strategic management in coke

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Strategic Intent

Mission

Coca Cola’s Roadmap starts with their mission, which is enduring. It declares their purpose as a

company and serves as the standard against which they weigh their actions and decisions.

To refresh the world...

To inspire moments of optimism and happiness...

To create value and make a difference.

Vision 2020

Their vision serves as the framework for their Roadmap i.e. their mission and guides every aspect of

the company’s business by describing what is needed to accomplish in order to continue achieving a

long-term, sustainable and quality growth.

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.

A Winning Culture

Their Winning Culture defines the attitudes and behaviors that will be required of them to make

their 2020 Vision a reality.

Core Values

These values serve as a compass for actions and describe how to work with the environment and

customers.

N.R.INSTITUTE OF BUSINESS MANAGEMENT

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Leadership: The courage to shape a better future

Collaboration: Leverage collective genius

Integrity: Be real

Accountability: If it is to be, it's up to me

Passion: Committed in heart and mind

Diversity: As inclusive as our brands

Quality: What we do, we do well

Business Definition

Customer Groups (who)

Coke is for everyone! Children, teenagers, middle-aged and old aged people; everyone is the target

market of Coca Cola company. It is a mass market product sold globally. Though everyone does drink

Coca cola but its major target markets are children and teen-agers.

Customer Function (what)

Coca Cola Company produces a vast range of beverages ranging from sodas to power/energy drinks

to juices, bottled water and ice teas. Thus we can say that its customer function is to quench thirst.

Alternative Technologies (How)

Focus on the Market

Focus on needs of their consumers, customers and franchise partners

Get out into the market and listen, observe and learn

Possess a world view

Focus on execution in the marketplace every day

Be insatiably curious

Work Smart

Act with urgency

Remain responsive to change

Have the courage to change course when needed


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Remain constructively discontent

Work efficiently

Act Like Owners

Be accountable for our actions and inactions

Steward system assets and focus on building value

Reward our people for taking risks and finding better ways to solve problems

Learn from our outcomes -- what worked and what didn’t

Be the Brand

Inspire creativity, passion, optimism and fun

Key Success factors of Coca Cola

1. Coca-Cola is a unique and recognized brand among the most recognized trademarks.

2. Its quality which is consistently offering consumers products of the highest quality

3. Marketing that deliverers creative and innovative marketing programmes worldwide

4. The global availability of Coca-Cola and its products are bottled and distributed worldwide

efficiently.

5. The ongoing innovation that keeps the company continually providing their consumers with

new product offerings such as Diet Coke, Coca-Cola Vanilla, etc.


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Environmental Analysis

SWOT

Coca Cola SWOT analysis 2013

Strengths Weaknesses

1. The best global brand in the world in

terms of value ($77,839 billion)

2. World’s largest market share in

beverage

3. Strong marketing and advertising

4. Most extensive beverage distribution

channel

5. Customer loyalty

6. Bargaining power over suppliers

7. Corporate social responsibility

1. Significant focus on carbonated drinks

2. Undiversified product portfolio

3. High debt level due to acquisitions

4. Negative publicity

5. Brand failures or many brands with

insignificant amount of revenues

Opportunities Threats

1. Bottled water consumption growth

2. Increasing demand for healthy food

and beverage

3. Growing beverages consumption in

emerging markets

4. Growth through acquisitions

1. Changes in consumer preferences

2. Legal requirements to disclose negative

information on product labels

3. Competition from PepsiCo

4. Saturated carbonated drinks market

Strengths

1. The best global brand in the world in terms of value. According to Interbrand, The Coca

Cola Company is the most valued ($77,839 billion) brand in the world.

2. World’s largest market share in beverage. Coca Cola holds the largest beverage market

share in the world (about 40%).

3. Strong marketing and advertising. Coca Cola’ advertising expenses accounted for more than

$3 billion in 2012 and increased firm’s sales and brand recognition.


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4. Most extensive beverage distribution channel. Coca Cola serves more than 200 countries

and more than 1.7 billion servings a day.

5. Customer loyalty. The firm enjoys having one of the most loyal consumer groups.

6. Bargaining power over suppliers. The Coca Cola Company is the largest beverage producer

in the world and exerts significant power over its suppliers to receive the lowest price

available from them.

