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REPORT

COCA-COLA
International Strategy

Kevin Baetsl Jens Hauser Alexei Petrici Larisa Ivanova Gilles Vandermeersch
Group 9
Lectors: Eef Scheerlinck and Karoline Segers

Artevelde University College International Business Management

1 EXECUTIVE SUMMARY
Coca-Cola is the main company in the beverage industry. Due to being the biggest company, CocaCola also has to endure a lot of criticism.
Coca-Cola already sells products for a large amount of consumers, but wants to broaden their
product popularity and create healthier beverage products.
Nowadays, Coca-Cola has a negative health image, this is a thorn in the eye for Coca-Cola, as CocaCola is actively busy trying to clean their negative image and get a healthier image.
Also Coca-Colas nemesis, PepsiCo is constantly developing new strategies to improve their brand
image.
Our group constantly searched for sources and adapted a critical mind on this report. Coca-Colas
website provided a lot of information, certainly on Coca-Colas infographics on their website. Since
Coca-Cola is one of the biggest successful, if not the biggest, companies on the world, there are a lot
of online reports available of Coca-Cola.
Coca-Colas effort in becoming a healthier brand is remarkable. Coca-Cola has investigated and
developed a new natural sweetener, called Stevia, in their products.
By launching the One Brand strategy and using natural sweeteners, Coca-Cola will use product
development to create healthier products, expand Coca-Colas consumer segment and enlarge their
distribution network to an even larger one.
The "One Brand" strategy would be appropriate to increase Coca-Colas position in creating a positive
health image.
Coca-Cola certainly can afford to take a risk with this new strategy, Coca-Cola is constantly busy
trying to improve their product portfolio and keep the demand for new products high.
Recently, Coca-Cola acquired healthier beverages such as Vitamin Water, Odawalla and
Chaudfontaine, also Coca-Cola invested in new energy drinks (such as Burn).
Over a larger scale of years, Coca-Cola brought Fanta, Sprite, PowerAde, Aquarius and added all of
those products in their portfolio. Coca-Colas distribution chain is global. Also Coca-Cola constantly
connects to new consumers by having creative and immensely popular advertisement.
If Coca-Cola actually achieves to develop a healthier image, theyll certainly get new consumers.
Coca-Cola constantly needs to be one step ahead of their competitors, so they can steal a few ideas
from PepsiCo for example.
PepsiCos strategy of offering drinks and snacks is an interesting perspective.
Coca-Cola can implant on this strategy by offering similar snacks in their product portfolio.
Also Coca-Cola could dominate the alcoholic market by offering low alcoholic beverages.
For the One Brand strategy, time will have to tell how consumers will adapt to it. Coca-Colas
strategies have always been dependent on their consumers. As mentioned above, the Coca-Cola
Vanilla strategy was successful in Great-Britain and United States, but it wasnt in the rest of Europe.
So, this new One Brand strategy will have to be tested on a large scale.

2 TABLE OF CONTENTS

Content
1

Executive Summary ......................................................................................................................... 1

Table of Contents ............................................................................................................................ 2

Introduction To The report .............................................................................................................. 5

3.1

Introduction to the report ....................................................................................................... 5

3.2

Introduction to Coca-Cola ....................................................................................................... 5

External Analysis ............................................................................................................................. 6


4.1

4.1.1

Politics ............................................................................................................................. 6

4.1.2

Economics ........................................................................................................................ 6

4.1.3

Social ............................................................................................................................... 6

4.1.4

Technological ................................................................................................................... 7

4.1.5

Ecological ......................................................................................................................... 7

4.1.6

Legal ................................................................................................................................ 7

4.2

Competitive Forces .................................................................................................................. 8

4.2.1

Competitive Rivalry ......................................................................................................... 8

4.2.2

Threat of Entry ................................................................................................................. 8

4.2.3

Threat of Substitutes ....................................................................................................... 8

4.2.4

Power of Buyers .............................................................................................................. 9

4.2.5

Power of Suppliers ........................................................................................................... 9

4.3

Industry ................................................................................................................................. 10

4.3.1

Type of Industry ............................................................................................................. 10

4.3.2

Industry life cycle ........................................................................................................... 10

4.4

PESTEL ANALYSIS ..................................................................................................................... 6

Competitors & Markets ......................................................................................................... 11

4.4.1

Strategic Group .............................................................................................................. 11

4.4.2

Market Segments .......................................................................................................... 13

Internal Analysis ............................................................................................................................ 14


5.1

Organizational resources & competences ............................................................................. 14

5.1.1
5.2

Organizational capabilities .................................................................................................... 16

5.2.1

Dynamics capabilities .................................................................................................... 16

5.2.2

Threshold capabilites & Distinctive capabilities ............................................................ 16

5.3

Strategic capability ........................................................................................................ 14

Diagnosing strategic capabilities ........................................................................................... 17


2

5.3.1
5.4

Value Chain ............................................................................................................................ 21

5.4.1
6

Analyzing competitive position using VRIO ................................................................... 21

SWOT ............................................................................................................................................. 22
6.1

Strengths ............................................................................................................................... 22

6.2

Weaknesses ........................................................................................................................... 24

6.3

Opportunities ........................................................................................................................ 25

6.4

Threats ................................................................................................................................... 25

6.5

SWOT- Graph ......................................................................................................................... 26

Strategic Purpose .......................................................................................................................... 27


7.1

Mission .................................................................................................................................. 27

7.2

Vision ..................................................................................................................................... 27

7.3

Values .................................................................................................................................... 27

7.4

Objectives .............................................................................................................................. 28

7.5

Stakeholders expectations .................................................................................................... 28

7.6

Corporate social responsibility .............................................................................................. 29

Business Strategy .......................................................................................................................... 30


8.1

Coca-Colas business strategies ............................................................................................. 30

8.2

Identifying strategic business unit ......................................................................................... 30

8.2.1

Market-based criteria .................................................................................................... 30

8.2.2

Capabilities-based criteria ............................................................................................. 30

8.3

Generic competitive strategy ................................................................................................ 30

8.3.1

Benchmarking ................................................................................................................ 17

Porter ............................................................................................................................. 31

8.4

Cost leadership ...................................................................................................................... 31

8.5

Differentiation strategy ......................................................................................................... 31

Corporate Strategy ........................................................................................................................ 32


9.1

Strategy directions ................................................................................................................ 32

9.1.1
9.2

Ansoff product/market growth matrix .......................................................................... 32

Market penetration ............................................................................................................... 33

9.2.1

Retaliation of competitors ............................................................................................. 33

9.2.2

Legal constraints ............................................................................................................ 34

9.3

Product development ............................................................................................................ 35

9.3.1

New strategic capabilites .............................................................................................. 35

9.3.2

Project management risk .............................................................................................. 36

9.4

Market development ............................................................................................................. 38


3

10

Critical Reflection and Recommendations ................................................................................ 39

10.1 Critical Reflection .................................................................................................................. 39


10.2 Recommendations ................................................................................................................ 39
11

Conclusion ................................................................................................................................. 40

12

List of References ...................................................................................................................... 41

13

Attachments .............................................................................................................................. 47

13.1 Coca-Colas One brand strategy and packaging rolls out in Europe in May ....................... 47


3 INTRODUCTION TO THE REPORT


3.1 INTRODUCTION TO THE REPORT
In this assignment we had to search for a company that recently made a strategic choice, then we
had to analyze the company and its recent strategic choice.
In our group we voted for different companies, choosing between Coca-Cola, Apple and Lufthansa.
Ultimately we have chosen Coca-Cola.
Our group had the idea that it would be interesting to make a report about Coca-Colas new strategy
One Brand, in this strategic choice, Coca-Cola is trying to change their unhealthy image to a
healthier image.
The problem about Coca-Cola is that it has an unhealthy image of its products, and its proven by
some facts that its fattening and has an unhealthy amount of sugar.
So, taking this fact in consideration, our main report goal about Coca-Colas new strategy, of One
Brand, is to see if Coca-Cola has improved its image to a healthy one or not. We will also take a look
at Coca-Colas closest competitor PepsiCo, and compare both of them in their strategies.
Following is the blueprint for this reports development.

