Description of Coca-Cola Company
ExecutiveSummary and General Introduction
TheCoca-Cola Company is among the leading non-alcoholic beverage makerson earth, selling more than 300 brands of beverages and operating inover 180 countries across the globe. It is considered the most valuedtrademark in the universe. Throughout the 90s Coca Cola had become amaster of building brands and with this it became a respected firmworldwide. Coca-Cola geographic coverage is the best with massiverecognition and penetration. The company’s turnover has beengrowing over the time the company has been in operation the companymade $24 billion in 2006. The responsibility of the beveragecorporation is developing syrups, beverage bases and concentratesthen these are sold to bottling companies around the globe, and thisinvolves the world’s largest beverage distribution system (Armus,2015). In addition to product marketing, the organization isresponsible for product development. This paper is an analysis ofCoca-Cola Company’s strategic management with the focus on companyand industry description, external and industry analysis, internalstrategic evaluation and finally, the paper will end with acompetitive assessment and recommendations given.
Companyand Industry Description
History of the Firm
In1886, John Stith Pemberson who was a pharmacist invented the cocacola drink. Asla Candler purchased the brand and formula in 1889 whothen merged the beverage company during1892. The organization beganmanufacturing its renowned drink in 1916, whereby its shape has notchanged to date. In 1928, the president of the company at that timewas Robert Woodruff, who promoted the company’s expansion in otherregions, as he introduced the drink in the Olympic Games or the veryfirst time.
Thecompany further expanded since new flavors such as Fresca, Sprite andFanta were available. Additionally, it got the minute maid companywhich gave rise to the upcoming of new flavors to the enterprise.Diet Coke was introduced in the 1980s and it became the most popularlow-calorie beverage globally. Currently, the company is verysuccessful and has at least 1.4 billion servings of beverage on adaily basis.
Thereare two types of owners in the Coca-Cola Company, which areinstitutional and public shareholding. It is a public-traded firm,with its marketplace shares traded on the NYSE (New York stockexchange) and thousands of investors and shareholders own thecompany`s stocks from different parts of the world. About 5 millionshares are what are owned by shareholders representing 24.6% ofCoca-Cola Company total shares. In institutional shareholding, FEMSAowns about 50% of the total company shares which equates to around 10million shares. In institutional shareholding, there is anothercompany which is a subsidiary of Coca-Cola under the company`s brandname. The subsidiary company owns around 26% of the total shareswhich is around 6 million shares (Watters, 2015). It does not impactstrategy because there is a majority shareholder, FEMSA, who is thefinal decision-maker regarding the direction the company should take.Decision-making at Coca-Cola Company takes long because there aredifferent shareholders involved who should deliberate on what wouldbe best for the enterprise.
Statisticsgiven by Watters (2015) show the exact revenues of Coca-Cola Companyas from 2009 to 2015. In 2009, the operating income was 8,231 millionU.S dollar, and the net operating revenue was 30, 990 million U.S.dollars. In 2010, the operating income was 8413 million U.S. dollars,while the net operating revenue was 35,119 million U.S. dollars. In2011, the operating income was 10,173 million U.S. dollars while thenet operating revenue was 46,543 million U.S. dollars. In 2012, theoperating revenue was 10,779 million U.S. dollars while the netoperating revenue was 48,017 U.S. million dollars. In 2013, theoperating income was 10,228 U.S. million dollars while the netoperating revenue was 46,854 U.S. million dollars. In 2014, theoperating income was 9,708 U.S. million dollars while the netoperating revenue was 45,998 U.S. million dollars. Finally, theoperating income in 2015 was 8,728 U.S. million dollars while the netoperating revenue was 44,294 U.S. million dollars. From the analysisconducted above, it is clear that the net operating revenue reducedfrom 45,998 to 44,295, and that is the case for the operating income.