7. Corporate Social Responsibility (CSR). Coca Cola is increasingly focusing on CSR programs,

such as recycling/packaging, energy conservation/climate change, active healthy living,

water stewardship and many others, which boosts company’ social image and result in

competitive advantage over competitors.

Weaknesses

1. Significant focus on carbonated drinks. The Coca Cola Company is still focusing on selling

Coke, Fanta, Sprite and other carbonated drinks. This strategy works in short term as

consumption of carbonated drinks will grow in emerging economies but it will prove weak as

the world is fighting obesity and is moving towards consuming healthier food and drinks.

2. Undiversified product portfolio. Unlike most company’s competitors, Coca Cola is still

focusing only on selling beverage, which puts the firm at disadvantage. The overall

consumption of soft drinks is stagnating and Coca Cola Company will find it hard to

penetrate to other markets (selling food or snacks) when it will have to sustain current level

of growth.

3. High debt level due to acquisitions. Nearly $8 billion of debt acquired from CCE’s acquisition

significantly increased Coca Cola's debt level, interest rates and borrowing costs.

4. Negative publicity. The firm is often criticized for high water consumption in water scarce

regions and using harmful ingredients to produce its drinks.

5. Brand failures or many brands with insignificant amount of revenues. Coca Cola currently

sells more than 500 brands but only few of the brands result in more than $1 billion sales.

Plus, the firm’s success of introducing new drinks is weak. Many of its introduction result in

failures, for example, C2 drink.


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Opportunities

1. Bottled water consumption growth. Consumption of bottled water is expected to grow both

in US and the rest of the world.

2. Increasing demand for healthy food and beverages. Due to many programs to fight obesity,

demand for healthy food and beverages has increased drastically. The Coca Cola Company

has an opportunity to further expand its product range with drinks that have low amount of

sugar and calories.

3. Growing beverages consumption in emerging markets. Consumption of soft drinks is still

significantly growing in emerging markets, especially BRIC countries, where Coca Cola could

increase and maintain its beverages market share.

4. Growth through acquisitions. Coca Cola will find it hard to keep current growth levels and

will find it hard to penetrate new markets with its existing product portfolio. All this can be

done more easily through acquiring other companies.

Threats

1. Changes in consumer tastes. Consumers around the world become more health conscious

and reduce their consumption of carbonated drinks, drinks that have large amounts of

sugar, calories and fat. This is the most serious threat as Coca Cola is mainly serving

carbonated drinks.

2. Legal requirements to disclose negative information on product labels. Some Coca Cola’s

carbonated drinks have adverse health consequences. For this reason, many governments

consider to pass legislation that requires disclosing such information on product labels.

Products containing such information may be perceived negatively and lose its customers.

3. Competition from PepsiCo. PepsiCo is fiercely competing with Coca Cola over market share

in BRIC countries, especially India.

4. Saturated carbonated drinks market. The company significantly relies on the carbonated

drinks sales, which is a threat for the Coca Cola as the market of carbonated drinks is not

growing or even declining in the world.

Competitor analysis

The top four competitors of Coca Cola Company are listed below:


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1. Pepsi Co.

2. Nestle

The major competition is faced by Coca Cola Company is Pepsi company. Pepsi is one of the world

leader brand with approximate revenues of $27billion and over 143,000 employees. Pepsi products

are available in nearly 200 countries (Pepsi Co 2011).

Porter’s Five forces Model

Porter’s five forces model help the companies to evaluate their business strategy. Three out of five

forces talk about the rivalry which is expected from micro-environment, macro-environment and

also some of the internal threats as well.

Threat of new competitors

The soft –drink market is already ruled by big giants like Pepsi and Coca-Cola. A survey done in 2000

which showed that advertisement expenditure is almost about $ 8.3 million of the current

competitors. It is very huge amount for the new player to invest in the marketing from an early

stage.

Also, due to the huge investment in advertisement, Coca-cola and Pepsi have created a strong brand

image and position in the minds of consumers. Customer loyalty has been increased and they are

not ready to leave this product for a new player (IvyThesis , 2009). Moreover the extended supply

chain and bottling networks of Coca-Cola and Pepsi are major threat for the new players.

