Coca-Cola Company: Difficulties of Global Organization

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Introduction

The Coca-Cola Company was first established in 1892 by John Stith Pemberton and had its headquarters in Atlanta, Georgia. Coca-Cola has in excess of 500 approved brands that produce different types of drinks(Ciafone, 2019). Coca-Cola makes and offers its well-known drink to shoppers in over 200 countries. Coca Cola brands are trustworthy because of the faithful client base and an immense assortment of refreshments, which satisfy every customer’s need.

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Industry Analysis

Currently, the beverage industry has seen an increase in the number of new products with health benefits promised to consumers. From stress relief to lasting emotional wellbeing, shoppers are currently looking for more than just hydration in their drinks (Ciafone, 2019). There is a developing interest for brands to consider the various needs of buyers. Therefore, they sometimes make personalized items or “drinks on request,” which is a new trend in this industry. For example, one of the target audiences for refreshing beverages are recent college graduates, who need products that will improve their performance (Ciafone, 2019). In addition, they are conscious of their wellbeing and health, which affects their attitudes towards carbonated drinks.

Improvement of sustainability has become a critical strategic objective for the food and beverage companies, and the importance of it, considering the increasing health-awareness of consumers, will increase. Moreover, customers are gradually becoming aware of the effect these companies have (Ciafone, 2019). As a result, they choose drinks produced in a sustainable manner. In September 2018, various leading manufacturers of filtered water and soda announced their goals to produce the packaging of water and soda pops using 100% recyclable or reusable material by 2030 (Jones & Comfort, 2018). The first benchmark for this is achieving 70% packaging produced from recyclable materials by 2025 (Jones & Comfort, 2018). Reducing plastic waste has been an essential part of the strategic development goals, and Coca-Cola Amatil has recently supplied carbonated soda pop pitchers produced using 100% recycled plastic (Ciafone, 2019).

Market

The refreshment market includes caffeinated drinks, strengthened juice, sports beverages, dairy and elective dairy beverages, and other drinks, for example, improved water, ready-to-drink (RTD) tea, and espresso. The market is divided into grocery stores or hypermarkets, wellbeing stores, comfort stores, web retailing, and other shops. Soda sales are expected to increase by $449.6 billion, driven by the rapid increase of 5.8% in the following years, and by 2025 the market is expected to be evaluated at $695.6 billion (Ciafone, 2019).

SWOT-Analysis

Coca Cola Strengths

Being the most well-known brand on earth, Coca-Cola’s name is evaluated at $84 billion. In addition, the company acquired recognizable brands, such as Coke, Sprite, and Fanta, each of which targets a different audience with distinct financial profiles and lifestyle. This beverage producer operates in 200 nations and in five industries. Coca-Cola Company sells more than 1.9 billion servings of its drinks every day (Ciafone, 2019). Therefore, the brand is recognized across the world, including Coca-Cola’s “Coke” and drinks produced by other brands owned by this corporation.

This company has successfully created and maintained an operating model that allows it to cooperate with multiple plants across the world. According to Ciafone (2019), the corporation has 225 bottling partners, responsible for production, while Coca Cola’s own manufacturing facilities produce syrup used by these partners. Local bottling firms are responsible for cooperation with shops and supermarkets, while the corporation develops global marketing strategies. This approach allows Coca Cola to operate in different parts of the world successfully.

Over the years of its operations, the company was able to establish or purchase over 500 brands (Ciafone, 2019). These companies produce soft drink pops, mineral water, sports drinks, juiced beverages, and other beverages. Notably, seventeen out of all Coke’s brands earn approximately $1 billion annually (Ciafone, 2019). There are two well-renowned brands of carbonated beverages — Coke and Pepsi. They control 60% of the global beverage industry, “out of which Coca Cola holds 40% while Pepsi holds 20%” (Zhang, 2019, p. 42). Coca Cola has a focal position and contains the most noteworthy bit of the pie.

