The Coca-Cola Company is a U.S multinational corporation based in Atlanta, Georgia and listed at the NYSE. The global enterprise has grown to become the leading non-alcoholic beverage company in the world. The major brands manufactured and sold by the corporation include Coca-Cola, Fanta, Diet Coke and Sprite. The company’s large distribution network and increased involvement in sponsorship programs, such as the 2010 FIFA World Cup and the American Idol TV series, have raised the company’s brand name to the rank of the world’s most valuable name (The Coca-Cola Company, 2015).Current paper seeks to analyze the business-level strategies for Coca-Cola Company and identify the best strategies that it can and has adopted in order to ensure the long-term success. It identifies the corporate-level strategies available to the enterprise that can enhance the company’s competitiveness in the beverage industry. It also seeks to determine the competitive factors in the beverages industry where the corporation operates and evaluate the effectiveness of Coca-Cola and its chief competitor in fast-cycle and slow-cycle market environments.
Analysis of the Business-Level Strategies for the Coca-Cola Company
The business-level strategies are those actions adopted by an enterprise so that to create value for its customers and acquire a competitive advantage in the market. It involves the exploitation of a firm’s core competencies in particular markets for its products (Vitez, 2015). The business-level strategies adopted by a firm are influenced by the five competitive forces that exist in an extremely competitive environment. These actions help the organization to create a long-term shareholder value, increasing its market share, and enhancing the customer satisfaction level.
The business environment in which the Coca-Cola Company operates ought to be termed as very dynamic. The appropriate business-level strategies that can be employed include cost leadership, differentiation, focused differentiation strategy, the integration strategy and the targeted low-cost strategy. The cost leadership strategy involves the determination and control of production costs and the reconfiguration of the firm’s distribution systems and the overall value chain in order to respond to the industry needs. An organization that adopts the cost-leadership strategy leverages on internal efficiency through efficient production, low operating costs, and minimal indirect expenses. The differentiation strategy involves the creation of a long-term customer value and gaining competitive advantage by achieving sustainability, decreasing customers’ costs and raising customers’ performance levels.
The differentiation business-level strategy shifts focus from the lowest price to product quality. It focuses on attaining high satisfaction levels and unique product features. However, there exist significant risks associated with this strategy, such as ease of product imitation, loss of value and product uniqueness. The other business-level strategies available to the Coca-Cola Company are focused low-cost strategy in which an organization selects a particular market segment and provides high-quality goods and services while competing on low price. The targeted differentiation approach involves differentiating the firm’s products in a selected target market where the organization has considerable capabilities to serve (Vitez, 2015).
The integration approach to business-level strategy involves the adoption of new technology in a firm’s production processes. It enables enterprises to leverage on their core competencies through a vertical integration approach or horizontal integration approach. The best business-level strategy for the Coca-Cola Company is the cost leadership strategy. The company has a large organization structure with a number of distribution channels spread across the world. In order to remain competitive in these markets, the company should minimize on production costs as much as possible. The organization has already adopted a state of the art technology in its manufacturing processes, and its skilled workforce will ensure that it tightly controls its overhead expenses and production costs. The cost leadership strategy will be a good choice for the Coca-Cola Company.
Analysis of the Corporate-Level Strategies for the Coca-Cola Company
The corporate-level strategies involve those strategic decisions made by organizations that affect every aspect of the organization. Such decisions are connected with resource allocation, financing, asset management, human resource management as well as mergers and acquisitions. The above mentioned decisions affect the organizational structure and policies since they determine the direction and goal for the overall organization. The beverage maker has had to develop a strategic plan that responds to current needs of the drinks industry in the light of environmental issues, water shortage, recycling, health, and human rights violations. The corporate-level strategies are of an internal nature and their implementation ensures that the organization creates value for its shareholders and customers (Bradley, 2015).
The corporate-level strategies include value-creating strategies, value-neutral strategies, and value-reducing strategies. A value-reducing strategy involves refocusing of the firm’s market in instances when the organizational structure is too big and with an extensive chain on command. The strategy becomes important in situations by which the large size of the organization does not benefit all the stakeholders and continued diversification does not create value for the company’s stakeholders. The importance of adopting such a strategy is ensuring that the company adequately serves its target market and avoids any unnecessary growth.
The other corporate level strategy is the value-neutral strategy. The main aim of this strategy is to maintain current market share of the company. The decisions adopted are meant to increase the efficiency and effectiveness of the business’s operational plans to maintain the existing market share. The value-neutral strategy thus allocates sufficient funds and personnel towards securing the market share and preventing existing competitors and potential new entrants from acquiring additional market share. It involves key strategic decisions, such as synergy creation, tight regulatory oversight of departmental functions and instituting a risk management processes aimed at reducing unnecessary losses resulting from the internal business processes.
