Business development and promotion strategies directly determine business sustainability and market success. The analysis of specific approaches can help identify relevant trends that affect target market recognition, customer value, and some other significant criteria. As the organization in question, the Coca-Cola Corporation will be engaged. Its business-level and corporate-level strategies will be reviewed, as well as those of the main competitor, and potential outcomes in slow-cycle and fast-cycle markets will be assessed to identify distinctions.
Business-Level Strategies
While taking into account the global specifics of Coca-Cola’s business, one can note that in its market practice, the corporation is promoting the integrated cost-leadership/differentiation strategy. According to Hitt, this principle involves a combination of two approaches, when an organization pursues the tactics of differentiation and, at the same time, strives to produce goods at affordable prices (1). This business-level strategy helps the company retain customers and increase consumer loyalty while overcoming the competitive barrier and maintaining market rivalry.
Since Coca-Cola operates in the soft drinks industry, considering the characteristics of this field largely determines the business-level strategy that the corporation adheres to and promotes. As Tien states, being a leader in this market niche, the company has to demonstrate flexibility to retain its high number of loyal customers it has deserved over the course of business development (2). The researcher also notes an extremely high percentage of consumers who are aware of the Coca-Cola brand – 94%, and this figure is largely due to the integrated business strategy (2). While dealing with colossal production volumes, the corporation needs to optimize all operational processes, whether it is direct production, delivery, storage, and other aspects. All these nuances require enormous expenses that clearly affect the cost of production. By utilizing available assets and the resource base efficiently, Coca-Cola has been able to create products that are accessible to the majority of consumers and meet the current taste preferences of the target market. Therefore, following the integrated strategy, in which the interests of different population categories are taken into account, and competitive aspects are met, is an adequate business practice.
In addition, the manufacturing and marketing agility that Coca-Cola promotes is also evidence of following the integrated business-level strategy. The company uses advanced information networks, modern cost reduction technologies, and other approaches that, according to Hitt, make it possible to pursue the integrated tactics (1). To compete in the marketplace, Coca-Cola promotes the principles of safety and quality as significant competencies to maintain in its business practices (3). This principle of operation makes it possible to meet competition effectively by addressing not only customer needs but also related nuances related to the global practice, for instance, legal and economic aspects. As a result, the integrated strategy helps the corporation adhere to flexible operating mechanisms to respond to any market fluctuations and trends timely.
In its activities, Coca-Cola performs the value-chain activities successfully, which allows the company to implement the principles of the integrated strategy effectively. Tien mentions the pricing policy of the corporation and notes significant differences in this aspect compared to some other brands operating in the field of soft drinks (2). Coca-Cola adheres to the principle of democratic pricing of goods by taking into account consumer interests and competitive factors. If the company had fewer assets, risks would increase due to the inability to address cost leadership practices successfully. However, Coca-Cola provides stable demand largely due to the low cost of its products. Together with the practice of differentiation that allows meeting the interests of different population groups, this approach justifies itself, which the leading position in the target market confirms. Therefore, the integrated cost-leadership/differentiation strategy that the corporation in question adheres to is an effective principle that ensures active sales and helps it withstand competition, despite the rivalry.
Corporate-Level Strategies
Given the marketing and operational initiatives that the Coca-Cola Company promotes, its value-creating approach is a valid corporate-level strategy. Hitt defines this principle and describes it as the tactics that allow organizations to remain competitive and gain market advantage for as long as possible (1). The official website of the corporation emphasizes the idea that in its global business, the company pays equal attention to both the client base and employees in its various worldwide branches (4). In an attempt to increase market share, Coca-Cola is introducing sub-brands to the global market, among which Fanta, Diet Coke, Schweppes, and Thums introduce a line of carbonated drinks (3). Other products also fall under the category of soft drinks and include juices, sports drinks, tea, coffee, and some plant-based beverages (3). Such a range of product lines suggests that the corporation in question adheres to a moderate to high level of diversification when the revenues from the dominant and subsidiary brands are interrelated (1). Thus, by following the value-creating strategy, Coca-Cola diversifies its products and expands its market presence, thus covering the widest possible customer segment and remaining a recognized leader.
The value-creating strategy is an effective method for achieving long-term success. When taking into account the characteristics of today’s market and the global business of the corporation, Coca-Cola’s approaches to satisfying the distinctive preferences and tastes of consumers contribute to customer retention and, thereby, maintaining a competitive advantage. Combined with a differentiation strategy, this mechanism helps increase profits, and this is particularly true if new soft drink manufacturers enter the target market. Van Alstyne argues that the success of the value-creating strategy lies in the equal use of business resources both inside and outside companies (5). In other words, this practice justifies itself if organizations pursuing such a corporate-level strategy pay attention to competition, demand, and other external indicators and use this information to adapt their production and marketing activities. Since Coca-Cola is characterized as a dynamic business in which changes are made based on the constant assessment of market trends, following such tactics of maintaining a competitive advantage is a reasonable development mechanism.
The effectiveness of this strategy is due to the fact that Coca-Cola minimizes its business risks associated with financial transactions. Hitt draws attention to companies that adhere to a moderate to high level of diversification and notes that all assets are distributed within related enterprises, which helps avoid the threat of severe budget losses (1). With this approach, the corporation in question controls resources successfully and can coordinate production and marketing initiatives depending on current needs. This, in turn, influences the long-term success of the company successfully because risk avoidance allows its managers to plan their market activities more confidently.