Level of Performance
Coca-ColaCompany is considered one of the beverage industry’s top mostcompanies with its operation being in more than 200 countriesworldwide. The company engages in marketing, distribution, andproduction of soft drinks. Around 3000 beverages are produced by thecorporation which ranges from fruit juices, milk-based drinks,caffeinated beverages, energizers and water selling to millions ofpeople globally. The core competencies of the company are aggressivemarketing skills, technological know-how, and brand building and thishas helped the company gain a competitive advantage over otherbeverage companies. Coca-Cola has a strong brand name that is whypeople feel safe buying its products because it has a unique logo andbrand, which took many years to build. The company performsdifferently in different markets because people from differentcultures have different needs and wants and different styles andtrends. Therefore, Coca-Cola Company targets those consumers who areconscious about their health, and as a result, the company has comeup with reduced calories and different diet beverages.
Soundness of the Company
Coca-ColaCompany is financially sound in all aspects this is exhibited by thefact that it is a profitable one, judging from the financialstatements in the appendix. In addition, it has sufficient assets aswell as funds, which are beneficial for the entity because it canspread its products, diversify it, and even spend more on training,and marketing, among other things (Foster, 2013).
Someof the assets include the Diamond Beverages Pvt. Ltd in West BengalIndia. Another one is FEMSA, which is situated in Argentina-Mexico,Columbia, Guatemala, Costa Rica and other regions as well.Furthermore, it also owns the coca cola assets in Fiji New Guinea,Australia, New Zealand and South Korea as well. All these assets showthat the company can fund new projects thus, being referred to as afinancially sound company.
Nonalcoholicdrinks are those beverages which have less than 0.5% alcohol content.The most consumed beverages in the globe are energy drinks, softdrinks, bottled water, ready to drink coffee and tea. The thingsdriving the non-alcoholic drinks’ demand are the introduction ofnew product variants and flavors and changing customer needs as wellas an increase in people`s disposable income. The largest marketplacefor non-alcoholic beverages is North America in the globe thenfollowed closely by Asia-Pacific (Foster, 2013). The United States isone of the non-alcoholic drinks major markets in North America. AsiaPacific is one of those markets that people who like non-alcoholicdrinks are fast growing because of the increasing disposable incomeand rapidly changing income. Some of the major markets in this regionare emerging economies such as China, India, and Singapore.
Culture of Coca-Cola Company
Allbusinesses are made up of cultures, and coca cola is one of them. Theculture adopted by a corporation depends on the organizationalstructure and the style of management it adapts. There are differenttypes of cultures, which include person-culture, task-culture,role-culture, and power-culture. Notably, Coca-Cola Company hasadopted the role culture, which is mostly employed by largeorganizations.
Thisis when all the employees have jobs or positions, which are defined,which all should be carried out. The culture is usually divided intoseveral functions which are organized in a hierarchical manner. Inthis culture, the primary source of power is the position, while themain source of influence is the procedures and rules.
Theorganizational culture at Coca-Cola Company is shown through some keyindicators which are the organization`s values, its history,stakeholder engagement, vision and mission, workplace and humanrights, its charitable foundations, innovation, and leadership. Thevision of the company is reader-friendly shown on their official webpage which is broken down to P`s which are basic namely portfolio,profit, people, productivity, and the planet this translates to thecommitment the company wants to show the peripheral systems involvedin its maximum sales contribution. The company aim is connectingwith its shareholders who have made the company achieve what it hasthis far (Armus, 2015). The company also has missions, which revolvearound its consumers. Its dominant mission is to make a differencethrough developing value, inspiring optimism and happiness moments,and refreshing the globe this shows that Coca-Cola Company`s cultureis that of embracing a changing society, and believes in hard workand honesty to be successful.
Organization and Structure
Thetype of organizational arrangement or structure this firm has is aseparate transnational division structure because its internationalstaff operates independently from the main office. There are manydistinct units in every continent around the globe, and a presidentcontrols each continental division. The company`s internationaloperations are very similar to its domestic operations, and thismakes the company an ethnocentric multinational corporation.Coca-Cola Company sales the same kind and brand of the beverages(soft drinks) in addition, it operates the similar way despite thelocation or country. The organization, from its head office, hastight control in its operations.