Creating the Table of Content (22/10)


Editing the parts of the report & dividing the parts of the report(22/10 12/11)
Working on the different parts of the report (22/10 1/12)
Finish all parts of the report (27/11)
Last check-up of the report & Correct the grammar (1/12)
Printing Document (2/12)
Deadline Report & PowerPoint (4/12)

3.2 INTRODUCTION TO COCA-COLA


Coca-Cola is the world's largest beverage company, refreshing consumers with more than 500
sparkling and still brands.
Led by Coca-Cola, one of the world's most valuable and recognizable brands, Coca-Colas portfolio
features 20 billion-dollar brands including, Diet Coke, Fanta, Sprite, Coca-Cola Zero, POWERADE,
Minute Maid, Simply, Georgia, Dasani, FUZE TEA and Del Valle.
Globally, Coca-Cola is the No. 1 provider of sparkling beverages, ready-to-drink coffees, and juices
and juice drinks.
With an enduring commitment to building sustainable communities, Coca-Cola is focused on
initiatives that reduces Coca-Colas environmental footprint, support active, healthy living, create a
safe, inclusive work environment for our associates, and enhance the economic development of the
communities where they operate.
Together with Coca-Colas bottling partners, they rank among the world's top 10 private employers
with more than 700,000 system associates. (Coca-Cola, 2015)
5

4 EXTERNAL ANALYSIS
4.1 PESTEL ANALYSIS
4.1.1 POLITICS
Coca-Cola is a global company, therefore it often happens that Coca-Cola has to interact with officials
and governments. Transactions with governments are covered by special legal rules, and are not the
same as conducting business with private parties.
As a result, Coca-Cola encourages its employees to avoid bribery such as payment to a government
official to encourage a decision to award or continue business relations, to influence the outcome of
a government audit or inspection, or to influence tax or other legislation.
Coca-Cola expects its employees to take a positive personal participation in the political process
which suitable with all relevant laws and company guidelines. (Code of Business Conduit, 2012)

4.1.2 ECONOMICS
Coca-Cola experienced global volume growth of 2% for the full year and 1% in the quarter. By rise in
brands such as Coca-Cola, Sprite and Fanta, the global sparkling beverage capacity grew 1% in the
quarter, as well in the full year.
There was a slight growth during the year by up to 1% in the quarter of the Coca-Cola brand.
Despite this growth Coca-Cola had to increase the price of juice drinks to cover higher input costs,
this increase led to decline of the product purchase. (Coca-Cola company, 2015)

4.1.3 SOCIAL
Coca-Cola is the largest beverage company of the world, due to this it has both positive and negative
effects on the society and the environment. Due to the fact that Coca-Cola is a huge multinational
corporation, it has to maintain its reputation by reflecting positive activities and achievements to the
society. The three primary areas on which Coca-Cola focuses are water, women, and well-being.
(Infographic: North America Community Connections, n.d.)
Coca-Cola also tries to help in critical situations. In 2011, Turkey was hit by a deadly earthquake. The
foundation took immediate action and supported the victims with water, clothes and money
(Gammell, Corporate Social Responsibility Report, 2011)
Unfortunately, Coca-Cola has bad effects on people and environment of the world, because the
drinks are unhealthy. The reduction of sperm motility is one of the main reason. Researchers have
proved that men who drank a lot of Coca-Cola daily could reduce their sperm count by nearly 30%.
Another reason why Coca-Cola is unhealthy is that it includes a lot of caffeine and sugar.
Unfortunately, a lot of people consume too much caffeine in order to keep them alert, but caffeine
has a really negative effect on people, because it constricts arteries, veins and boosts heart rates.
The other main (unhealthy) ingredient in Coca-Cola is sugar, drinking too much Coca-Cola can cause a
decline in stamina, because after drinking Coca-Cola products the sugar will be absorbed and burned
by the body for energy. (Paventi, 2015)
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4.1.4 TECHNOLOGICAL
Recycling and recovering are integrated in the value chain of the Coca-Cola. In 2014, Coca-Cola
closed down its recycling division, but is nevertheless active with recycling. (Recycling Today Staff,
2014)
Coca-Cola started a partnership with Spotify in 2013.
Spotify is a music on demand service. The partnership of Coca-Cola and Spotify innovated a
service/app which helps customers with similar music taste to connect with each other all around the
world. The music provided by Spotify serves as important marketing strategy. (Moye, Every Song Has
a Place: Coca-Cola, Spotify Launch Groundbreaking Social Music App, 2013)

4.1.5 ECOLOGICAL
In order to protect the environment and save water, Coca-Cola provides $ 200.000 to The Nature
Conservancy to support the North American Freshwater Replenishment Partnership in Georgia,
Louisiana and Michigan. (Infographic: North America Community Connections, n.d.)
Under energy management and climate protection, Coca-Colas primary goal is to decrease the
amount of energy they consume, to minimize the Coca-Colas carbon footprint and to be a leading
company in climate protection.
Coca-Colas main ecological strategy is to establish a sustainable water management model and
minimize its water footprint.
Coca-Cola reclaimed a total of 56,338 m3 of water by recycling the water used for direct washing of
carbon tanks and rinsing water in the Ankara plants. (Coca-Cola ecek, 2011)
Coca-Cola takes part in more than 100 community watershed projects to help protect and conserve
local water resources. The Coca-Cola Foundation programs allowed saving more than 4 billion liter of
water annually in the United States since 2010. Furthermore, the Coca-Cola and World Wildlife Fund
partnership efforts have facilitated to save 1 billion liter of water within the Big Bend National Park.
(Infographic: North America Community Connections, n.d.)
Coca-Cola has been accused of dehydrating communities, which means that Coca-Cola used too
much water resulting in farmers wells drying up. (Coca-Cola drinking the world dry, 2007)

4.1.6 LEGAL
Mexico, the country with the highest consumption of Coca-Colas beverages, is developing a plan to
fight against Coca-Cola.
Soon the Mexican government will propose a tax on the sales of all sugary drinks. Major Mexican TV
networks already have declined to air Coca-Cola commercials because of their high sugar content.
(Flannery, 2013)

4.2 COMPETITIVE FORCES


4.2.1 COMPETITIVE RIVALRY
The main competitor of Coca-Cola is PepsiCo. Coca-Cola and PepsiCo have been the two key players
in the non-alcoholic drinks industry. Of all soft beverage companies, Coca-Cola controls about 40% of
the industry and PepsiCo 20%. (Maverick, n.d.)


http://tearsoftime.com/wp-content/uploads/2012/11/coke-vs-pepsi.jpg

4.2.2 THREAT OF ENTRY


Coca-Cola is spending a huge amount of money to advertise products and for marketing goals.
In 2013 Coca-Cola spent $ 3,37 billion on advertising, thats 7% of its 2013 total revenues.
The current market takes a stable position and makes it difficult for new competitors to expand
visibly.
Coca-Cola is promoted as a lifestyle and Coca-Colas investments on the advertisements and
marketing throughout Coca-Cola`s existence, effected a highly popular and strong brand.
This negatively affects potential competitors, their entrance in soft drink industry is almost
unfeasible. (Bailey, Advertising is a key strategy for Coca-Colas growth, 2014)

4.2.3 THREAT OF SUBSTITUTES


The soft beverage industry has an aggressive environment, there is a huge range of substitutes
presented to consumers such as tea, water, juice, coffee, other cola brands,
Nowadays consumers anxiety about health is rising an awareness towards Coca-Cola products,
which makes bottled water, sport drinks and juice become more in demand.
However most of the substitutes are weak market players compared to Coca-Cola because of the
immense advertising, brand loyalty and the availability that Coca-Cola offers. To reach those goals
and make loyal customers, companies spend enormous amount of money on advertisements and
marketing projects. (Value Line Research Department, 2015)
8

4.2.4 POWER OF BUYERS


The most significant buyers of the soft beverage industry are restaurants/fast food chains, dining
canteens, food stores. The aim to distribute soft drinks to these buyers is resale. The buyers have
high bargaining power because of the huge amount they purchase, the availability of great choice of
beverages make a decline in demand in unhealthy soft drinks. There are insignificant switching costs.
(Bailey, Why growth is sluggish in the non-alcoholic beverage industry?, 2014)

4.2.5 POWER OF SUPPLIERS


Coca-Cola could not survive without its suppliers. Coca-Colas suppliers are responsible for the
conjoint value creation initiatives, packaging associations, sustainable sourcing, annual supplier
conference and the Supplier Guiding Principles. (The Coca-Cola Company, n.d.)
The suppliers of Coca-Cola provide products such as goods, services, ingredients, packaging and
machinery.
The suppliers have a low bargaining power. Nevertheless, the rising prices of the raw material
directly affects the profit of Coca-Cola.
Basic commodities or main raw material are easily available to every manufacturer, the
manufacturers also have low costs that gives an opportunity of changing to other suppliers. (The
Coca-Cola Company, n.d.)