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Coca-Cola’s brands have an enormous and dependable customer base. This company has been operating for 125 years, serving the buyers drinks they enjoy (Ciafone, 2019). Consequently, Coca-Cola and its brands managed to establish a relationship with their customers. This results in Coca Cola having returning customers who enjoy the flavor of their drinks. Water is the basis of all Coca Cola’s products, which means that it is an essential component of the beverages production. Much like any other asset, water has to be acquired somewhere. Coca Cola has faced several issues with water management, for example, accusations of water contamination and unethical use, as well as the scarcity of this resource that threatens production (Ciafone, 2019). Coca Cola has to develop sustainable water management practices and use these in all of its plants across the world in order to avoid accusations of improper resource use.

Contemporary consumers are more mindful of diabetes and obesity, however, Coca Cola, mainly produces drinks that contain sugar or syrup, which are considered unhealthy (Ciafone, 2019). These sweet refreshments and soft drinks increment the odds of diabetes and related comorbidities. The buyers are becoming more conscious of what they consume, which means that the company’s revenue from sugar-containing drinks may significantly decrease (Ciafone, 2019). The Company made $31.85 billion in 2018, which was 10% less from the previous year’s earnings of $35.410 billion (Jones & Comfort, 2018). Hence, Coca Cola should focus on addressing the discrepancies associated with the adverse impact of drinks with sugar on people’s health since this factor is already impacting the market.

Coca Cola’s Opportunities

Considering the need to focus on producing healthy drinks since the consumers show interest in this niche, the company can focus on developing new products. Coca-Cola is supported by its solid customer base and a valid dispersal system, which means that the new products can be easily distributed and introduced in multiple markets. This corporation can acquire other brands, specifically those producing healthy beverages, to address the demand. Coca-Cola purchased Costa Coffee for 3.9 billion pounds (Jones & Comfort, 2018). Most people are aware of Coke, Sprite, Fanta, Diet Coke, which are some of the brand’s bestsellers. However, Coca Colla has over five hundred brands in possession, which means that more efforts can be dedicated to advertising and promoting other drinks.

Coca Cola’s Threats

The company’s drinks are sold to over 200 nations, which means that the company is one of the largest beverage brands globally. However, the business has competition, for example, PepsiCo, Dr. Pepper Snaple, Nestle, and Food Limited. The competition with Pepsi is especially notable since the two corporations use similar models and sell their drinks to multiple nations, meaning that Coca Cola should consider the threat of this competitor, increasing its market share.

Productivity is significantly impacted by governmental laws and regulations. These laws differ from nation to nation, and Coca Cola has to meet these guidelines. The main issues include pollution and water use regulations, which can restrict the plants’ work and output. Since more states are adopting policies that should reduce pollution and environmental damage, the corporation should be cautious of its current standards. Currently, no state imposes a tax on carbonated drinks with sugar. However, with multiple evidence of the health problems that arise as a result of the overconsumption of soft drinks, local policymakers may adopt an approach that would allow lowering the number of people who smoke. Hence, governments can tax sugar-containing beverages in an attempt to improve the population’s health, and Coca Cola will have to either increase prices or decrease profit margins.

Today people are more careful and avoid carbonated and sweet beverages because they contain a lot of sugar. Coca Cola currently offers a substitute for its bestseller with an artificial sweetener (Ciafone, 2019). However, it is assumed that the sales of carbonated drinks with sugar will decline swiftly, which is why the company may lose revenue. Changing Consumer taste is an upsetting risk to Coca Cola, Pepsi, and other soda pop corporations. Table 1 summarizes the main elements of this SWOT.

Strengths Weaknesses
  • Recognizable brand
  • Multiple brands
  • Operating model
  • Market share
  • Loyal customer base
  • Water management
  • Health-related issues
Opportunities Threats
  • New products
  • Acquisitions
  • Noticing unpopular products
  • Government regulations
  • Taxes
  • Competition
  • Health awareness

Table 1. A summary of Coca Cola’s SWOT (created by the author).

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Benchmark Analysis

Fundamentally, it is important to express that the main rival in the beverage business for the selected company is PepsiCo. The analysis of the market position of this opponent will be founded on the benchmarking investigation, distinguishing organizations’ human resources (HR), budgetary, and advertising qualities. In terms of HR, this corporation is an attractive employer who does not have to advertise open positions since it is a large international organization. The company hires top-level executives and managers.