Externaland Industry Analysis of Coca-Cola Company
CocaCola’s macro environment comprises of uncontrollable and externalissues which affect the company’s performance, decision making, andstrategy as well. The different issues include social,technological, economic, political, and legal. Under these issues arefactors such as environmental forces, corporate socialresponsibility, and demographics. The factors that affect theoperations of the business under the analysis of the industryinclude the structure of the market, customers, suppliers, andcompetition.
PESTLE Analysis of Coca-Cola
PESTLEanalysis is a tool for marketing, which is used to study a company’sexternal or macro environment. A company’s external environment isinfluenced by several factors such as political, economic, social,technological, Environment and legal. Despite the fact that thebusiness is very successful in the beverage industry, it shouldregularly conduct a PESTLE analysis so as to acquire a competitiveadvantage over the competitors by learning their opponent’sstrategies as stated by Charnes et al., (2014). It will, in turn,enable the company to capture the opportunities which will allow themto earn their customer`s loyalty.
Theestablishment of the political environment of a particular regionsignificantly affects the marketing decisions of a company. Thepolitical factors comprise of pressure groups, government agencies,and policies and rules such as trade traffic and fiscal policies thataffect the country’s economy, thus influence the company’soperations. The management of the company has to ensure that in alldecisions regarding the business, regulations and rules have to befollowed.
Becausecoca cola is not an alcoholic drink, it is placed under the Food andDrug Administration (FDA) bracket. The FDA is a U.S. based agencywhich monitors and ensures that the components of drink are safe forthe consumption of human beings. In this light, Coca-Cola Companymust be in conformity with the guidelines of FDA before they get ago-ahead from the agency.
Otherpolitical factors that coca cola should put into considerationinclude the rules and regulations of imports, political catastrophes,exports and income tax. This is because political catastrophes suchas violence and protests bring a rise in demand fluctuations whichpose a challenge for the business to enter the regions experiencingthe disasters. An example of a political incident is the war that wasconstrued by the USA against Iraq. Considering that coca cola isknown to be an American company, there was a decrease in sales inMuslim countries including the Middle East. Individuals ceased buyingcoca cola`s products in solidarity, so as to show support to thecitizens of Iraq.
Economicfactors determine the purchasing capacity of the consumer and pricesand sales of the product. These factors include fluctuation rates,exchange rates, interest rates, a nation`s economic growth andcurrency exchange rate. There are also other economic factors whichinfluence a company regarding future investment such as employmentand unemployment rates, inflation rate and standard of living. Thesefactors, however, vary with different countries therefore when acompany such as Coca-Cola is entering into new markets. For thecompany to succeed in this new environment, it should be incongruence with the new country of entry`s economic factors. Acountry`s economic growth depends on its purchasing power, and thisis shown best by Coca-Cola Company venturing into new markets and cansell its products in the globe.
Thecompany should consider fluctuation in currency rates and exchangerates because there more than 60 currencies the company is workingwith, and the export of these products is bound to be affected bythese issues. The interest rates accrued on borrowed money is anothertool that the Coca-Cola Company is influenced by in the macroenvironment. There is a derivative instrument used by the company tomitigate fluctuations in interest rates. In countries where inflationis high, the company gives its employees high salaries to help themcope with the high rise. High rise, however, is a significantdisadvantage because the company suffers additional expenses such asproduct cost and there is no way to transfer these costs on productprices because of the competition and market risk.
Coca-ColaCompany has created employment through the business’s value cycle.The company is very responsible because of the contributions it hason the society by hiring local individuals, engaging in welfareprojects in the community, paying taxes and paying suppliers on time.