4.3 INDUSTRY
4.3.1 TYPE OF INDUSTRY
Coca-Colas industry is an oligopolistic industry, because approximately 90% of the market share are
being owned by three companies. Coca-Cola is the leader in this industry with a market share of 37%.
There are only two more main competitors next to Coca-Cola named PepsiCo, with a market share of
30%, and Dr. Pepper Snapple Group, which has a market share of 21%. (Faber, Coke crushes Pepsi in
most social metrics, 2012)


(Faber, Coke crushes Pepsi in most social media metrics, 2012)

4.3.2 INDUSTRY LIFE CYCLE


Development

Growth

Shake-out

Maturity

Decline

High d
2015

Market
size

Low d
Time


The industry life cycle shows that the soft drink industry is in the Maturity phase. That means the
market size hits its peak. High-flying companies emerge as cash cows and have an affluence of money
to pay out as dividends to shareholders. (What Is The Industry Life Cylce?, n.d.)
The current market growing is 7%. The reason for this growth are energy drinks and energy shots.
They are the new generation of products in this market. (Soft Drink Industry SAR Analysis, n.d.)

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4.4 COMPETITORS & MARKETS


4.4.1 STRATEGIC GROUP
4.4.1.1 INTRODUCTION

Volume Change since 2008

Decrease

Dr. Pepper
Snapple
Group

PepsiCo
Coca-Cola
Company

Increase
Low
Source

High

Market Share since 2009


http://www.aaaessays.com/samples/Case_Coca_Cola.pdf

http://www.aaaessays.com/samples/case_coca_cola.pdf

The chart shows that PepsiCo and Coca-Cola are two direct competitors in the soft drink industry. It
also identifies that they rival on the fundament of the market share of the soft drink industry and
volume of sales.
The map displays a third company. Dr. Pepper Snapple Group has a lower market share than the
other two competitors.
Dr. Pepper Snapple Group was able to increase more sales volume than Pepsi and Coca-Cola. It can
also be seen in the diagram that PepsiCo rose more volume of sales in comparison with Coca-Cola.
(Running Head: COCA-COLA CASE Coca-Cola Case Analyses, n.d.)

11

4.4.1.2 COMPETITOR ANALYSIS


PepsiCo is currently a strong worldwide leader in the food and beverage industry. Throughout its
growth, it has stayed true to its mission and objectives, while becoming a dominant force within the
United States as well as abroad.
Known throughout the world for quality products and customer care, PepsiCo should make no major
strategic changes to its plan. However, like in any business situation there are areas that PepsiCo can
improve upon.
Dangerous arrangements of PepsiCo
High
PepsiCo should
expand their
markets and
market segments

Risk for Coca-Cola

Capture more of
the aging
populations
market share

Continue to
expand with their
Human
Sustainability

Pepsi should
cut their
expenses
Low
Low

High
Development of PepsiCo

The most dangerous territory of PepsiCo is their expanding of their markets and market segments.
Coca-Cola should also have a look on their aging costumers, because it is also a dangerous sector,
which PepsiCo can conquer.
PepsiCo has their highest development in their human sustainability. In operational Business,
PepsiCo can also cut their expenses, but this is not that important for Coca-Cola in the competition.
(Widhaningrat, 2012)

12

4.4.2 MARKET SEGMENTS


4.4.2.1 ACTUAL COSTUMERS AND THEIR NEEDS
Coca-Cola has over 400 brands of drinks, so they can satisfy a huge amount of different people.
As a result, they have the possibility to provide drinks for several different target markets. These
markets include people of all ages, sexes, races, etc. The trend of todays society is about people,
who are looking to lead a better and healthier life.
Coca-Cola is responding on this trend by beginning to create diet drinks that have similar tastes as
their regular drinks while still being low fat or low calorie drinks, Coke Zero & Coke life for example.
Coca-Cola completes this idea with many lines of fruit juices for both kids and adults. One example
for kids products is Disney Hundred Acre Woods, and for adults, who want a grown up taste in a
healthy fruit drink, Coca-Cola provides the Odwalla.
Mainly, Coca-Cola provides their drinks to the middle and high-class people.
They have more money to buy luxury items. People nowadays are caring about the environmental
damage, which has been done in the past. These consumers are thinking about Coca-Colas ethics
and social responsibility in their decision-making process. To be able to gain and stabilize the trust
and respect of the potential buyers, those who care about the environment, Coca-Cola contributes to
stop pollution both within and outside their factories. After gaining the trust and respect more
consumers will be willing to buy their products, because Coca-Cola stands for the same goals that
their customers are attempting to protect. (Coca-Cola, n.d.)

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5 INTERNAL ANALYSIS
5.1 ORGANIZATIONAL RESOURCES & COMPETENCES
5.1.1 STRATEGIC CAPABILITY
5.1.1.1 FINANCIAL ASSETS
Coca-Cola Co., Consolidated Statement of Financial Position, Assets
USD $ in millions

Cash and cash equivalents


Short-term investments
Cash, cash equivalents and short-term
investments
Marketable securities
Trade accounts receivable, less allowances
Inventories
Prepaid expenses and other assets
Assets held for sale
Current assets
Equity method investments
Other investments
Other assets
Property, plant and equipment, net
Trademarks with indefinite lives
Bottlers' franchise rights with indefinite lives
Goodwill
Other intangible assets
Noncurrent assets
Total assets

Dec 31, 2014 Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010
8.958
10.414
8.442
12.803
8.517
9.052
6.707
5.017
1.088
2.682
18.010
3.665
4.466
3.100
3.066
679
32.986
9.947
3.678
4.407
14.633
6.533
6.689
12.100
1.050
59.037
92.023

17.121
3.147
4.873
3.277
2.886

31.304
10.393
1.119
4.661
14.967
6.744
7.415
12.312
1.140
58.751
90.055

13.459
3.092
4.759
3.264
2.781
2.973
30.328
9.216
1.232
3.585
14.476
6.527
7.405
12.255
1.150
55.846
86.174

13.891
144
4.920
3.092
3.450

25.497
7.233
1.141
3.495
14.939
6.430
7.770
12.219
1.250
54.477
79.974

11.199
138
4.430
2.650
3.162

21.579
6.954
631
2.121
14.727
6.356
7.511
11.665
1.377
51.342
72.921

Source: Coca-Cola Co., Annual Reports

Cash and cash equivalents include currency on hand as well as demand deposits with banks or
financial institutions.
It also includes other accounts that have the general characteristics of demand deposits.
Generally, only investments with original maturities of three months or less qualify under that
definition.
Original maturity means original maturity to the entity holding the investment. For example, both a
three month US Treasury bill and a three-year Treasury note purchased three months from maturity
qualify as cash equivalents. (Statement of Financial Position, Assets, n.d.)

14

5.1.1.2 PHYSICAL ASSETS


(Stock Analysis On Net, n.d.)
This table shows the resources of the physical assets of Coca-Cola from 2013 till 2014.
The main positions in this list are Property, plant and equipment, gross and Property, plant and
equipment net.
The first one is defined as realizing amount of the balance sheet date for long-lived physical assets
used in the standardized guidance of business and unmeant for resale. This can contain land, physical
structures, machinery, vehicles, furniture, computer equipment, construction in progress, and similar
items.
Coca-Colas land declined significantly from 2013 to 2014. Also Coca-Colas buildings and
improvements decreased in this period. Machinery, equipment and vehicle fleet was at $ 17 billion in
2013.
In 2014, Coca-Cola increased them to $ 18 billion. Coca-Cola lost $ 343 million in Construction in
progress from 2013 to 2014. This will result in Property, plant and equipment, gross that Coca-Cola
won $ 226 million from 2013 to 2014 and end at $ 25 billion.
The estimated depreciation is the final reason why Coca-Cola lost $ 334 million at the Property, plant
and equipment, net. So Coca-Cola decreased their level of $ 15 billion from 2013 and finish at $ 14
billion in 2014. (Umar, n.d.)

15

5.2 ORGANIZATIONAL CAPABILITIES


5.2.1 DYNAMICS CAPABILITIES
An organizations ability to renew and recreate its strategic capabilities to meet the needs of the
changing environments (Gerry Johnson)

5.2.1.1 SENSING
Coca-Cola sensed an opportunity in using a natural sweetener (Stevia) as replacement for the normal
sugars.