Capacity building through the active development of related businesses contributes to expanding market power, which is also a significant factor in support of Coca-Cola’s corporate-level strategy. As Van Alstyne notes, investing in brand strength is directly correlated with increased demand and enhances the chances of growing a customer base (5). The company has assets in several subsidiaries, and in the case of a competitive threat, resources can be allocated quickly to reinforce relevant weaknesses. All these nuances speak in support of Coca-Cola’s current corporate-level strategy and explain its relevance to the company’s long-term success.
Competitive Environment
At the moment, Coca-Cola’s main competitor is PepsiCo, which is also a major player in the global soft drink market. Hitt calls the competition between these brands relatively equal, which suggests a sustainable rivalry in which both opponents have sufficient resources to run a successful business (1). PepsiCo is also mentioned in Coca-Cola’s official report and presented as a primary competitor (3). By analyzing their strategies at every each, one can identify the potential for long-term success in the corporations.
When speaking of the corporate-level strategy, PepsiCo’s approach today is more ambitious. Coca-Cola actively promotes sub-brands, but it focuses exclusively on the beverage industry. PepsiCo, in turn, has expanded its scope of interest towards food products, thereby increasing the target audience and strengthening the market presence (6). Millions of people worldwide purchase snacks produced under the PepsiCo brand, which allows the company to outperform its direct competitor in terms of product diversification. However, given the reputation characteristics of Coca-Cola, one should note its more stable customer base and consumer loyalty. Both PepsiCo and Coca-Cola have over a century of history; nevertheless, the latter brand has shaped the market preferences and interests of buyers, growing its business rapidly, as evidenced by profit indicators (6). In addition, despite unstable profits at the moment, Coca-Cola, through cost-cutting, is holding its own against the competition and still sets marketing trends. Thus, PepsiCo always remains in the role of catching up, although its corporate-level strategy is based not only on creating value but also on expansion, which implies the desire to cover a large market share.
When analyzing the companies’ business-level strategies, one can note that they both adhere to the same cost-leadership/differentiation principle. Along with Coca-Cola, PepsiCo promotes risk avoidance and makes products that are affordable and popular with the public (6). However, the development approaches of the two companies are different, which clearly describes their strategic models. According to Zhang, PepsiCo’s key task is to build strong and sustainable brands that can withstand competition and reach the consumer agenda (6). This strategic principle helps the company maintain stable sales and prove its status to the entire market. Unlike PepsiCo, Coca-Cola focuses its business on an innovative approach to marketing and aims to continually innovate its product line by creating new flavors and tastes for its drinks (6). These tactics differ from those of PepsiCo, which, despite a wider list of subsidiaries, pays less attention to the dynamics of development.
Given the aforementioned features, in the long run, Coca-Cola still has a more favorable bottom line than PepsiCo. The main reason is the emphasis on innovative development and expanding the range of available products. Both brands have been competing for a long time, and the awareness criterion, which Hitt identifies as a significant driver of rivalry, is high (1). However, due to its reputation as a global market player that supplies its products to five continents, Coca-Cola surpasses PepsiCo in the number of regions in which residents prefer the brand (6). Moreover, the innovative production model emphasizes Coca-Cola’s interest in constant movement and the desire to satisfy customer interests. Therefore, despite the fact that its main rival demonstrates high-profit margins and possesses a significant resource base, Coca-Cola has a better chance of succeeding in the long term.
Market Cycles
Competitive dynamics are determined by the specific pace at which competition occurs in a particular market. Hitt describes in detail the different speed forms and highlights slow-cycle and fast-cycle markets (1). The markets included in the first category are those in which participants do not have sufficient capacity to address competitive advantage through imitation (1). Fast-cycle markets, in turn, function in the opposite way; market participants are able to imitate competitive companies’ activities, which increases their competitive advantage (1). For Coca-Cola and PepsiCo, activities in different markets could affect the corporations’ competitiveness, as well as their long-term success.
In slow-cycle markets, PepsiCo’s corporate-level strategy of creating value might be less efficient due to the lack of resources to strengthen affiliated brands. The inability to invest in subsidiaries, in turn, is directly related to low profits (7). Thus, in the future, the corporation could hardly count on the success of all its products. The same goes for Coca-Cola’s value-creating strategy; satisfying the interests of a wide range of consumers is impossible without sufficient production capacity. In terms of business-level strategies, in slow-cycle markets, both companies could still be successful since the focus on cost leadership is their common feature. At the moment, both PepsiCo and Coca-Cola operate in the fast-cycle market. Judging by their business outcomes, they both can successfully realize the current opportunities, although the competitive advantage can shift due to distinctive marketing approaches.
Sources
Michael A. Hitt. 2020. Strategic Management: Concepts and Cases: Competitiveness and Globalization 13th ed. Cengage Learning.
Nguen H. Tien. 2020. The Role of Brand and Brand Management in Creating Business Value Case of Coca-Cola Vietnam. p. 59. Web.
United States Securities and Exchange Commission. 2021. The Coca-Cola Company and Subsidiaries. Web.
Coca-Cola CEO: ‘We Continue to Focus on Winning as the World Reopens.’ 2020. The Coca-Cola Company. Web.
Marshall Van Alstyne. 2017. Platform Business: From Resources to Relationships. p. 26. Web.
Zhuo Zhang. 2019. Risk Analysis of Two Leader Drink Company: PepsiCo and Coca-Cola. p. 42. Web.
Fernando Luco. 2020. The Competitive Impact of Vertical Integration by Multiproduct Firms. p. 2047. Web.