Coca Cola Case Study

 

The Coca-Cola Company is the world’s largest beverage company, founded in Georgia, USA in 1892. The company has more than 500 non-alcoholic beverage brands. These brands are mainly sparkling beverages, but there are also various non-sparkling beverages such as water, fortified water, juice and juice blended beverages, ready-to-drink tea and coffee, energy and sports drinks. Among the top five non-alcoholic beverage brands in the world, Coca-Cola, Diet Coke, Fanta and Sprite are among them. Coca-Cola’s beverages are now sold in more than 200 countries. (Mokhov&Ryabukhin, 2018).

Coca-Cola forms the world’s largest beverage distribution system through the company’s own or company-controlled bottling and distribution business network, as well as independent bottling partners, distributors, wholesalers and retailers, and provides its branded beverage products to consumers around the world. Approximately 57 billion drinks are consumed every day in the world. Approximately 1.9 billion drinks are either KO trademarks or KO authorized trademarks.

Industry and Industry Players

Coca Cola that is actually a carbonated soft drink belong to the non-alcoholic beverage industry. Under this industry, the companies produce regular and diet fizzy drinks, juice, bottled water, sports and energy drinks, and hot and iced coffee and tea.  The Coca Cola company can alternatively be ranked in the food industry; however, it is a drink which is only a niche of food and so it is better to use the non-alcoholic beverage industry for it. (Gertner& Rifkin, 2017)

Carbonated drinks are the largest market segment of soft drinks in the world. From the sales volume perspective, isn 2020 to become the world’s largest carbonated soft drink beverages category, accounting for 35.28% of the share; bottled water and fruit juice drinks for the second and third largest soft drinks classified and accounted for 26.92% 15.58%; followed by instant tea, energy drinks, instant coffee, sports drinks, concentrated drinks, and Asian specialty drinks. (Mokhov&Ryabukhin, 2018)

From the changes in the product structure of soft drinks from 2016 to 2020, it can be seen that in recent years, people’s consumption concepts have changed, and people have paid more attention to healthy diets and pursued “sugar-free and low-sugar”, which has had an impact on the carbonated beverage market. The proportion has decreased from 36.91% in 2016 to 35.28% in 2020.

The packaged drinking water industry has both scale and growth potential, and has shown an upward trend in recent years. Energy drinks are also loved by more and more people, and their market share has risen from 5.66% in 2016 to 6.58% in 2020. (Mokhov&Ryabukhin, 2018)

From a global perspective, the soft drink industry with a large hatch market value of the company capacity, which with Coca-Cola by Coca-Cola this brand started the market, followed by the introduction of a variety of products in various segments of the track to become the soft drink industry leading enterprises , accounting for the global soft drinks market 14.9 % Share; Pepsi came in second with 7.2% market share ; Nestlé and Danone accounted for 2.8% and 2.0% of the soft drink market respectively.(Mokhov&Ryabukhin, 2018)

At present, in the global soft drink industry, Coca-Cola and Pepsi are the two most popular brands. According to Euromonitor data, the brands with the highest total sales in the global soft drink industry in 2020 are Coca-Cola and Pepsi, followed by Sprite, Fanta and Nestlé and others. Among them, five of the top ten brands are owned by Coca-Cola and are all carbonated drinks; two of them are owned by Pepsi.

Corporate Strategy of The Coca Cola Company

The company has been evolving and upgrading its corporate strategy and how it is doing business. The main corporate strategy of the company focuses around the beverage.  The company’s strategy Is to be a total beverage company that the customers love. So it is chopping and changing its portfolio in accordance with the customer demands and needs. The company understand the need for healthy drinks and launched several of such drinks that are healthier. The company can afford such a great expense on each product because it focuses on building a portfolio of “consumer-centric brands” requires shifting focus from what the company wants to sell to what consumers want to buy, explains President and Chief Operating Officer James Quincey, who shared this strategy as part of the company’s vision for future growth today. (Gertner& Rifkin, 2017)

Opportunities and Threats

Opportunities for Coca-Cola Company—External Strategic Factors

  1. Introduce new products and diversify its business (Gertner& Rifkin, 2017)
  2. Increase presence in developing countries
  3. Introduce advanced supply chain system.
  4. The company may be committed to establishing more relationships with coffee, energy and health beverage companies.

Coca-Cola’s business is highly dependent on logistics and supply chains. Transportation costs and fuel prices have been rising. Therefore, it may be an opportunity to propose an advanced and improved distribution system.

The threat of Coca-Cola-external strategic factors

  1. Health problems as customers are increasingly being conscious to health and thus drinking healthy beverages. Carbonated drinks are one of the main sources of sugar intake. (DeMello et al., 2018)
  2. Direct and indirect competition from Pepsi but from other several brands as well.

Then, though for the Coca Cola, Although Pepsi’s direct competition is strong and apparent, there is also competition from non beverage companies while there are other companies like Starbucks.

there are also many other companies that compete indirectly with Coca-Cola. Starbucks, Coffee Family, Tropicana, Lipton Juice and Nescafe are indirect competitors of Coca-Cola, which may threaten its market position. (DeMello et al., 2018).