Theenvironmental factors that affect the company include naturalcalamities which are beyond human control. However, there are otherenvironmental factors which can be monitored by the organization suchas greenhouse gasses emission and water pollution. Coca-Cola Companywherever it is set up it tends to follow the policies that are set upin its countries of operation. For instance, most countries promotesustainability and Coca-Cola Company is no exception as it does thisthrough recycling of plastic that is used for packing of itsproducts. Besides, the company also recycles waste water by openingrecycling plants near its areas of operations, and it has also beeninvolved in the planting of trees all over the world so as to savewater. Coca-Cola Company has been faced with a few environment issuesduring its growth particularly the use of pesticides.
Theproducts of the company in India contained toxins from pesticidessuch as DDT, chlorpyrifos, lindane and Malathion and these toxinsattacked the immune system leading to its breakdown and alsocontributed to cancer (Armus, 2015). The company was affectedprofoundly by this environmental issue because people viewed thecompany as not sustainable as it was not environmentally sustainabletherefore it lost a significant customer base and their sales volumeplummeted.
Thesocial factors consist of the issues related to demographics,environmental, cultural, population and seasonal too. For instance,the beverages’ demand increases during the season of sports.Additionally, regarding the segmentation of demographics, youngerindividuals opt to consume soft drinks more, as compared to thesenior citizens. The company cannot change Social factors such as thegrowth of the population, people’s tradition, and cultures, and thetrends cannot, hence the company has no other choice other thanadapting to the factors. Notably, coca cola is a business to customerkind of company, and with its customers, it maintains a directrelationship. In this light, coca cola is very particular inexamining the traditions and cultures of the country they areplanning to enter. Considering that it has approximately 3000different beverages, its strategy is very active whenever its wantsto enter new markets. For instance, it analyses the country/region’smarket, then introduces some of their products by considering thesocial factors of the area targeted. Next, it slowly increases theproducts base, all in consideration of the social factors in thearea.
Oneof the greatest threats that the company faces is the Coca-Coladrinks’ nutritional value. More specifically, several individualsare starting to be extra careful because of matters concerningobesity, which is in direct relations to the beverage industry asstated by Vartanian, Schwartz & Brownell (2012). Furthermore, theyounger generation has begun to be skeptical about consumingCoca-Cola drinks due to their nutritional value. Overall, people aremore aware of healthier alternatives, thus the demand or beverageswhich are non-alcoholic are influenced significantly. Consumers nowprefer to consume a bottle of water than a bottle of Coca-Cola. Inresponse to this threat, the company introduced drinks such as lightcoke and diet coke.
Technologyplays a very critical role in the packaging of the bottles,distribution of the final product, production of the syrup andfilling of the bottles. Technological advancement has allowed thecompany to package their products in different packaging andcontainers of various sizes and be able to be to be in differentvending machines all over the world. The technology used by thecompany helps in the production of colorful, stylish n0n-refillablebottles and cans which attract teenagers and small children thisbeing one of the primary marketing tool used by the company for thepromotion of its products.
Thecompany is heavily dependent on its bottling partners since this iswhere major of its business is. Coca-Cola Company manufacturingpartners are responsible for more than 80% of the volume producedbecause the company does not have enough power to do this (Foster,2013). The company’s bulk of the work is making the syrup that issupposed to be distributed to its bottling partners whose work isbottle filling, bottle manufacturing, and packaging. For the companyto uphold its success as one of the top beverage companies, it needsto have strong relationships with its partners.
Technologicaladvancement in the globe such as access to social media, theinternet, and television have impacted Coca-Cola Company directly asthe company has been able to use this medium for advertisement oftheir products. These mediums have been essential for the growth ofthe company as they have been used for brand identity, directconsumer communication, consumer awareness and promotions. Throughdifferent forms of advertisement, the company has been able to reachtheir target groups because commercials have made their products lookattractive and as a result, the demand for the company’s productshas gone up (Foster, 2013).
