Company Background
The Coca-Cola Company belongs to the beverage industry and is a multinational company in the United States. The company produces several types of beverages that are sold worldwide. The company was founded in 1882 and trades in alcoholic and non-alcoholic drinks.
As of 2021, the company had a total of 79,000 employees worldwide, and the employees helped the company to remain at the top in the beverage industry (Brondoni, 2019). The company operates in more than 200 nations and can produce more than 2800 products, which gives it a competitive advantage over its competitors (Brondoni, 2019). Nevertheless, the main headquarters are in Atlanta, Georgia, which acts as the administrative point for all of the company’s branches (Brondoni, 2019).
Coca-Cola Company has been classified as the most extensive corporation in the beverage industry, with outstanding manufacturing and distribution abilities and channels (Brondoni, 2019). Since its inception, Coca-Cola Company has grown in sales and employees due to strategic management and leadership. This paper explores various aspects of the Coca-Cola Company and establishes its status in the modern market.
Competitive Advantage of the Coca-Cola Company
The Coca-Cola Company has several strengths that make it more competitive than its rivals in the market. However, the company also has several weaknesses that derail it from fully maximizing its strengths and profitability in the market. One strength of the company is its strong brand identity. Coca-Cola Company has worldwide recognition, and people can easily identify it, especially its bottle designs. Therefore, the company has registered huge sales due to its unique and well-recognized brands.
Another strength of the company is its high brand valuation. According to a global brand report released in 2021, Coca-Cola was ranked sixth internationally, which explains why the company has stayed ahead of other companies in the beverages industry (Sulistiani et al., 2019). Generally, excellent brand identity and high product valuation are the main drivers of Coca-Cola’s competitive edge.
Coca-Cola Company has an outstanding market share and excellent customer loyalty. Therefore, the company enables its customers to have various choices, increasing customer satisfaction and retention. However, the company faces several weaknesses that derail it from achieving its full potential in the market.
One of the significant weaknesses facing the Coca-Cola Company entails health concerns about its products (Sulistiani et al., 2019). Health experts have warned that soft drinks are not healthy and should be consumed sparingly, which has had a global adverse effect on the total sales made by Coca-Cola (Brondoni, 2019). The other weakness is the overreliance on third-party technology experts. Failure to integrate technology use and be independent in advertising its products has derailed the company from realizing its full potential in the market. The company also faces competition from Pepsi because of the variety of soft drinks produced by Pepsi Company in the countries in which it operates internationally.
Company’s Strategies Towards Achieving Its Goals
The Coca-Cola Company relies on several strategies to achieve its goals and targets in the market. One of the strategies that Coca-Cola overly uses is the pricing strategy. The company aims to sell its products to as many consumers as possible. As a result, the company relies on lowered pricing strategies that ensure consumers can access its products from varied social classes. Besides, the company offers its products in different sizes and at different prices for each size (Serodio et al., 2020). Therefore, people can access the product size that fits their financial abilities.
Due to its unique pricing strategies and utilization of different products, the company records high sales that help it grow financially and dominate the market. Compared to other beverage companies, Coca-Cola prices are relatively lower (Serodio et al., 2020). These low prices have helped the company achieve its goals by boosting productivity.
The other strategy used by Coca-Cola Company is a unique response to customers. The company responds to complaints raised by customers promptly and ensures that the complaints are appropriately addressed. For instance, the company occasionally prepares questionnaires distributed randomly online to customers to give their views and opinions and raise any complaints that might help the company achieve high results in the market. The views, opinions, and complaints raised by the company’s customers are used to implement necessary changes and advances in the company’s various departments (Serodio et al., 2020). For many years, the company has relied on its customers to make the necessary changes to increase customer satisfaction and retention.
Coca-Cola’s Market Structure
The beverage industry is an oligopoly because only two companies dominate it. The beverage industry is overly dominated by the Coca-Cola Company and Pepsi, which dominate the most significant portion of the beverage industry’s market share. Although there are other companies in the beverage industry, they have been unable to compete effectively with Coke and Pepsi because the two companies have established brands and markets in many countries (O’Connell & Smith, 2020).
As a result of the dominant nature of the beverage industry by the two major companies, Coke and Pepsi, the companies have the advantage of setting market prices at the level that best fits their operations. Therefore, the two companies can set the market prices high or low depending on the market situation. The setting of the market price by the two companies might make the operations of the other small companies in the industry unprofitable.
The performance of both Pepsi and Coca-Cola in the beverage industry reflects their dominance. The number of sales by the Coca-Cola Company was $38.7 billion, while that of Pepsi was $25.3 billion in 2021 (Xu et al., 2020). These high annual sales numbers show the two companies’ position in the market compared to the other smaller companies. Therefore, the small companies in the beverage industry rely on the Coca-Cola Company and Pepsi to make decisions in the market, derailing them from growing sales and profitability (O’Connell & Smith, 2020).
