, Coca Cola company has failed to comply with the health requirement regulations in specifically Asian countries which serve as the reason of its declined reputation in that particular area. Thus, company has to put much focus on this domain to reduce negative consumer perceptions and to make them loyal with the brand and products.