Newtechnologies have also enabled the company to recycle differentproducts to have plastic bottles and cans as end products. Sustainability has also allowed the company to gain another customerbase who is concerned with the environment, and recycling has madethe company sustainable. Coca-Cola Company came up with amind-blowing strategy a while back which involved the customizationof its bottles by having the bottles written familiar names on thebottle so when customers bought a bottle of soda they would buy onewhich had their name or buy someone a bottle which had their name.Technology has also directly impacted production by reducing the costof production significantly through the introduction of highautomation levels in manufacturing.
Thereare several legal factors which comprise of all the laws regardinghealth and safety, discrimination, consumers, and employment as well.Considering that Coca-Cola is based in the U.S, it has to be inconformity with the regulations and rules of U.S.A such as FederalTrade Act, Food Safety Act, Cosmetic Act and so on. Aside from theabove acts, the company also has to comply with environmental Actssuch as pollution issues and the disposal of waste as well. Inessence, the company has instituted several plants where they conductrecycling of water as well as plastic bottles.
Coca-Colahas to be in conformity with all the rules regarding promotions,sales, and advertising. The company`s failure to do this would resultin the creation of a negative impact on the company`s brand image,and the company will also have to face serious legal consequences aswell. For instance, in April 1999, the company was sued due to issuesregarding racial discrimination. More specifically, it was sued forinstituting an organizational culture whereby workers who were blackwere being paid less than the white people in the institution. Thesaid black people didn`t want to complain because they would berisking their jobs. When this information became accessible toindividuals in the mass media and the internet, millions of thecompany`s customers were disgusted and in shock. Even worse, severalcountries forbade the selling of the business`s products, as thebrand image was already damaged. In essence, Coca-Cola company mustkeep regularly check its operations, and ensure that they are inconformity to the region`s statutory factors.
Porter’sFive Force Model
Porter’sFive Forces analytical framework analyses five particular forceswhich shape the industry’s whole extent of competition.it basicallyanalyses the industry or the company’s competitors. The structureconsists of Threat of substitute products, clients’ bargainingpower, suppliers’ bargaining power, competitive contention withinthe sector as well as the threat of new competitors.
Threatof New Entrants
Thethreat of new entrants in the industry of beverages is considered tobe unimportant this is because there is a high saturation in theinternational market of carbonated drinks. Therefore, it isimpossible for the new entrants to gain any advantage from theeconomies of scale which have already been exploited by the marketplayers who are already in the industry. In addition to this, thereis a significant barrier of knowledge in regard to having the abilityto create soft drinks which could effectively compete with thecompany’s which are leading in the industry such as Pepsi andCoca-Cola company. Furthermore, there is also a barrier in thetechnology hence, restrictions regarding the technology areconsidered to be considerable.
Thevendors’ bargaining power is very little for providers of rawmaterial used for the manufacture of soft drinks since they arereadily available and cheap because the products involved areflavors, color, and sugar. The producers have this material readilyavailable to them and therefore manufacturers switching cost to othersuppliers is less. The profitability of Coca-Cola Company is directlyaffected by the increasing rates of materials used for packaging andsugar. Over the next half a decade Coca-Cola company expects to savearound $1.4 billion this, therefore, translates to the weakbargaining power suppliers have.
Thebuyers` bargaining power is upsurge because of the vast availabilityof options of the Coca-Cola beverages. Furthermore, customers don`tincur switching costs, and the products` price elasticity increasesthe purchasing power of the buyer. Concurrently, issues concerningthe addiction caused by Coca-Cola drink have been all over the media.For instance, news about the addiction of Peter Lawrie who isprofessional golfer was in the mass media and the internet as well.Armus (2015) argues that the bargaining power of a small section ofbuyers who can be considered to be addicts of coke is not notable.