Intensity of Competitive Rivalry

The soft-drink industry is dominated by two large players, namely Coca-Cola and Pepsi. This industry

is also known for duopoly created by Pepsi and Coca-cola. These players have the huge market share

and other small players have very less market share (Valuation Academy, 2011). The bigger giants

are mostly competing with each other on the factors of differentiation and advertisement. The price

war hasn’t seen between the two competitors. However, a price war is experienced in some of the

International markets.

Threat of Substitute Products

This beverage industry has a lot of substitutes which are available to the end consumers. Some of

these substitutes include: water, tea, coffees, juices, and beer etc. All of the suppliers of these

substitutes only need a huge advertisement campaign in order to create brand loyalty and consumer

demand (Valuation Academy, 2011). However the switching cost to substitute products is quite low

but consumers prefer differentiation of Coca-cola to the lower prices of substitute products.


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The Bargaining Power of Customers

There are some major buyers of soft-drink industry including fast-food-chains, restaurants,

convenience stores etc. The bargaining power of the buyers depends on the position and potential

market it has. For example: Fast-food chain segment is regarded as the “Paid-Sampling” by the Coke

and PepsiCo due to quite small profit margins. The bargaining power of these buyers is quite high.

Contrary to that, vending machines provide no power to the customers (Valuation Academy, 2011).

The Bargaining Power of the Suppliers

The raw materials used to manufacture soft-drink or Coca-cola include color, caffeine, flavor, and

sugar etc. the supplier of these products have relatively no power over the price bargaining. These

raw materials can easily available to any of the producer so they don’t need to hire some specific

suppliers. Switching costs to these suppliers is very low because the producers can shift to other

suppliers anytime.


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Environmental Appraisal

PESTEL Analysis

Political

In every business environment, there are potential pressures from the government. Coca-Cola

produces non-alcoholic beverages which come under the category of FDA and government plays an

important role in the manufacturing of these products. There are certain regulations that

governments of different countries enforce on these companies. If the company fails to produce the

product according to the required quality standard, there are certain fines which they have to pay.

It is equally important to consider the changing laws and regulations of the foreign countries. These

changes may occur in the accounting standards, environmental laws and the taxation requirements

etc. These changes have the severe impact on the account books of the companies. There profit

potential can be dependent on such factors as well. So companies like Coca-cola should adapt

proactive approach and remain aware of such changes to able to cope up with the changing business

laws and regulations.

The current political conditions of the target country also hold a lot of importance for the company

wishing to enter in the foreign markets. The governmental laws and other political scenario can

affect the ability of the company to penetrate its business successfully in the emerging market. All

the emerging markets have volatile political and economic conditions. Coca-cola always monitors the

changing policies and government regulations set by the government.

Economic

Economic Analysis is used to examine the local, national, international markets and world economy

which can play a major role for the company in selection of its target markets. The economic analysis

also includes the issues of recession and inflation. This recession and inflation has also affected coke

as its prices have considerably increased over the years.

Sociological

Changes in society such as lifestyle changes and attitudes of the people can also determine the

market potential. It is important to analyze the current sociological factors which can help in

understanding the market growth and demand of the products in any area.

There has been seen a changing trend among the people in the age –group of 37 to 55 that they are

concerned with the nutrition (IvyThesis , 2009). They want to eat healthy food in order to live a


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healthy life. The baby boomers are now grown adults and as they are becoming old so their concern

with their health is also increasing with time.

Technological

In this rapid-paced world, we encounter with new emerging technologies which can increase the

efficiency of the business in many ways. Technological advancements create opportunities for new

product development and also product improvements (Valuation Academy, 2011). Technological

improvements and enhancements also force companies to develop new products in order to remain

competitive in the market. This advancement of technology has also helped Coca-Cola in

development of Cherry Coke in 1985.

Legal

The legal environment also holds a lot of importance in every business progress. Coca-Cola has

determined all the rights applicable to its business and they gain patent of all the products they

develop. All the companies must align company’s policy with the changing legislation of the world

(IvyThesis , 2009).

Environmental

Environmental analysis includes the close examination of local, international and all world

environmental issues. The companies must respect the environment and must carry out some

projects to reduce the environmental pollution. The basic idea here is that a company must be

environmental-friendly (Goos Kant, 2007). The Coca-Cola Company strictly monitors all the

environmental regulations and laws imposed by the foreign and local governments.


