Product Strategy Provides Competitive Advantage at Coca-Cola Coca-Cola Company is the world's leading manufacturer, distributor and marketer

of non-alcoholic beverage concentrates and syrups and, to a lesser degree, finished beverages which it sells to bottling and canning operations and authorized wholesalers. Coca-Cola produces more than 230 beverage brands and markets four of the world's top five soft drink brands, including Coke, diet Coke, Fanta, and Sprite. Coca-Cola's finished beverage products bearing the Coca-Cola Company's trademarks are sold in over 200 countries. In 2000, 72% of Coca-Cola's Operating Income was generated outside the United States. Coca-Cola also maintains ownership interest in many bottling and canning operations. Similar to The Coca-Cola Company, PepsiCo's strategy is mainly based on establishing a differentiation advantage. Its strong intangible resources enable it to be a strong competitor. In fact, its brand equity and other intangibles such as its reputation, strategic relationships with suppliers, bottling partners and distribution centres result in customer loyalty. The performance and family-oriented culture (especially visible amongst executives is another asset that leads to firm's long-term success, as developed by Morris (2008). Coca-Cola is also attempting to transition from a centralized, inward-looking carbonated soft-drink company to an entrepreneurial, consumer needs driven non-alcoholic beverage company with its "Think Local, Act Local" business strategy. Coke has introduced new beverages in almost every non-alcoholic ready-to-drink category (water, sports drinks, fruit drinks, teas, coffee) through internal development or external acquisitions and has been shaping products and marketing initiatives to meet local needs. Initial results of this new strategy seem to be positive as growth in 2001 has come primarily from new local product initiatives that exploit local opportunities. Coke has a 50% share of the global carbonated soft-drink industry and over 80% in many markets. Coke appears to have a sustainable scale advantages over its competition - it's reatest competitive advantage is the scale of its global bottling system, even more than the predominance of the Coke brand. Coke should be able to use these scale advantages outside the US to leverage its distribution pipeline expanding into other beverage segments. However, as Coke has seen its stock nearly half since 1998, its main competitor, PepsiCo (PEP) has seen its stock climb from $35 to a high of $50 (now currently at $47) with a 52-week rise of 14% vs. Coca-Cola's fall of 24% - reversing the 10 year trend of consistently lagging behind Coca-Cola. Pepsi internationally manufactures concentrates of brand Pepsi, Mountain Dew, and other brands for sale to franchised bottlers in the US and international markets. Pepsi also markets, sells, and distributes juices under several Tropicana trademarks in the US and internationally. In addition to the soft drink and juice business, PepsiCo is engaged in the snack food segment through its domestic and international Frito Lay business. Despite Coca-Cola's dominant global position, Coca-Cola's bottom line has been declining since the passing of its last CEO Roberto Giozueta in 1987 and macroeconomic factors such as the Asian crisis and a product recall and anti-trust lawsuit in Europe -

reversing a 10 year trend of rising growth from $43B in 1981 to $143B in 1987. Coke's stock price has fallen from a high of $90 in mid-1998 to its current price of $47. To improve its position, for the past year and a half, Coca-Cola has been undergoing a strategic transformation. It has been broadening its focus from the slower growth carbonated soft drink segment to the higher growing non-alcoholic/noncarbonated beverage segment. Coke currently has 60% of its current global volume in carbonated beverages, which is declining at -2% compared to the non-carbonated beverages which is growing at 5% and represents over 45% of the global soft drink industry. To hasten this transition, Coca Cola has made many recent acquisitions in these segments such as Planet Java (maker of coffee drinks), Mad River Traders (distributor of new age teas and juices) and a recent tender offer for Odwalla (maker of Fresh Samantha drinks). The Coca-Cola Company wishes to eliminate all waste through packaging innovations, recycling and re-using its waste. One of its precise goals was to reuse 50% of its bottles and cans via recovery by 2020. It is currently on the right track as it is currently recovering 36% of its packages. Another one of its goals is to use 25% of recycled PET (polyethylene terephthalate) for its plastic bottles by 2015. Overall, Coca-Cola is very tied global markets and requires its partners in Mexico, China and many other countries comply to such measures too. Coca-Cola wants to send a worldwide positive message about recycling, in which it partners with government regulations and campaigns to increase awareness (The Coca-Cola Company, Performance Highlights, 2012). Coca-Cola's greatest strengths reside in its intangible resources. It is mainly thanks to its reputation and brand equity, that it can differentiate itself from its competitors. In fact, in 2006, Coca-Cola was the world's most valuable brand, worth $67.5 billion, according to research by Interbrand (Grant, 2008, p. 134). Its name and products are well known and appreciated in nearly every single country in the world and its availability enables Coca-Cola to nearly always be at one's reach if desired or needed, just as it promises to do in its mission. It relies heavily on product innovation, marketing and developed distribution systems in its differentiation strategy. This has enabled it to be the market leader since many decades and to maintain this position, even catching PepsiCo up in the race for the 2nd most sold soft drink (Alani, 2011). Moreover, companies can manage all their brands better by keeping up with all the marketing practices and innovating constantly. For example, firms could innovate in packaging to make it cheaper, more user-friendly and environmentally friendly. This could become a source of competitive advantage for one company. Also, one major trend and opportunity in this industry is to focus on society and the community. Producing healthier drinks (more nutritious and less sugary), discovering and using environmental friendly practices in all areas of business (from production to selling) and giving back to the society (donating to charities, becoming involved in selfless causes) are all new ways in which all major players are reformulating their strategy. (Hoover's, 2012).