The following point to examine is the money related execution of the adversary retailer. Over the earlier decade, the interest for carbonated soda pops was in decline, with consumers preferring healthier options and drinks that do not have sugar. Hence, the incomes of companies that produce these soft drinks declined. The two organizations announced a serious downturn in income in the last quarter of 2019: Coca-Cola sales dropped by 55%, and Pepsi’s revenue diminished by 25% (Jones & Comfort, 2018). Notably, although the two companies focused on addressing discrepancies in the last decade, their return on equity (ROE) differs significantly and Coca Cola is more successfull.

Porter’s model of five forces helps examine the way the companies approach their market strategy. The danger of new participants is negligible in this business. Undeniably, Coke was the worldwide market pioneer until Pepsi developed and offered new products (Ciafone, 2019). Currently, the cost of market entry is high, and the war between two contenders suggests that new participants are probably not going to enter the refreshments industry. Purchaser power is a basic factor when an organization builds up its operations. The main buyers of carbonated sodas (CSD) are inexpensive food wellsprings, candy machines, eateries, corner stores, and understudy containers.

Pepsi also provided its containers to KFC, Taco Bell, Pizza Hut, and different diners. Then, in response, Coke became a partner of Burger King and McDonald’s and offers the drinks there (Ciafone, 2019). The issue of substitute products is not a danger to the organizations as they produce one of a kind of a unique and branded beverage. The power of suppliers in this industry is limited since both companies are large customers and have bargaining power.

The promoting plan is another vital highlight considered in this benchmarking. Coca-Cola and Pepsi sold their first soft drinks for a considerable length of time until they chose to develop certain improvements by investigating new flavors and changing the recipe of their drinks. The two organizations gave new drinks, including juices, dairy, and syrups (Ciafone, 2019). In addition, Pepsi experienced failure when introducing new refreshments because of Coke’s moderate cost, which became a significant competitive advantage. Currently, the two competitors attempt to keep moderate costs to pull to attract more consumers in different markets (Ciafone, 2019). Hence, the two corporations have established brands that contribute to their advertising efforts since many people have known their drinks for years. New promotion plans are focusing on the healthier drinks and new refreshments that the companies introduce to the market.

One of the strategies that both companies use is branded furniture and accessories provided to distributors. Commonly, Coca-Cola and Pepsi have their products in markdown stores, supermarkets, and other retail stores, cafeterias, candy machines, and corner stores. The two retailers use TV ads, draw in big names to publicize their drinks. In addition, Coke uses sponsorships and advertisements during global or local sports events as a way of increasing brand awareness (Ciafone, 2019). The Internet and new marketing strategies, such as influencer marketing, are also used for advertising purposes.

From the research, it is very clear that the Coca-Cola Company outperforms PepsiCo. Nonetheless, to receive more profits, the producer should implement a few operational enhancements. Coca Cola should focus more attention on developing the sugar-free drinks and advertising its products as healthy substitutes for the brand’s well-known refreshments. Additionally, more attention should be dedicated to digital marketing and social media as it generates better results in terms of brand awareness and engagement when compared to traditional advertising (Zhang, 2019). In general, Coca Cola’s benchmarking analysis shows that the business has been successfully battling its competition.

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Competitor Analysis

PepsiCo is one of the most prominent organizations in the U.S. It is among the 15 most significant organizations overall as per the number of workers employed, and it was ranked in the United States Fortune list of 50 best companies. The organization revenue in 1997 was estimated at $2.14 billion, with incomes of $20.92 billion, and Pepsi is packaged in almost 190 nations (Abbis, 2017). This company is one of the global leaders of the soft drink industry producers. It includes numerous organizations, among which Pepsi-Cola, Frito-Lay, and Pepsi Food International. In general, it has acquired large brands accessible in about 150 nations all over the globe (Abbis, 2017). In addition, Pepsi has a joined venture where it produces juices. Some of the beverages it produces are Mountain Dew and various brands around the world, as well as 7-UP outside of the US markets (Zhang, 2019). Its food division works with chips and snacks for the global market.