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Environment Opportunity Threat Profile (ETOP) for SAP

Environmental sectors Nature of Impact Impact of each sector

Economic Unfavorable Impact The overall impact of inflation

has effected everyone.

Therefore we can say that

economy has an unfavorable

impact on Coke too as the

prices have raised considerably

in past 10years.

Market Favorable The majority of customers

worldwide have a strong

preference for Coca Cola

instead of its competitor Pepsi.

Also, soft drinks are something

that are consumed by people of

all age groups.

International Favorable It is already a global brand and

has its operations worldwide.

Still the economic trade groups

are increasing opportunities for

Coke to expand.

Political Neutral Political system usually does

not impact the food and

beverage industry much.

Regulatory Favorable The products are in accordance

to the quality standards.

Social Less favorable The socio culture trend is that

people are becoming more

health conscious.

Supplier Favorable The supplying system of Coke

is strong worldwide.

Technological Favorable The Coca Cola company is up to

date with technology in their

day to day operations and


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activities.

Organizational Appraisal

Internal Analysis

Porters generic value chain model

As far as coca cola is concerned the cross business strategic fits can exist anywhere along the value

chain of coca cola. We will discuss these value chains one by one and see how coca cola can

strategically fit into these value chains


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Support Activities

Firm Infrastructure

Firm has a strong infrastructure as it is shown by its financials. The financial data is readily available

to the management for strategic decision making. Financial data can be extracted through different

networks that are present at the Coca-Cola Company for e.g. they use mySAP which helps them in

forecasting and consolidation of data.

Managerial and administrative support Activities

Coca cola can also diversify because of its managerial and administrative support activities. Many

times most of the businesses require same management, administrative and operating know how.

The products which coca cola is producing are under the control of same management. This is a

huge cost saving benefit for coca cola.

Technology Development

Coca cola can fit into a kind of business where it can utilize its resources of R & D and technology. As

we already know that the R & D and technology of coca cola is very strong. In the area of technology

coca cola is very advance when we see their packaging and bottling technology. When coca cola will

diversify into any other business which is related to its industry it will obviously have the advantage

of its technological expertise. The coca cola company has always worked for bringing in technological

changes to meet the customer needs. These are the various examples of latest technology adopted

by the company

Procurement

Businesses who have supply chain strategic fit can perform better together because of potential for

skills transfer in procurement, greater bargaining power and benefits of collaboration with common

supply chain partners. Coca cola has a strong supply chain network. It makes the syrup used to make

the coke and gives it to its distributors and they make the final good. It also has contract with

a bottling company which makes bottles for coca cola. So having such a strong supply chain network

it can also diversify into relative business as this will help the company in reducing costs and

increasing efficiency. Coca cola is using the same supply chain for its diversified products.

Primary Activities

Operations

Coca cola has the World sixth largest production plant. One assembly line can produce 2000 cans in

minute. Production line has 25000 bottle storage capacities per minute. So coca cola can also fit


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because of its production related activities. Such a strong production capacity will result in lower

costs.

Inbound and Outbound Logistics

Separate contracts (‘‘Bottler’s Agreements’’) exist between Company and each of its bottlers

regarding the manufacture and sale of soft drinks. Subject to specified terms and conditions and

certain variations, the Bottler’s Agreements generally authorize the bottler to prepare particular

designated Company Trademark Beverages, to package the same in particular authorized containers,

and to distribute and sell the same in (but generally only in) an identified territory. The bottler is

obligated to purchase its entire requirement of concentrates or syrups for the designated Company

Trademark Beverages from the Company or Company authorized suppliers. They typically agree to

refrain from selling or distributing or from authorizing third parties to sell or distribute the

designated Company Trademark Beverages throughout the identified territory in the particular

authorized containers; however Coca-Cola typically reserve for ourselves or our designee the right

(1) to prepare and package such beverages in such container sin the territory for sale outside the

territory and (2) to prepare, package, distribute and sell such beverages in the territory in any other

manner or form.

Sales and marketing activities

Many cost saving opportunities arise for coca cola as single sales and marketing activities will be

used to sell the products. There will be a single sales force for the related products. Advertising of

the related products is carried out together. The strong company brand name is also important

in this case. The new product gains attractiveness because of the strong brand name.