5.2.1.2 SEIZING
Coca-Cola launched Coca-Cola Life as a new product for testing the new sweetener and the effect it
has on the consumers of it (whether the product is popular or not, whether Coca-Cola Life can have a
long product life cycle)

5.2.1.3 RECONFIGURING
Coca-Cola will use the new sweetener as substitute for the regular sugars (used in Coca-Cola
products) in all of the Coca-Cola products (Coca-Cola, Coca-Cola Light, Sprite, )

5.2.2 THRESHOLD CAPABILITES & DISTINCTIVE CAPABILITIES


Coca-Cola is a powerful company with a lot of capabilities to keep Coca-Cola on the top of the
business world.
Coca-Cola constantly innovates and builds marketing capabilities to be one step ahead of the
competitors, also its not unknown that Coca-Cola often buys the competitors most popular product
(Sprite, Fanta, Chaudfontaine for example). Coca-Cola invests a lot in Consumer Marketing &
Commercial Leadership (including Franchise Leadership) to maintain a strong brand thats easily one
of the most popular and most used brands in the world. (Core Capabilities, 2010)

16

5.3 DIAGNOSING STRATEGIC CAPABILITIES


5.3.1 BENCHMARKING
5.3.1.1 INDUSTRIES & SECTOR BENCHMARKING
As it is known, todays soft drinks and beverages market is shared by two main companies:
Coca-Cola Company and Pepsi.
Coca-Cola and PepsiCo both remain the giants of the soft drinks industry; brands from their
portfolios make up 8 of the top 10 soft drinks. Coca-Cola remains the most valuable soft drinks
brand.
Coca-Cola was the worlds most valuable brand across all industries in 2007, with a brand value of $
43,1 billion, at the same time Pepsi ranked 19th with a value of $23,9 billion. Despite a reasonable
growth rate this year, todays values are lower than that peak, and both have been overtaken by
brands from the tech and telecoms sectors.
Increasing concerns over the links between carbonated drinks and obesity have begun to undermine
the image that Coca-Cola and Pepsi brands have represented for over a century.
Next, there is a ranking chart of Coca-Cola Co and PepsiCo drinks to prove that these two companies
are the giants of the soft drinks industry. (Haigh, 2015)


http://brandfinance.com/images/upload/brand_finance_soft_drinks_10_2015.pdf

17

Coca-Cola recently introduced the low calorie, naturally-sweetened Coke Life. Coke Life represents
an alternative approach to the challenge. Rather than relying on the acquisition or development of
new brands, there is clearly a belief that the master brand can stretch beyond its traditional values of
fun, friendship and refreshment to health and sustainability.
Initial sales have been slow, though the jury is still out on whether Coca-Colas strategy is a bridge
too far.
Despite the ongoing health concerns over its core product, Coca-Cola is unrelenting in its efforts to
continue increasing the power of its brand by high profile campaigns such as World Cup sponsorship
and the share a Coke initiative. In early 2014, when annual marketing spends already exceeded $ 3
billion, CEO Muhtar Kent pledged to increase the figure by $1 billion by 2016. (Sierra Services, Inc.,
n.d.)

5.3.1.2 COMPARING PERFORMANCES


As said before, the best company (in the same industry) that could handle a comparison with CocaCola, is PepsiCo.
Coca-Cola and PepsiCo are very similar businesses in terms of industry, consumers and flagship
products.
Both Coca-Cola and PepsiCo are global leaders in the beverage industry, offering consumers
hundreds of beverage brands. In addition, both companies offer ancillary products such as consumer
packaged goods.
On the surface, Coca-Cola and PepsiCo have very similar business models. As potential investors dig
deeper, however, they find key differences and key similarities between the two business models
that make the companies what they are as of 2015.

Diversified Business Model

Coca-Cola only focuses on a diversified product portfolio within the beverage industry and has few
products outside of that industry, while PepsiCo is a company known for a highly diversified product
portfolio, both within the beverage industry and in other industries such as the consumer packaged
goods industry.
This means PepsiCo's products in the snack food category account for more than 50% of its business
revenue, while a majority of Coca-Cola's revenue comes directly from the products it owns.
In a scenario where the beverage industry declines in overall revenue, PepsiCo is positioned to take
advantage of the situation, while Coca-Cola may falter.
However, Coca-Cola has more focus within the beverage industry, allowing it to make key
investments and communicate key messaging with consumers.

Complementary Products

Even though Coca-Cola may have an advantage with a more focused business model, PepsiCo
created a scenario where one product that PepsiCo owns, may induce a consumer to purchase a
second product that PepsiCo also owns.
In contrast, Coca-Cola has made efforts to dominate the beverage industry almost exclusively and
shied away from the cross-promotion of multiple products in multiple industries.
18

Pushing in New Markets

Both Coca-Cola and PepsiCo are so large, they face the issue of market saturation.
There are not many new or markets that remain untapped for both companies.
However, both companies have made a push into the energy drink category. This push highlights the
fact that sales volume for Diet Pepsi and Diet Coke has declined steadily over the past 10 years,
according to Time Magazine.
What is interesting to note is that Time Magazine also reports that the energy drink segment of the
beverage industry has captured a big growth over the past 10 years. Keeping with the theme of
diversification and product complements, Coca-Cola bought a large stake in Monster Energy in 2014,
whereas PepsiCo decided to start its own energy drink, Mountain Dew Kickstart.

Efficient Business Operations

With both companies facing market saturation, Coca-Cola and PepsiCo have made strong
commitments to more efficient operations in 2015. This allows both companies to take advantage of
the few new and emerging markets left.
Since every large market has been fully tapped by the beverage industry, the remaining smaller
markets require efficient operations to turn a profit and make a lucrative investment, since the sales
volume felt in countries such as the U.S. is not there. These more efficient operations help both
companies increase the price per share given it should result in higher earnings per share, or EPS,
even if sales remain flat. (Comparing Coca-Cola and Pepsi's Business Models, 2015)

Coca-Colas Dominance

According to Beverage Digest, in 2013, Coca-Cola held a 34% share of the liquid refreshment
beverages (or LRB) market, which includes carbonated soft drinks (or CSD), bottled water, and noncarbonates like sports drinks, ready-to-drink teas, and juice drinks. PepsiCo held 25% of the LRB
market.
Coca-Cola is the undisputed leader in the CSD market, with a share of 42% in 2013.
Its ahead of PepsiCo, which had a 27% market share. In 2013, Coca-Colas CSD volume was down by
2%, while PepsiCo declined at twice that rate, 4%. Dr. Pepper Snapple Group (DPS) held the thirdlargest US CSD market share at 16%.
Coca-Colas leading brands, Coca-Cola (or Coke) and Diet Coke, both are leading the CSD market with
17% and 9% in market shares, respectively.
In 2013. PepsiCos key beverage brands, Pepsi and Mountain Dew, trail Coca-Colas brands with a
market share of 8% and 6% respectively. (Bailey, Coca-Cola Company vs PepsiCo : A battle of giants,
2014)

19

5.3.1.3 BEST-IN-CLASS BENCHMARKING

Womens Economic Empowerment

Coca-Cola is supporting the women entrepreneurial potential around the world using the 5by20
program to empower 5 million women by 2020. Women do 66% of the worlds work but only earn
10% of the worlds income, yet they spend 90% of their income on their family and the community.
Unleashing the entrepreneurial potential of women is one of the most powerful and enduring ways
to help families and communities prosper. It is also an important way to help make business more
sustainable. Investing in the success of women fuels Coca-Colas own success and the success of
communities around the world.
In 2013, 5by20 programs enabled more than 26.000 women entrepreneurs in India, who are often
challenged by a lack of business experience and difficulty accessing finance and assets. By the latest
count in 2014, Coca-Cola has empowered 900.000 women across Africa, Asia and Latin-America.

Creating Sustainable Communities

Coca-Cola is a massive part of a global system with operations in more than 200 countries.
These places are not just markets to Coca-Cola, they are home, where they live and work.
For more than a century, Coca-Cola has invested time, expertise and resources to strengthen these
communities, and is committed to enhancing its strategies to achieve maximum effectiveness in
helping to address critical human needs.
This is about $ 100 million each year. For example, in March 2015, Coca-Cola announced that it
would invest an additional $ 35 million for access to water and sanitation in Africa (project RAIN). In
addition to the existing funding, this means that 6 million people will benefit from this program. (The
Coca-Cola Company, n.d.)

5.3.1.4 LIMITATIONS OF COCA-COLA

Competition with Pepsi

Pepsi is a thorn in the flesh for Coca-Cola. Coca-Cola would have been the clear market leader had it
not been for Pepsi. The competition in these two brands is immense and Pepsi will not give up so
easily.

Product Diversification is low

Coca-Cola is missing from that segment where Pepsi has made a smart move and diversified into the
snacks segment with products like Lays.

Absence in Health beverages

The business environment is changing and people are taking measures to ensure that they are not
obese.
Carbonated beverages are one of the major reasons for fat intake and Coca-Cola is the largest
manufacturer of carbonated beverages. The inference is that the consumption of beverages in
developed countries might go down as people will prefer a healthy alternative. (Bhasin, n.d.)
20

5.4 VALUE CHAIN


Infrastructure
Support Activities

HRM
Technology Development
Procurement

Primary Activities

Warehouses
storages

Bottle &
Cans
packaging,
Recycling,

Inbound
Logistics

Operations

Financial services
Accounting services
Information management
Recruiting personnel

IT-Services
(controlling
website)
Educating &
training

New products development, Market Research, new


Marketing campaigns
Suppliers of sugars, cans, bottles, ERP system
water,
Transportation Advertising,
Costumer
system, retail marketing
service
contracts,
campaigns,
distribution
systems
Outbound
Marketing &
Service
logistics
Sales

(Coca-Cola System and Value Chain, n.d.)