Theindustry of beverages is packed with several products, such ascoffee, tea, juices, and water, to mention just a few. All thesecompanies require effective marketing and advertising strategies inorder to ensure that their consumers can easily access the products.In this light, to acquire a competitive advantage and increase itsprofits, Coca-Cola has commenced on plans regarding thediversification of its products such as juice and bottled drinkingwater. The consumer’s switching cost is microscopic, hence theyshift to other alternatives quickly. The value of the industry isless since the consumers perceive all products in the sector to besimilar, with the sole difference being their strategies regardingpromotions.
Rivalryamong Existing Firms
Oneof the major threats that Coca-Cola faces is rival companiescompetitive pressure. The main company`s competitor is Pepsi Cowhere the two beverage companies for more than a century have been ina power struggle with each other. Coca-Cola possesses four of theleading five major non-alcoholic labels, which are Sprite, diet coke,Coca-Cola and Fanta but this did not help the situation that it wasdominated by Pepsi in North America as it rival made $22 billion insales and Coca-Cola made $7 billion, however, on the global marketCoca-Cola Company has higher sales in comparison to Pepsi.
Resourcesand Capabilities of Coca-Cola Company
Tangibleresources comprise of the physical resources and financial assets. In2012, the company realized a profit of $8.6 billion, and the marketvalue is approximately $ 158.8 billion. The company possessessustainable and substantial financial resources, whereby they havemade investments in Russia, China, and Vietnam. The head office isdivided into different department such as ICT, marketing, sales andHR. All these units contain suitable, modern facilities, which aid inthe operations of the company.
Regardingthe human resources, the total number of employees is 146,200internationally, whereby the company aims at fully satisfying themand providing a conducive work environment for them. For instance,the company offers a gym, flexible working hours and fruits in theworkplace. Additionally, it organizes for seminars and trainingsessions to establish teams that can work anywhere in the world.
Consideringthe sturdy financial nature of the company, the company can use thefunds to advertise and promote their products, train their staff anddevelop their distribution network. Coca-Cola Company also has astrong organizational capability, whereby they can have theirproducts available in approximately 200 countries internationally.The fact that they fully satisfy the employees translates to thecompany’s ability to get creative ideas from the employees, thusthey can get new innovative ideas and solve whatever problem thecompany may be having. However, they have not been as creative asPepsi Company, which is one of its greatest competitors.
Thereputation and technological resources of Coca-Cola Company are theintangible resources. Regarding technical resources, the company hasinvested in modern machinery, whereby the whole process of productionis wholly automated. Additionally, the company developed a greenbottle which is eco-friendly because of high decomposition. Thereputation of the company is very good, as it is one of the top 3best brands internationally.
Current Level Strategy
Coca-ColaCompany makes use of a differentiation strategy so as to compete inthe global non-alcoholic beverage market where this creates value forthe company`s consumers and customers. The organization`s missionstatement revolves around clients. The establishment, in a bid toaccomplish its mission, has different strategic growth paths (Foster,2013). The company is paying attention to other core brands that ithas that are not doing as good, which include energy drinks, coffeeand sports dinks to capture the attention of its customers. Coca-ColaCompany growth strategy in different business seems to be promising,but the company has focused much on saturating the markets it hasbeen able to penetrate with cola. Instead of trying to offer bottledwater early by acquiring bottled water companies such as South BeachBeverage Company responsible for the sales of SoBe. Because Coca-ColaCompany was late in the acquisition of bottled water companies PepsiCo acquired two major water bottling companies, and as a result,Pepsi is way ahead of the bottled water front.
Beard& Dess (2013) points out that the business level strategy of acompany entails all the actions taken to give value to customers andget a competitive advantage by making an exploitation of corecompetencies in particular individual products. In Coca-Cola Company,one strategy used is developing new products for their customers. Forinstance, new coke flavors such as vanilla, cherry and otherhealthier alternatives such as diet coke are appealing to differentconsumers. It aims at bringing people together.