The third corporate-level strategy is the value-creating strategy. It aims at gaining additional market share by forcing out weak competitors and taking on the existing competitors. The decisions that are adopted by firms are designed towards acquiring additional market share, this is possible through exploiting the existing economies of scope. The economies of scope are those capabilities and resources that a firm employs throughout the whole organization with the objective of increasing efficiency and reducing costs. Through diversification, the organization can meet the demand in the market.
The most appropriate corporate-level strategy for the Coca-Cola Company is the value-creating strategy. The strategy is appropriate since the company operates in a vast market controlling a large market share globally. The strategy is also necessary due to increasing competition from other industry players dealing in the non-alcoholic beverages industry. The value-neutral approach is unnecessary since Coca-Cola already has strong financial control and the independent bottlers have their systems of internal oversight. Also, the value-reducing strategy will be inapplicable in the Coca-Cola case since a high number of stakeholders benefit from the company’s success. Thus, the successful implementation of the value-creating strategy will ensure that the beverage giant gains substantial market share in the non-alcoholic beverages market due to increased internal efficiency and reduction in operating costs. It will also enhance the overall competitiveness of the company in the Coke market while assuring the shareholders long-term value and quality products for its customers.
Analysis of the Competitive Environment
The non-alcoholic beverages industry is the most competitive segment in the beverage industry. There exists a number of established and upcoming businesses competing for the same market share in both the local and global markets. The Coca-Cola Company faces increasing competition from established companies, such as Unilever, Kraft Foods, Mondelez International, Nestle, and Groupe Danone (The Coca-Cola Company, 2013). These companies have established brands that sell ready-to-drink beverages, energy and sports drinks, dairy-based beverages, relaxation beverages, vitamin-based products, as well as coffee and tea. The primary competitive factors that are inherent in the highly competitive commercial beverage industry include advertising, pricing, product innovation, packaging and sales promotion activities. Other competition factors include production efficiency, state of the art vending and dispensing machinery as well as patent and copyright protection. Ultimately, Pepsi is considered the major competitor for Coca-Cola.
Porter’s Five Forces Model
Using Michael Porter’s five forces model, the competitive factors in the commercial beverages industry in which Coca-Cola operates will be identified and analyzed. The forces include increased rivalry, threat of new entrants, customers’ bargaining power, and supplier bargaining power. Stiff competition exists in the commercial beverages industry due to the risk of potential price wars from close competitors. Coca-Cola’s chief competitor is Pepsi Company. Customers have a high bargaining power since they force the beverage manufacturers into undertaking their production activities at low-profit levels. The supplier bargaining power is also high due to limited resource and raw materials availability. However, the threat of new entrants is minimal since venturing into the beverages industry requires massive capital investment. There exist significant regulatory barriers to entry. The commercial beverages industry also faces the threat of competition from close substitutes from the beer industry which requires an important investment on customer retention programs.
Comparison of Coca-Cola and Pepsi Strategies
The Coca-Cola Company has been able to beat off competition from Pepsi given its high consumer acceptance levels. Thus, the customer bargaining power is low when compared to Pepsi’s. Coca-Cola has a strong value chain comprised of worldwide distribution channels, covering a vast geographical area. It operates a franchise network thus making it have an edge over Pepsi that has a limited global presence. In terms of rivalry, the Coca-Cola Company has an edge over its close competitor, Pepsi Company, given that it has sophisticated and creative marketing capabilities. The concentrated retail sector controlled by the Coca-Cola Company is complicated, making it hard for new entrants. Based on the competitive analysis carried out above, the Coca-Cola Company is likely to perform excellently in the long-term within the highly competitive business environment.
The Impact in Slow-Cycle and Fast-Cycle Markets
The existence of slow-cycle markets enhances the company’s monopoly position given that competitors have a limited access to the market. The market leader has a competitive edge over the other market players, and hence the competitors have no access to the enterprise’s sources of profitability and strategic competitiveness (Competitive rivalry outcomes - FREE online courses on competitive strategies - a model of competitive rivalry, 2011). In slow-cycle markets, the Coca-Cola Company will thus maintain its competitive position in the highly-competitive commercial beverages market given its complex and unique product design. On the other hand, the Coca-Cola Company risks losing its market leadership in fast-cycle markets if it relies on a single set of resources and core competencies. Also, close competitors, such as Pepsi, can gain access to the sources of the company’s strategic competitiveness.
The Coca-Cola Company has been able to retain its market leadership role in the non-alcoholic segment of the commercial beverages industry through its excellent franchised distribution system. The adoption of a cost leadership business-level strategy and value-creating corporate-level strategy will enhance the beverage maker’s strategic advantage in the commercial beverage industry. The Coca-Cola Company faces increasing competition from Pepsi Company both locally within the U.S and globally thus putting a strain on its profitability. However, the strong value chain and robust distribution system have ensured that the U.S listed firm maintains its position as the world-leading manufacturer of unique beverage brands.