5.4.1 ANALYZING COMPETITIVE POSITION USING VRIO


5.4.1.1 VALUE
Coca-Cola has an immense global distribution network of which it profits every day. Also Coca-Colas
marketing campaigns are extremely well created, especially during the Christmas holidays (the
famous Christmas advertisements for example).

5.4.1.2 RARITY
The fact that Coca-Cola is such a massive brand with an immense global distribution network makes
Coca-Cola rare. Coca-Cola is on the top of the world with their popularity, also Coca-Cola has an
advantage on their competitors (such as Pepsi) by being global.

5.4.1.3 IMITATIONS
Coca-Colas push and pull strategy may be imitated but Coca-Colas massive global distribution
network is unique & rare. Coca-Colas unique marketing campaigns are also hard to copy.

5.4.1.4 OTHERS
The human recourses management makes sure that the services are great, Coca-Cola trains
personnel to sell Coca-Cola in companies (for example vending machines). (Patrick Lucas, VRIO,
n.d.),


21

6 SWOT
6.1 STRENGTHS

Advertising and marketing capabilities.

Coca-Colas annual advertising spending was $ 3.499 billion, $ 3.266 billion and $ 3.342 billion in
2014, 2013 and 2012, respectively. Advertising expenses accounted for 7% of total revenues each
year.
In 2014, Coca-Cola was the largest advertiser in the beverage industry in the world. (United States :
Securities & Exchange Commission, 2014)
Coca-Colas large advertising budget provides a few advantages over its competitors:
o
o
o
o
o

Helps to introduce new products to the market


Promotes the brand
Informs consumers about the products features
Communicates the brands message to the public
Increases sales

In addition, Coca-Colas total marketing expenses reached $ 7 billion or 15% of its total revenue in
2014. It is one of the largest marketing budgets when compared to the rivals budgets and is used
very effectively.
Only PepsiCo uses its marketing budget more effectively by spending only $ 3.9 billion to generate $
66.7 billion of PepsiCos revenue.
Coca-Cola with its largest advertising budget and strong marketing capabilities is able to attract more
customers and to do that more effectively than its rivals.
Marketing expenses (in US $ Total revenue (in
billion)
US $ billion)
7
45.998

Company
Coca-Cola

% of total
revenue
15.2%

PepsiCo Inc.

3.9

66.683

5.8%

Dr Pepper Snapple Group Inc.

3.7

6.121

60.4%

Nestl S.A.

19.8

92.3

21.5%

Extensive and diversified product portfolio.

Coca-Cola offers more than 650 brands to consumers in over 200 countries.
It has the most extensive beverage product portfolio that no other rival can match. Coca-Cola offers
diet and regular beverages, juices, water, tea, coffee and energy drinks. Coca-Cola has been
strengthening its product portfolio over the years and now owns 4 out of 5 worlds top nonalcoholic
sparkling beverage brands: Coca-Cola, Coca-Cola Light, Fanta and Sprite. (Coca-Cola Company, n.d.)


22

Strong partnerships with bottling companies

Coca-Cola emphasizes its franchise leadership and bottling distribution operations as Coca-Colas key
capabilities and strengths. Coca-Colas business model relies on its bottling partners to bottle its
syrups or concentrates into the packages, to distribute, sell and market the products.
Usually, only one bottling partner holds a license to sell and distribute Coca-Colas products in a
certain geographical area.
On the other hand, the bottling partners rely on Coca-Cola to develop and introduce new products
and to provide promotional and marketing services. If one of the bottling partners is
underperforming in the market, Coca-Cola usually invests in that bottling company and takes control
of it.
Coca-Cola then uses its expertise and resources to improve the partners performance and then
returns the control of the bottling company back to the original owner.
Strong partnerships are mutual for both parties to operate successfully. No other rivals business
model is based on such strong partnerships. (Wikipedia, n.d.), (Coca-Cola, n.d.)

Leading player in the global beverages industry.

Coca-Cola has the largest market share of the worlds beverage industry. According to a beverage
industry analysis done by MarketLine, the worlds soft drinks market reached $ 631 billion in 2013, in
which, Coca-Cola was the dominant leader. (PRNewswire, 2015), (MarketLine, n.d.)

Brand recognition and reputation.

Coca-Cola owns and markets some of the most recognizable global brands, including Coca-Cola,
Sprite, Fanta, PowerAde, Minute Maid, Dasani and Georgia. According to Interbrand and Forbes,
Coca-Colas brand is the 3rd and 4th most valuable brand in the world, respectively.
Sprite, the other companys brand, has been recognized by Interbrand as the 81th most valuable
brand and by Forbes as the 98th most valuable brand in the world.
Except Pepsi, no other nonalcoholic beverage brand has been recognized as one of the top 100 most
valuable brands in the world. (Best Global Brands of 2015, 2015), (Forbes, 2015)
What does this mean to Coca-Cola and its brands? First, the brand value is related to the brand
awareness and its reputation.
The most valuable brands are known across the world. Coca-Cola and Sprite are sold in over 200
countries across the world.

23

Global distribution channels.

Coca-Cola sells 1.9 billion servings out of the approximately 57 billion beverage servings consumed
every day. The products are distributed and served to more than 200 countries and that can only be
achieved with an extensive distribution channels in place. (United States : Securities & Exchange
Commission, 2014)
Coca-Cola uses its bottling partners, which are called Coca-Cola System, to distribute and sell its
products worldwide. Coca-Cola has sold 28 billion, 27 billion and 26 billion unit cases of Coca-Colas
products in 2013, 2012 and 2011, respectively.

6.2 WEAKNESSES

Rising debt levels.

Coca-Colas debt in 2013 has reached $ 56.615 billion, an increase of 7% over 2012. Companys debt
to asset ratio has also been increasing over the past 4 years and has reached 63% of total assets in
2013. (Global Beverages, n.d.)
Coca-Colas debt level isnt extremely high, but it becomes a significant weakness when Coca-Cola
struggles to grow and its only strategy to reverse that is to dive into the cash demanding acquisitions.
Coca-Colas acquisition activities have to be financed by borrowing, which increases companys debt
even further.

Criticism and negative publicity

Coca-Cola receives lots of criticism from various groups, governments and consumers over its
business practices, environmental practices and impact on obesity.
The main areas, for which Coca-Cola are being criticized, are:
o
o
o
o
o

Questionable advertising and marketing practices


Policies towards environment
Lobbying and bribing government officials and health organizations
High water usage
Monopolistic business practices

Criticism towards the business results in negative publicity, which damages Coca-Colas brand
reputation and sales.

24

6.3 OPPORTUNITIES

Growing alcoholic beverage industry.

The alcoholic beverage market has been steadily growing since 2009. According to the Global
Alcoholic Drinks Industry Report from MarketLine, the alcoholic drinks market value has reached $ 1
trillion in 2012. In 2017, the market is expected to reach a value of $ 1.319 trillion or a 17.6% growth
from 2012. It is one of the few global beverage segments that will experience a moderate growth.
(PRNewswire, 2014)
Coca-Cola could expand into alcoholic beverages industry by acquiring some of the successful brands
that are already established in a market. Coca-Cola could also use its marketing capabilities to market
the products and its extensive distribution system to push them into the right markets.

Expansion of ready-to-drink coffee products in the global market.

According to the Beverage Marketing Corporation report, the fastest growing beverage sector in the
U.S. in 2013 and 2014 was RTD coffees. While, the whole beverage industry remained flat or grew
only slightly, the RTD coffees grew by 16.9% in two years and are projected to grow even faster in the
future.
Although, the sector is relatively small, Coca-Cola could push its Georgia brand to the global market
and establish itself as the RTD coffee (Beverage Marketing Corporation, 2015)

6.4 THREATS

Obesity concerns may reduce demand for some of Coca-Colas products.