The portfolio of businesses and brands also includes restaurants. The organization ventured into the restaurant business with Taco Bell, KFC, and Pizza Hut, which happened in 2017 (Serodio et al., 2018). In addition, the new acquisition, the joined venture between Pepsi-Cola Company and Frito-Lay, will continue to carry the PepsiCo name. The move should upgrade the two organizations’ capacity to flourish with their own utterly committed structure and supervisory crew. It is noteworthy that Coca-Cola receives 80% of its profits from international markets, while the same indicator for PepsiCo remains at 6% (Zhang, 2019). Hence, although these competitors use similar models of operations and possess different brands in the food and beverage industry, their target markets differ.

Analysis of the Marketing Plan

The Company Profile

The Coca-Cola Company is a beverage retailer with its headquarter office located in Atlanta, Georgia. The company produces various drinks and syrups and sells them in over 200 countries

Administrative Operations

Managing and analyzing are among the primary tasks needed for operational improvements. This company’s headquarters are responsible for managing relationships with bottling partners, producing syrup, and creating advertisement campaigns.

Management Team

James Quincey is the Chief Executive Officer (CEO) of Coke, and the management team consists of experienced and well-educated professionals. Other executives are Muhtar Kent, Helene Gaye, and Ronald Allen (Ciafone, 2019).

Management Analysis

Experience and Specialty

Coke’s history began in 1886, and the company is still thriving. Its specialty is the carbonated drinks and juices.

Organizational Structure

The hierarchy is the following:

  1. President of Coca-Cola
  2. Corporate staff and manufacturers
  3. Marketing and finance departments
  4. Continent divisions
  5. Continent’s sub-divisions
  6. Partners and bottling companies

Intellectual and Property Rights

Coca-Cola possesses copyright for the design of its cans, its logos, and its promotional materials. Moreover, the company maintains the rights to the unique recipe of the syrup, and the process of manufacturing is still a secret (Ciafone, 2019).

Strategic and Marketing Plan

Target Market and Clients

The primary target audience is youths and adolescents. Although Coca-Cola thinks about every client as a potential shopper.

Competition and Market Share

The leading competitor is PepsiCo, having a share of 20%. Coke’s share is equal to 40% in the industry.

Price Strategy

Currently, the company uses a market price strategy and sets a price for its products based on the one declared by its competitors.

Promotion and Distribution

Coke had a successful Taste the Feeling campaign in 2016, and its products are advertised on TV, social media, radio, and newspapers. The company distributes its products to over 200 countries and sells franchises, while the main office is responsible for developing and executing advertising campaigns.

Conclusion

Coca-Cola being a global organization has confronted numerous difficulties everywhere throughout the world. However, it has handled the issues productively and manages to uphold its brand image and market share. Coca Cola’s strength significantly outweighs its weaknesses. However, there is a severe threat due to the changing nature of consumer behavior. Both buyers and government officials understand the side effects of sugar-containing drinks, which can result in a decline in sales and taxes. However, the corporation can explore the niche of healthy beverages, both through the acquisition of existing businesses and by advertising some of its less-known brands.

References

Abbis, H. (2017). Marketing strategies of Coke: An overview. KAAV International Journal of Economics, Commerce & Business Management, 4(2), 194-199.

Ciafone, A. (2019). Counter-Cola: A multinational history of the global corporation. University of California Press.

Jones, P., & Comfort, D. (2018). The Coca Cola brand and sustainability. Indonesian Journal of Applied Business and Economic Research, 1, 34-46.

Serodio, P., McKee, M., & Stuckler, D. (2018). Coca-Cola – A model of transparency in research partnerships? A network analysis of Coca-Cola’s research funding. Public Health Nutrition, 21(9), 1594-1607.

Zhang, Z. (2019). Risk analysis of two leader drink company: PepsiCo and Coca-Cola. Asian Business Research, 4(3), 42-47.

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