Anotherstrategy noted is the company’s use of advanced technology to aidin creating a better and less costly means of producing soft drinks.This is exhibited in the coke bottle changes, whereby it now has adistinct design and less plastic is used. The company has invested inrecycling machinery, and they try to use less plastic as well. Allthe above strategies are significant in the realization of thecompany’s mission statement.
Thevalue chain of Coca-Cola Company contains five main activities whichinclude operations, marketing, and sales, inbound logistics, outboundlogistics, and services. In inbound logistics, if the company hasissues with the guiding principles of the suppliers they are given aspecific period to correct these matters and if they do not,Coca-Cola terminates their contract because it has the right to do so(Foster, 2013). In operations, the company works with its partners toensure that its consumers get value for their money.
CurrentCorporate Level Strategy
Thebusiness level strategy of a company comprises of the strategicdecisions it makes, which influence the organization. Morespecifically, part of the strategy includes mergers andacquisitions, financial performance, HRM, and the allocation ofresources as well (Goold, Campbell, & Alexander, 2011). In thislight, Coca-Cola ensures that the soft drinks they offer showexcitement and fun. By instilling this concept into the minds of itscustomers, the soft drink becomes a vital part of any arranged socialgathering.
TheCompany`s current corporate strategy is based on opportunities, in abid to improve its performance financially. Coca-Cola knows that theysell more than one billion drinks daily and that people consume 48billion beverage servings every day around the world. Therefore, thecompany has taken this opportunity by building critical mass daily.Despite the fact that it produces a lot, the propriety, value andquality remain constant.
Thebeverage company practices immense product adjustment and adaptationin all the marketplaces it serves. The symbols of the company’sproduct tactic are rapid adaptation and product testing. Productcreation or improvement and testing are performed for each and everymarket because one county’s market research differs from anothercountry regarding the trends. Because the sales of Coca-Cola’scarbonated products have stagnated, new products have been developedbecause of the ever changing interests of its consumers such as fruitjuices, RTD coffee and tea, bottled water, and energy drinks. Todiversify the products produced by the company, it acquired Odwallain 2003 which had a blue colored fruit juice and four other new juicevarieties. Coca-Cola Zero was introduced in North America in 2005this product had zero calories. At the beginning of the same year,there was a product launch which was Coca-Cola with lime.
CompetitiveEvaluation and Recommendations
Thekey strategic issues noted in the business include declining volumein the carbonated soft drink (CSD) segment, health and wellness, andlack of innovation. Regarding the CSD segment, an example of Canadais given, whereby in 2005, the volume of cola carbonates declined by2%. Furthermore, for two decades, the sodas sold in the U.S. reducedsignificantly. The main reason as to why the sector is falling isbecause it doesn’t possess the health attributed required for it tosucceed in a marketplace where people are becoming more healthconscious.
Inthe international beverage market, people are more focused on mattersconcerning wellness and health as pointed out by Popkin et al,(2014).
Mostof the consumers are steadily changing what they consume to productsthat have little or no side effects and the healthier ones too. Morespecifically, in the market of soft drinks, the consumers haveresolved to consume bottled water, carbonates with low calories,white and green tea, and so on. One study conducted by Armus (2015)shows that a child risks being obese every time they consumesweetened soft drinks. High levels of insulin are linked to cognitivedisorders, cardiovascular diseases, type 2 diabetes and so on.
Itis worth to note that the company has neglected the innovation ofnew, different products for some time now. Since 1982 when the DietCoke was produced, the company has not produced a best-selling newsoda again. In recent years, Matson (2014) notes that PepsiCo hasmanaged to outdo Coca-Cola Company, because of the emergence of otherbeverages such as Gatorade and SoBe. For the very first time in 112years, PepsiCo adapted better to the health trends of consumers, andin fact, it overtook Coca-Cola Company.