According to the Coca-Cola s financial report, obesity concerns is the no.1 threat that is affecting the
company:
Consumers, public health officials and government officials are highly concerned about the public
health consequences of obesity, particularly among young people. In addition, some researchers,
health advocates and dietary guidelines are suggesting that consumption of sugar-sweetened
beverages, including those sweetened with HFCS or other nutritive sweeteners, is a primary cause of
increased obesity rates and are encouraging consumers to reduce or eliminate consumption of such
products. Increasing public concern about obesity; possible new or increased taxes on sugar-
sweetened beverages by government entities to reduce consumption or to raise revenue; additional
governmental regulations concerning the marketing, labeling, packaging or sale of our sugarsweetened beverages; and negative publicity resulting from actual or threatened legal actions
against us or other companies in our industry relating to the marketing, labeling or sale of sugarsweetened beverages may reduce demand for or increase the cost of our sugar-sweetened
beverages, which could adversely affect our profitability. (United States : Securities & Exchange
Commission, 2014)

25

Increased competition and capabilities in the marketplace could hurt Coca-Colas business

According to Coca-Colas financial report, rivalry is one of the key threats affecting Coca-Cola.
The beverage industry is highly competitive industry consisting of numerous small, large and
multinational companies. The businesses in the beverage industry compete on many factors,
including pricing, advertising, sales promotion programs, product innovation, increased efficiency in
production techniques, the introduction of new packaging, new vending and dispensing equipment.
(United States : Securities & Exchange Commission, 2014)

6.5 SWOT- GRAPH


Strengths

Weaknesses

Advertising and marketing capabilities


Extensive and diversified product portfolio
Strong partnerships with bottling
companies
Leading player in the global beverages
industry
Brand recognition and reputation
Global distribution channels

Opportunities

Growing alcoholic beverage industry

Expansion of ready-to-drink coffee products


in the global market

New sweetener and product launch of


Coke Life

Rising debt levels


Criticism and negative publicity

Threats
Obesity concerns may reduce demand for
some of Coca-Cola s products
Increased competition and capabilities in
the marketplace could hurt Coca-Colas
business

26

7 STRATEGIC PURPOSE
7.1 MISSION
The missions of Coca-Cola are among others to refresh the world, to inspire moments of optimism
and happiness and to create value and make a difference. (Coca-Cola Company, n.d.)

7.2 VISION
The vision of Coca-Cola is to achieve sustainable, quality growth. There are six points that serve as
framework:

People: Be a great place to work where people are inspired to be the best they can be.
Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate and satisfy
people's desires and needs.
Partners: Nurture a winning network of customers and suppliers, together we create mutual,
enduring value.
Planet: Be a responsible citizen that makes a difference by helping build and support sustainable
communities.
Profit: Maximize long-term return to shareowners while being mindful of our overall
responsibilities.
Productivity: Be a highly effective, lean and fast-moving organization.

Integrity is one of the key pillars of Coca-Colas 2020 vision besides leadership, passion,
accountability, collaboration, diversity and quality. (Coca-Cola Company, n.d.)

7.3 VALUES
Coca-Colas product responsibility pursues to make sustainable corporate governance with its
marketing, production and purchasing practices in order to create value to the entire value chain.
For Coca-Cola, the term integrity means doing what is right, which means that Coca-Cola expresses
positively its values and reputation in over 200 countries where they operate. (Gammell, Corporate
Social Responsibility Report, 2011)
Coca-Cola creates orders for suppliers who perform best in social, economic and environmental
areas. Moreover, Coca-Cola strives to a product portfolio meeting the needs of every lifestyle, age,
and purchasing power.
Coca-Cola helps customers to manage their calorie intake by offering its drinks in smaller packages.
(Metz, 2015)
19% of Coca-Colas products are now available in units of less than 250ml.
The British Government has developed a stimulating program across the country for people to
reduce their calorie intakes.
The Coca-Cola System has been supporting this program and leading restaurant chains, food
retailers, and food and drink manufacturers since 2012. (Journey Staff, 2015)
27

7.4 OBJECTIVES
Coca-Cola aims to reach a global fame by operating as a responsible, ethical and sustainable business
in tomorrow`s world. (Yang, n.d.)

7.5 STAKEHOLDERS EXPECTATIONS

Customers: are the main priority of Coca-Cola. Coca-Cola remains a relationship by making use of
dedicated account teams, cooperative value creation lead, customer care centers, reviews,
cooperative business planning.
Employees: are the internal stakeholders, because they work for Coca-Cola. People who work for
Coca-Cola help Coca-Cola function and to achieve its goals.
Shareholders: they are the main group of stakeholders, whose stake in the business is obtaining
a large amount of dividends from Coca-Cola; shareholders usually have a financial interest in the
business.
Managers: are internal stakeholders, because they control Coca-Cola and manage employees.
Bankers: their stake in Coca-Cola is about the interest to be paid by Coca-Cola and how quickly
the money they have lent out is repaid.
Pressure Groups: this is concerns issues as regarding preservation, environmental problems.
Suppliers: Coca-Cola could not survive without its suppliers. Their suppliers are responsible for
the conjoint value creation initiatives, packaging associations, sustainable sourcing, annual
supplier conference, Supplier Guiding Principles.
Governments and regulatory authorities: recycling and recovery lead, EU Platform for Action on
Diet, Physical Activity and Health, foreign investment consultative councils, chambers of
commerce.
Non-governmental and intergovernmental organizations (NGOs and IGOs): dialogue,
partnerships on general issues, fellowship of business and industry associations.
Communities: plant visits, lectures at universities, fellowship meetings, sponsorship activities,
partnerships on overall issues.

Coca-Cola considers honest conversations and ongoing dialogue with its stakeholders as very
important.
Coca-Colas sustainability plan was developed by listening closely to the expectations of the
stakeholders, setting out stretching goals and addressing the significant issues and concerns
highlighted across their value chain. For Coca-Cola collaboration is essential, both to achieve their
targets and for society as a whole.
Consequently, the continuing commitments and partnership with their local communities, NGOs,
suppliers, customers and many other stakeholders is fundamental to their progress and future
innovation.
Coca-Cola has developed a program of stakeholder engagement to ensure they understand views
and expectations, and are able to respond to raised issues or potential concerns. (Hellenic Bottling
Company, 2014)


28

7.6 CORPORATE SOCIAL RESPONSIBILITY


Coca-Cola is not only a world famous global brand, but it also takes an active, responsible interest in
individuals and communities at a local level, wherever it operates. (Coca-Cola Great Britain, n.d.)
Coca-Cola believes that their primary responsibility is to meet the needs of its stakeholders, and to
continuously improve their social, environmental and economic performance while pursuing the
sustainability and operational success of Coca-Cola. (Coca-Cola Entreprises, 2015)
Coca-Cola has divided its responsibility into 4 main parts :

Environment
Coca-Cola workplace
Product Responsibility
Community

However, Coca-Cola is pointing out importance of the responsible marketing.


Coca-Cola calls itself a global family of people working together that gives an opportunity to bring
into their lives wide range of beverages.
By providing customers with nutritional information on the labels and online, moreover with portion
control, buyer has enough awareness to make informed choices. (More, 2015)
All range of beverages is covered by a Responsible Marketing policy; the promotions are not meant
for children under the age of 12. This policy applies its power to mobile phones, television, radio,
print, (Journey Staff, 2015)

29

8 BUSINESS STRATEGY
8.1 COCA-COLAS BUSINESS STRATEGIES

Unique, market-tested formula


Timeless logo
Distributed in a proprietary bottle
High standards for retailers
Fixed consumer price
Much mouth-to-mouth advertising
Franchise model (Feloni, 2015)

8.2 IDENTIFYING STRATEGIC BUSINESS UNIT


8.2.1 MARKET-BASED CRITERIA
Coca-Cola has drinking products aiming at a lot of people, such as Coca-Cola which is a timeless
brand and focusses on youth and older, using the same marketing campaigns (sometimes depending
on the country/region).

8.2.2 CAPABILITIES-BASED CRITERIA


The marketing department is different in each region. There are different advertisements in Asia
than in Europe.

8.3 GENERIC COMPETITIVE STRATEGY


Competitive Advantage
Lower Cost

Differentiation

Broad
Competitive Scope

Cost Leadership

Differentiation

Cost Focus

Differentiation
Focus

Narrow

(Vrontis, n.d.)

30

8.3.1 PORTER
8.3.1.1 COST
Coca-Colas production costs less then its competitors.

8.3.1.2 DIFFERENTIATION
Coca-Colas main products have a different taste than its closest competitors (Pepsi). Tests have
proven that multiple people prefer a sip of Pepsi, but enjoy an entire drink of Coca-Cola more. (How
to Tell the Difference Between Coke and Pepsi, n.d.)

8.3.1.3 SCOPE
Coca-Cola uses a broad scope, they target their costumer segments on the region and country based.
For example, there will be more exotic Fantas in South America than there will be in Europe. Same
as for Coca-Cola Vanilla, which will be more in demand in North America than in Middle-East based
countries.

8.4 COST LEADERSHIP


Coca-Colas positioning in the Cost Leadership is achieved not only through economies of scale in
research, development and promotion, but also through learning, knowledge and experience in
production and operational processes. It is also achieved through effective/efficient distribution
networks and manufacturing systems. (How to Tell the Difference Between Coke and Pepsi, n.d.)