The volume market share by the Coca-Cola Company was 44.9%, and that of Pepsi was 25.9% in 2021 (Brondoni, 2019). Therefore, it is difficult for upcoming and small companies to rise in the industry. The oligopolistic nature of the beverage industry deters other companies from penetrating the market.
Michael Porter’s Five Forces
According to Michael Porter’s Five Forces, the first force in the market that affects companies is the threat to new entrants. Concerning the Coca-Cola Company, the threat to new entrants is not a significant threat to the company. The company has a widely recognized brand and a broad customer base. Therefore, any new entrants in the market will face stiff competition in trying to get customers to the market (Guo & Wen, 2021).
The second force is the threat of substitutes, which entails customers switching their preferences for goods from one company to another. Although the Coca-Cola Company has a broad customer base and a unique brand, there is a threat for the firm to switch to the products manufactured by Pepsi. It will take long and unique strategies for any company in the beverage industry to pull customers from the Coca-Cola Company.
The third force is the bargaining power of customers, which affects the pricing strategy utilized by the Coca-Cola Company. The challenge faced by Coca-Cola Company is to maintain fixed prices for its products. As a result, the fluctuation of manufacturing costs in the global market might affect the suppliers or the company.
The fourth force is the bargaining power of suppliers. The Coca-Cola Company deals with numerous suppliers because of its vast size. The company requires raw materials in large quantities; thus, it must link with companies that can supply raw materials in large quantities (Guo & Wen, 2021). Due to its status in the market, Coca-Cola can quickly shift its preference for a supplier, but it is hard for the supply to shift to a new client who requires large quantities of raw materials like Coca-Cola. Therefore, the bargaining power of suppliers at Coca-Cola Company is low.
The fifth force is the competitive rivalry that only comes from Pepsi. However, the market status of Pepsi is not a significant threat to Coca-Cola Company because its market is already established and has a broad base of customers for its products.
Brief Financial Report
The company has enjoyed steady market share and sales growth in the last five years. For instance, the company experienced a 9.17% increment in sales and revenue in 2019 due to an increase in the advertisement of its products (Xu et al., 2020). The company’s only significant drop in sales and revenue was during 2020 due to the Covid-19 pandemic (Xu et al., 2020).
The company’s performance can be deduced from Table 1 below. Nevertheless, the COVID-19 pandemic affected almost all Coca-Cola branches, leading to a global drop in sales and profits. Therefore, the company could not carry out effective business activities in 2020 because of movement restrictions that the World Health Organization instituted to contain the spread of the disease.
Table 1: Financial performance of Coca-Cola from the year 2017 to 2021
However, the COVID-19 pandemic brought a significant change in the global market regarding the use of technology. Many companies overly adopted technology due to the COVID-19 pandemic, and the Coca-Cola Company was included among the companies that increased the use of modern technology. The technology used for advertisement and customer engagement helped the company to realize a 17.25% sales and revenue increment in 2021 and continue to record high sales in the global market (Xu et al., 2020). The company is expected to realize a further increment in sales and revenue in the financial year ending in 2022 because global business operations have reverted to normalcy after the containment of the COVID-19 pandemic.
The Future of the Company
Due to the company’s current position and operations, it is expected to continue dominating the beverage industry and remain competitive. The company has nine new operating units that are expected to unite and work in unison to ensure the company attains greater heights and milestones in the global market (Xu et al., 2020). The nine units are also expected to limit the possibility of duplication of the company’s products to increase its profitability and make it more competitive in the global market.
References
Brondoni, S. M. (2019). Shareowners, stakeholders & the oversize global economy. The coca-cola company case. Symphonya. Emerging Issues in Management, (1), 16-27. Web.
Serodio, P., Ruskin, G., McKee, M., & Stuckler, D. (2020). Evaluating Coca-Cola’s attempts to influence public health ‘in their own words’: analysis of Coca-Cola emails with public health academics leading the Global Energy Balance Network. Public Health Nutrition, 23(14), 2647-2653. Web.
O’Connell, M., & Smith, K. (2020). Corrective tax design in oligopoly. Working Paper.
Xu, Z., Shen, S., Zhai, Z., & Song, X. (2020). Stock & potential evaluation: The Coca-Cola Company. Frontiers, 1(11). Web.
Sulistiani, H., Wardani, F., & Sulistyawati, A. (2019). Application of best first search method to search nearest business partner location (Case Study: PT Coca Cola Amatil Indonesia, Bandar Lampung). In 2019 International Conference on Computer Science, Information Technology, and Electrical Engineering (ICOMITEE) (pp. 102-106). IEEE. Web.
Guo, X., & Wen, M. (2021). Research on the competitive strategy of Coca-Cola Company. In 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021) (pp. 2879-2885). Web.