In addition, smaller franchise and retail chains provide customers with private label alternatives to traditional Coca-Cola products, which allows these companies to provide beverages at lower prices. (DeMello et al., 2018)

Five Forces Analysis

Competitive Rivalry

The competition is very strong in the market from both direct and indirect competition. All are fighting for same market share and so the competitive rivalry is a very strong force. A company like The Coca Cola company needs to focus on differentiation and competitive advantage.

Threat of Buyers

This is a strong force, because there are so many other options in the market and so the sales of the Coke is also decreasing and so as the other carbonated beverages as already explained. The customers can easily switch as the switching cost is literally zero.

Threat of suppliers

The threat of suppliers is low because the companies in the industry are often large companies and then the ingredients used are very common.

Threat of substitution

Threat of substitution is very high because there are so many substitutes of the beverages like Tea, coffee, water milk and so on.

Threat of new entrant

The threat of new entrants is very low because the industry is either saturated or in some countries, government controls it.

VRIO Framework

Valuable

Global distribution network: yes, it is an important resource that allows Coca Cola to serve the global market and

maintain a global presence.

Wide range of products: Yes, it has helped Coca Cola reach and serve the global audience with different

pleasures.

Skilled Human Resources: Yes, it helps Coca Cola run its large system efficiently.

Marketing skills and expenses: Yes, it helps Coca Cola manage a differentiated brand image and

better connect with your audience.

Secret Formula: Yes, this is something accessible only to a few people in the entire Coca Cola system.

Brand image: Yes, brand image generates value and is important to manage an impressive

presence in the market.

Research and development: Yes, it helps Coca Cola innovate and continuously respond to changes market situations.

Rare

Global Distribution Network – Owned by only a few companies in the soft drink industry and helps to

Coca Cola to manage its global reach.

Wide range of products – not absolutely rare, Pepsi and Dr Pepper Snapple are also marketed

in a wide range of products.

Skilled Human Resources: Yes, Coca Cola is ahead of all other companies in the industry

of soft drinks in terms of human resource management.

Marketing Skills and Expenses: Coca Cola’s marketing expenses are around $ 4,000

million, which is much higher than that of its competitors. While marketing skills are

they can combine with the high level of expenses, it is very difficult for any company.

Secret Formula: Rare, however, Pepsi and Dr Pepper Snapple also serve unique flavors. Still, the

Coca Cola’s differentiated taste gives the company an edge in terms of competition.

Brand Image: Yes, it is not easy to create a strong brand image like Coca Cola. However, Pepsi also has a strong brand image.

Research and development: yes, but Pepsi is also very focused on R&D.

Global Distribution Network: Pepsi also has a global network of distributors.

Wide range of products: Pepsi also has a wide range of products. -temporary advantage

Skilled HR – yes, it’s hard to mimic the competitive advantage generated by HR

qualified. High spending is involved in hiring, training, and paying professionals

qualified. – competitive parity

Marketing Skills and Expenses: Difficult to copy due to high expenses. – competitive parity

Secret Formula: You Can’t Imitate – Sustainable Competitive Advantage

Organization

The company’s policies and procedures are adequately organized to

Help her exploit her precious resources and inimitable resources.

Global distribution network: yes.

Wide range of products: yes

Qualified Human Resources – Yes

Marketing Skills and Expenses: Yes

Secret formula: yes

Brand image: yes

Research and development: yes

Immutable

The current strategy of the company provides a sustainable competitive advantage.

Global distribution network: no, just a temporary advantage because Pepsi

can easily imitate. However, it is difficult to imitate for another rival than Pepsi.

Wide range of products: no, just a temporary advantage because Pepsi

can easily imitate. However, no rival other than Pepsi treats

in such a large product range.

Qualified human resources – (competitive parity), because it implies a

big expense. However, it is not very difficult for Pepsi to imitate due to its financial strength.

Marketing skills and expenses – (competitive parity), because

involves large expenses. However, it is not very difficult for Pepsi to imitate due to its financial strength.

Secret formula: yes. – Sustainable competitive advantage

Brand image: up to a point, because only one competitor, Pepsi, it has such a strong image in the market.

Research and development: only to a small extent. (parity competitive)

References

DeMello, M., Pinto, B., Dunsiger, S., Shook, R., Burgess, S., Hand, G., & Blair, S. (2018). Reciprocal relationship between sedentary behavior and mood in young adults over one-year duration. Mental Health And Physical Activity14, 157-162. doi: 10.1016/j.mhpa.2017.12.001

Gertner, D., & Rifkin, L. (2017). Coca-Cola and the Fight against the Global Obesity Epidemic. Thunderbird International Business Review60(2), 161-173. doi: 10.1002/tie.21888

Indira,  B(.2021). The future of beverages. Retrieved from: https://www.kearney.com/consumer-retail/article/?/a/the-future-of-beverages

Mokhov, V., &Ryabukhin, M. (2018). Sustainable development program «COCA-COLA HBC RUSSIA». Investment And Innovation Management Journal, (4), 68-72. doi: 10.14529/iimj170410

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