8.5 DIFFERENTIATION STRATEGY


The use of a differentiation strategy is where Coca-Cola attempts to be diverse from its competitors
by adding something to its product that will provide a unique value to its customers.
There are also various ways Coca-Cola can differentiate, depending on the industry it is in, however
the costs of this differentiation policy must be lower than the additional pricing Coca-Cola can obtain.
Differentiation for Coca-Cola is achieved through superior quality product, which surpasses their
nearest rivals, and high brand image and recognition.
Coca-Cola has also used their promotion and packaging as a means of further differentiation, for
example, the Coca-Cola bottle, which has become an internationally recognized symbol.
The decision in 1999 to revitalize the contoured bottle design was Coca-Colas first global marketing
priority. (The Strategic Positioning of Coca Cola in their Global Marketing Operation, n.d.)

31

9 CORPORATE STRATEGY
9.1 STRATEGY DIRECTIONS
9.1.1 ANSOFF PRODUCT/MARKET GROWTH MATRIX

Current Markets

New Markets

Current Products
Market Penetration
o Increase Market Share
o Increase product usage
o Increase healthy products
o
Market Development
o Expand market for existing
products
o Geographic expansion
o Target new Consumer
segment (healthier people)

New Products
Product Development
o Product Improvement
o Launch "One Brand"
o Launch Coca-Cola Life

Diversification Strategy
o Vertical Integration
o Forward Integration
o Backward Integration
o Conglomerate Diversification

(Slidesharecdn, n.d.)

32

9.2 MARKET PENETRATION


9.2.1 RETALIATION OF COMPETITORS
Since the start of the new millennium, Coca-Cola and PepsiCo were forced to deal with an even more
powerful competitor, an increasingly health conscious public.
With soft drinks sales in a seemingly terminal decline, we took a look at the effectiveness of each
companys strategy in dealing with this new adversary.

Coca-Cola

The ongoing obesity crisis and anti-soda public sentiment means Coca-Cola has been forced to evolve
with their audience in recent years. With the soft drinks market in the midst of a ten year slump,
Coca-Cola have invested in healthier options like Vitamin Water and Odawalla (and Chaudfontaine).
Yet soda still accounts for 75% of Coca-Colas global sales however and Coca-Cola intends on ramping
up their advertising budget by an extra $ 1 billion over the next three years.
In 2013 Coca-Cola spent $3.3 billion on advertising for healthier drinks.
Diet Coke, in particular, has suffered amidst public concern over the dangers of artificial sweeteners
and was overtaken by Pepsi as the second most popular carbonated soft drink in America in 2014.
The launch of Coke Zero, a zero calorie alternative to Coca-Colas main brand, did prove successful
however and became Coca-Cola s 12th brand to reach $1 billion in global revenue.
Coca-Colas strength has always been their ability to emotionally engage their audience through their
iconic advertising. (Macias, 2015)

Pepsi

While Coca-Cola comfortably outsells Pepsi, Indra Nooyis shrewd leadership of PepsiCo has led some
to believe that Pepsi now has the edge over its fierce rival.
Certainly in terms of understanding their audience.
Since becoming CEO in 2006, Nooyi has had a strong grasp of shifting consumer sentiment away from
the high calorie and high sugar soft drinks. She refocused Pepsi on water, teas, juices and sports
drinks.
There are also plans to expand PepsiCos nutritional business from $10 billion to $30 billion by 2020.
The strong performance of Pepsis snack division, which counts for 50% of PepsiCos sales volume,
means Pepsi is in a much better position than Coke to withstand the seemingly unstoppable trend
away from sodas.
The 2015 relaunch of Pepsis most famous advertising campaign the Pepsi Challenge shows Pepsis
awareness of the current marketplace. The blind taste test has been replaced by music, tech, sports,
and design in a campaign fronted by Serena Williams, Usher, and James Rodriguez whom urge
participants to taste life differently.
Pepsi have realized that Coca-Cola is no longer their main competitor.
Changing tastes and an increasingly health aware public means Pepsi have switched the focus from
soda to trying to build an emotional connection with the Pepsi brand. (Macias, 2015)

33

9.2.2 LEGAL CONSTRAINTS


Coca-Cola is the biggest and most known company of beverages and soft drinks. As every company, it
has legal constraints that regulate its activity in order to follow the law and other rules that have to
be respected.
Coca-Cola has legal constraints which include some basic laws that Coca-Cola should respect:

Customer law
Health and safety law
Employment law
Discrimination and antitrust law

Also, Coca-Cola has other laws and regulations to follow in different countries they are developing,
that are specific to the business sector of beverages and soft drinks.
Those laws include environment protection, advertising and labelling, competition, product safety
and labor practices.
Also, the government of the country where Coca-Cola is doing its business, imposes laws and
regulations to follow. Those laws and regulations are about recruiting labors, amount of permitted
goods by the government, trade restrictions, accounting standards. According to the jurisdiction of
those countries, Coca-Cola has to income tax policies. To add more here, Coca-Cola is imposed to
import and excise duties for the distribution of products in those countries where are no outsourcing
units. (Bimtech Birla Institute, 2010)

34

9.3 PRODUCT DEVELOPMENT


9.3.1 NEW STRATEGIC CAPABILITES
9.3.1.1 BRAND BUILDING BY LAUNCHING ONE BRAND STRATEGY
Today Coca-Cola remains a powerful brand with over a century of history. The success of the CocaCola brand has made it an icon in brand marketing and of American and global history.
It symbolizes the popularity of a soft drink as well as the dominance in beverages and soft drinks
industry.
To stay on the top of the beverages and soft drinks industry and to refresh their brand strength,
Coca-Cola is launching a bold shift in branding called One Brand strategy.
This strategy calls for a unification of marketing under the Coca-Cola master brand for all its product
sub-brands, including Diet Coke, Coca-Cola Life, Coca-Cola Zero and regular Coca-Cola.
This new step in Coca-Colas activity creates brand building synergies by bundling all marketing spend
on a single brand, while driving greater penetration and trial of the product sub-brands.
In Europe, participating markets will be uniting the Coca-Cola family into a one-brand marketing
approach.
Instead of separate brand communications for Coca-Cola, Coca-Cola Zero, Diet Coke/Coca-Cola Light
and Coca-Cola Life, consumers in these markets will now see one iconic Coca-Cola brand, supporting
all Coca-Cola choices.
No calorie and low-calorie Coca-Cola options will be included in the sign off for all Coca-Cola
television advertising in these markets, and the optimism, happiness and refreshment of the iconic
brand will be reflected in all Coca-Cola communication. (Moye, Coke Launches New Packaging
Designs and Marketing Approach in Key Markets as Part of Global Pilot, 2015)


http://f.fastcompany.net/multisite_files/fastcompany/poster/2015/03/3043308-poster-p-1-every-type-of-coke-may-soonshare-the-iconic-red-branding.jpg


35

9.3.1.2 FINANCIAL STRENGTH


Coca-Cola has a huge financial power doing it business. With such a financial strength, they can
proceed to develop the market on a large scale in many countries.
The money is being used to build infrastructure, staff training and development of the distribution
network. Even they can fully bear the losses for a long time to invest into the potential market.
Furthermore, they can use the financial resources to implement various advertising strategies by ads
on television, newspapers, magazines and posters.

9.3.1.3 ORGANIZATIONAL CAPABILITIES


Coca-Cola is one of the three most valuable brands in the world. Brand reputation is being
established after more than one century. It can be considered as core competency of Coca-Cola.
Coca-Cola has a lot of loyal customers. Coca-Cola can earn stable profits from these loyal customers
to develop Coca-Cola. Besides the brand name awareness of Coca-Cola is much higher than other
competitors.
Therefore, Coca-Cola, simply based on their reputation, was able to create a clear competitive
advantage.
Coca-Cola builds a positive and open working environment where employees can share ideas as well
as the candid comments.
It helps companies find new business ideas as well as talent in Coca-Cola. Moreover Coca-Cola is also
hiring a lot of talented employees around the world. Because Coca-Cola applies the strategy of talent
localization successfully.
Each time they enter a new market, they recruit a lot of local staff in order to increase the ability to
understand new markets. So the ability to penetrate new markets is remarkably fast and is going to
be the same or even much better by implementing and launching One Brand strategy. (The
Resouces And Capabilities Of The Coca Cola Business Essay, n.d.)

9.3.2 PROJECT MANAGEMENT RISK


Project Risk management is the identification, assessment, and prioritization of risks followed by
coordinated and economical application of resources to minimize, monitor, and control the
probability and/or impact of unfortunate events or to maximize the realization of opportunities.
(Project Risk Management, n.d.)
When performing a risk management process, it is vital to first understand the organizations
strategic objectives and the current state of the organization in order to be able to realize and detect
risks.
When the organizational setup is understood, the risk assessment can be performed, which is built
up from two major parts: risk analysis and risk evaluation. The first phase of a risk analysis is to
identify which risks and disturbances the organization is facing. The risk identification can be
performed by introducing a number of different techniques, such as brainstorming, industry
benchmarking, risk assessment workshops and auditing.
The overall aim of these activities is to recognize activities where Coca-Cola is being exposed to
uncertainties and to find the risks associated with these activities.