Recommendationsand Required Actions
Regardingthe issue of declining volume in Carbonated Soft Drink (CSD) segment,the first advice for Coca-Cola Company is to compete in the currentbeverage segment aggressively and to mark its spot in the local andinternational market for bottled water, energy drinks and otherdrinks which are not carbonated too. They should compete by producingother drinks with nutritional value, with the target being theconsumers who are health conscious. In essence, it should competeoutside of its sector of carbonated soft drink so as to gain acompetitive advantage.
Coca-ColaCompany’s lack of innovation should be dealt with, because ittranslates to declining sales for the company. In this light, a keyrecommendation for the company is that it should continue with theinnovation of products, and expand its product line.
CriticalRecommendations and Alternatives
Forthe issue about wellness and health of the consumers, Coca-Colashould aim at being committed to providing industry supremacy in thearena of wellness and health. This is the most crucial recommendationbecause it is the most prevalent issue in the soft drinks industry.The company should stay in touch with consumers and shoppers as thiswill create value for the enterprise. Because the most crucial driverfor the demand of beverages is population demographics, the companyshould focus on it. The senior citizens are skeptical about consumingthe drinks because of particular health conditions. On the otherhand, the new generation wants new age energy drinks and sportsdrink. An alternative for Coca-Cola Company would be to produce morekinds of beverages, especially those that have more nutritionalvalue.
PossibleStrategies for Implementation
Regardingthe issue of declining sales, the best strategy for Coca-Cola Companyis to adapt a marketing tool which will be best suited for competinginternationally and locally, to advertise for the new products. Thiswill enable the company to increase its profitability eventually. Thenext possible strategy for implementation for Coca-Cola Company wouldbe to conduct an analysis on the demographics of several regions, soas to know the trends and preferences of people. Different peoplerequire different kinds of products, thus the company should focuson this and provide what the people want. Another strategy which canbe used by the firm concerning the issue of lack of innovation is tointroduce new products, which will lead to the creation of value. More specifically, it should foster the innovation of merchandising,new goods and packages as well.
Overall,Coca-Cola Company is financially sound, considering all the assets itpossesses. However, it faces several issues regarding the health andwellness of the consumers. Most consumers are shifting towards betterand healthier alternatives, which do not have any side effects and assuch, the sales of the company`s carbonated drinks have beendeclining. For the enterprise to curb the problem of health, itshould take an initiative of making an analysis of the demographics(population), as this would enable the business to get the consumers`information which will translate to the production of products thatare in line with the wants and preferences of the customers.
Armus,S. (2015). Coca-Cola Company. Franceand the Americas: Culture, Politics, and History: a MultidisciplinaryEncyclopedia, 1,273.
Beard,D. W., & Dess, G. G. (2013). Corporate-level strategy,business-level strategy, and firm performance. Academyof management Journal, 24(4),663-688.
Charnes,A., Cooper, W. W., Golany, B., Learner, D. B., Phillips, F. Y., &Rousseau, J. J. (2014). A multiperiod analysis of market segments andbrand efficiency in the competitive carbonated beverage industry.In DataEnvelopment Analysis: Theory, Methodology, and Applications (pp.145-165). Springer Netherlands.
Foster,R. J. (2013). Coca‐Globalization.John Wiley & Sons, Ltd.
Goold,M., Campbell, A., & Alexander, M. (2011).Corporate-level-strategy. NewYork.
Matson,E. W. (2014). Can cities market themselves like Coke and Pepsido?. InternationalJournal of Public Sector Management, 7(2),35-41.
Popkin,B. M., Armstrong, L. E., Bray, G. M., Caballero, B., Frei, B., &Willett, W. C. (2014). A new proposed guidance system for beverageconsumption in the United States. TheAmerican journal of clinical nutrition, 83(3),529-542.
Vartanian,L. R., Schwartz, M. B., & Brownell, K. D. (2012). Effects of softdrink consumption on nutrition and health: a systematic review andmeta-analysis. Americanjournal of public health, 97(4),667-675.
Watters,P. (2015). Coca-cola:an illustrated history.Doubleday Books.
FinancialStatements of Coca-Cola Company