36

Coca-Cola has to offer a great range of different products in order to satisfy customer demands in
many countries with several preferences of each.
This leads to higher susceptibility of an impact in the supply chain due to high complexity of the
management risk process. Since the management risk is an on-going process, it is important for CocaCola as well to know how to continue working with risk management and which are the
consequences of it.
Coca-Cola has to identify and handle the risks in all steps of the production process starting from
supply process of raw materials to finished products. There are two main categories of risks that a
company can face. Those are:

Internal Risks: have their origin form the events occurring within the company.
External Risks: have their origin form the events occurring outside the company which are very
(Dittmer, n.d.), (Gabriel berg Bustad, 2012)

37

9.4 MARKET DEVELOPMENT


Today Coca-Cola has an international presence, operating more than 230 brands in nearly 200
countries.
Next, there are some examples of Coca-Colas products that has successfully introduced into new
markets.

Coca-Cola Vanilla

Coca-Cola Vanilla had a successful launch in the USA, so it was decided to test its potential in Great
Britain.
Product evaluation involved carrying out taste testing to identify the best formula/flavor for
consumers' palates in Great Britain.
At the same time, considerable effort was put into graphic development. It was important for the
pack design to incorporate the Coca-Cola trade mark, thus remaining true to the Coca-Cola family,
but also to differentiate the new flavor.
Consumer focus groups were used to identify the preferred design.
In addition, a simulated test market was carried out. On the basis of the background market research
it was possible to forecast likely sales volumes. This calculation was based on the type and level of
support the brand flavor launch would receive (e.g. advertising, sampling, promotions, price and
distribution), consumer perceptions and claimed behavior (what the consumers said they would do).
The results were favorable and supported the launch of this flavor in Great Britain.

Fanta Icy Lemon

The development of this new flavor developed from listening directly to consumers who called CocaColas care-line to enquire about the availability of a lemon Fanta based on their experience on
holidays abroad.
As a result, Coca-Cola undertook a series of quantified product taste tests and once the preferred
flavor was identified, Fanta Icy Lemon was launched in 2001. The launch was a great success and the
brand has subsequently been complemented by a range of other flavors.

Coca-Cola Share Size 1.25-liter Bottle

Desk research showed a growth in the number of smaller households, plus a change in the way we
shop. The research identified a need for a bottle size that was ideal for top-up shoppers or 1-2
person households to share over dinner.
This was followed up by qualitative research to confirm consumer appeal in relation to alternative
pack formats. Quantitative in-store test marketing was also carried out to measure rates of sale. This
was supported by the scrutiny of retailer loyalty card data to identify types of households purchasing
the new bottle size. (Coca-Cola Great Britain, n.d.)

38

10 CRITICAL REFLECTION AND RECOMMENDATIONS


10.1 CRITICAL REFLECTION
Coca-Colas new strategic choice "One Brand" is a good idea. Categorizing every brand of Coca-Cola
(Coca-Cola Light/Diet, Coca-Cola Zero, ...) under 1 massive brand is a daring strategic choice.
In the past it has shown that Coca-Cola doesnt make a strategic choice without any context. CocaColas recent strategic choices, Coca-Cola Zero and Coca-Cola Life have been proven successful in
sales and demand.
Coca-Cola have been extremely irritated by their current health image (being unhealthy and
fattening) and Coca-Cola are actively trying to change their image by developing new low calorie
sweeteners extracted from the Stevia plant.
By creating "One Brand", Coca-Cola is implanting a healthier image to their products.
Although "One Brand" can be negative as well, most consumers of Coca-Cola are loyal to their brands
and suddenly a new design and brand could be confusing. Also the new sweetener still needs to be
tested on a large scale.

10.2 RECOMMENDATIONS
Coca-Cola constantly needs to be one step ahead of their competitors, so they can steal a few ideas
from PepsiCo for example. PepsiCos strategy of offering drinks and snacks is an interesting
perspective. Coca-Cola can implant on this strategy by offering similar snacks in their product
portfolio.
Also Coca-Cola could dominate the alcoholic market by offering low alcoholic beverages.
For the One Brand strategy, time will have to tell how consumers will adapt to it. Coca-Colas
strategies have always been dependent on their consumers. As mentioned above, the Coca-Cola
Vanilla strategy was successful in Great-Britain and United States, but it wasnt in the rest of Europe.
So, this new One Brand strategy will have to be tested on a large scale.

39

11 CONCLUSION
Coca-Cola is the largest beverage company in the world. Coca-Cola has a global distributor network
and is extremely active with the image of Coca-Colas products. Coca-Colas mission is to refresh the
world, create inspiring moments of optimism and be connected to happiness.
However, Coca-Cola receives a lot of criticism on their health image. Studies have proven that CocaCola products have bad effects on the human body, being very unhealthy (fattening, reduction of
sperm motility, ). Coca-Colas products include a lot caffeine and sugar.
Due to this negative criticism, Coca-Cola launched a new strategy "One Brand" with the intention to
change the image of Coca-Cola in to a healthier image.
Coca-Cola tries to be healthier by substitute their regular sugars by Stevia sugars (from the Stevia
plant).
Coca-Colas nemesis on beverages is PepsiCo. PepsiCo has a major part in the non-alcoholic drinks
industry, together Coca-Cola and PepsiCo divide 60% of the drinks industry. PepsiCo also offers food
products along their beverage products. However, PepsiCo still has a few points where Coca-Cola
dominates the industry such as for example:

Advertisement

Coca-Colas efforts in advertisement is a major contribution to their brand. Almost everyone knows
the famous Christmas commercials of Coca-Cola (polar bears, Santa Clause, big Coca-Cola trucks, ).
Their marketing image is excellent and Coca-Cola constantly tries to improve their advertisement.

Distribution

Consumers of Coca-Cola products include large international chains of retailers, restaurants, small
independent businesses and obviously the regular consumer. To reach this large scale of consumers,
Coca-Cola has to put a lot of effort in their distribution network. Coca-Colas distribution network is
world-class on a global level. Coca-Cola does effort in maintaining this level high and active.

Coca-Colas Product Portfolio

Coca-Cola & Coca-Cola Light (diet Coke) are leading the carbonated soft drinks market comfortably
whereas PepsiCos main products Pepsi and Mountain Dew trail Coca-Colas products.
Coca-Colas main strengths are Coca-Colas advertisement and marketing capabilities, Coca-Colas
strong and diversified products (Coca-Cola, Coca-Cola Light, Sprite, Fanta, ) and having a global
distribution network. The main weakness of Coca-Cola is that Coca-Cola receives criticism on their
products (the products being unhealthy, fattening, ).
However, there are few opportunities, such as the launch of Coke Life and the usage of the new
sweetener (Stevia). The threats of Coca-Cola are that there are way too much obesity concerns,
leading to a reduction of demand.
Coca-Cola is constantly busy trying to improve their product portfolio and keep the demand for new
products high. Recently, Coca-Cola acquired healthier beverages such as Vitamin Water, Odawalla
and Chaudfontaine.


40

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13 ATTACHMENTS
13.1 COCA-COLAS ONE BRAND STRATEGY AND PACKAGING ROLLS OUT IN EUROPE IN
MAY
Coca-Cola, the worlds largest soft drinks manufacturer, is changing its marketing strategy in
European markets to unite four separate brandsregular Coca-Cola, Diet Coke, Coca-Cola Zero and
Coca-Cola Lifeunder the one and only brand, Coca-Cola, while making emphasis on different taste
attributes and sugar content in each variant. This will take consumers away from direct associations
of Coca-Cola with sugar, thus will help them make healthier, more informed choices, Bobby Brittain,
Marketing Director for Coca-Cola Great Britain, says.


The first market to see the new package design and communications will be the UK, the companys
flagship Western European market, followed by Scandinavian, North West and Iberia regions since
May 2015. The new packaging was developed by the brand and design agency Turner Duckworth,
while Epoch Design adapted it to the UK market specifically.
The new One Brand Coke cans and labels on the glass bottles in the UK will be in four recognizable
coloursiconic red, grass green, black and silverfeaturing clear points of differentiation (no sugar,
no calories for Diet Coke, or since 1886 for a regular variant), along with the government
nutritional labeling system.
When people think about Coca-Cola now there is an immediate jump to the
product with sugar in it, said Brittain in an interview to Marketing. Our ambition
is that over time when people think of Coca-Cola they think about the choice that
is available to them under that.
With this move, the company expects to generate about 50% of all cola sales from the low and zerocalories variants by 2020.
(Popsop Staff, 2015)

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