VRIO Framework

Resources and

capabilities

Value Rarity Inimitable Organized for

Usage

Brand (Coca Cola) Yes No Yes yes

Value: Coke’s main value would be their Brand. Coke is globally recognized.

Rare: This asset is semi-rare. While it is true that few of their competitors have the strength of brand

that Coke has, it is not a resource that is unattainable by other companies.

Inimitable: As we have well established, Cola is easily inimitable. Perhaps the strength of their brand

however, is not as easy to imitate.


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Organized: The resource is definitely useable by Coke to drive sales and capture market share

Organizational Capability Profile for SAP

Capability Factor Nature of Impact Competitive Strengths and

weaknesses

Finance Strength

Marketing Neutral There is a strong competition

between Pepsi and Coke going in

the industry. Both try hard to

market their products in best

possible way. Therefore we can say

that Coke has a secure position in

the Industry

Operations Neutral Plant and machinery are

compareable to that of competitors.

Personnel Strength Really good managers and workers

are present at coke

Information Strength Advanced information systems are

available. Coke website also has

extensive company information

available on it

General Management Strength High quality and experienced top

management available


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Organizational Structure

Coca Cola has a very tall and bureaucratic organizational structure. A graphical representation of its

organizational structure is given below:

The above graphical representation shows the top functionaries of the company.

Coca Cola International Strategy:

Coca Cola has a global strategy to operate in the 200 countries it is offering its products. This is

because Coca Cola has unique yet consistent recipe/taste of beverages all across the world but the

marketing and sales strategies are localized as per the region’s socio-cultural dimensions.

Considering the corporate and business strategies of Coca Cola mentioned earlier in the report, we

could analyze its organizational structure and see that it is structured in a way to complement its

strategies in the best possible manner.

The reason for the tall structure of the organization is because the corporate headquarters want full

control of its product. Since, the one of the key success factors for the company is the consistent


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unique tastes of its beverages; hence the higher ups of Coca Cola don’t want to take any risks in that

matter.

Coca Cola faces some problem in slow process of communication because of tall hierarchy of the

organization but to keep it centralized, this is the cost the company needs to pay. It can reduce this

problem by introducing latest IT solutions to speed up its communications.

Roles and responsibilities of Top Functionaries

Corporate Headquarter:

Corporate headquarters is where all corporate decisions are made. It also keeps an eye over the

different operations across the world. The strategic decisions of innovations, diversification,

introducing new beverages are taken here. Once the decision is taken, then it is communicated to all

the regional offices which further pour it down to the country subsidiaries.

Regional Office:

There are a total of four regional offices of Coca Cola around the world. Regional offices keep a check

of all country subsidiaries coming under its defined boundary. It keeps a track of all the sales,

financials of all the country subsidiaries and then reports them to the corporate headquarters. Also,

any orders from the corporate headquarters for the country subsidiary are channelized through

regional offices.

Country Subsidiary:

The corporate headquarter keeps a watch over the activities of different regional offices located in

every continent where Coca Cola operates. Under a regional office, every country has its own

subsidiary. This subsidiary is responsible for the manufacturing of the beverages from the secret

recipe, distribution of the products and the sales & marketing as well. As mentioned earlier, the

marketing is localized as per the country the product is selling in.


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COMPETITIVE ADVANTAGE

Market Leadership. Coca-Cola FEMSA is the largest bottler of Coca-Cola trademark

beverages in the world in terms of total sales volume, with operations in Mexico,

Guatemala, Nicaragua, Costa Rica, Panama, Colombia, Venezuela, Argentina and Brazil.

Business partnerships. Coca-Cola FEMSA is working together with the Coca-Cola Company

to develop more advanced joint business models to continue exploring and participating in

new lines of beverages, extending existing product lines and effectively advertising and

marketing our products. As partners, we have a shared incentive to capture important

growth opportunities in Latin America’s fast-growing, but under-developed non-carbonated

beverage segment, developing and expanding our still beverage portfolio through

innovation, strategic acquisitions and by entering into agreements to jointly acquire

companies with The Coca-Cola Company.

Strong brand portfolio. The company offers a powerful and wide portfolio of beverages to

its customers and consumers, and continuously explores promising beverage categories to

capture growth in its different markets. To get closer to its customers and help them to

satisfy consumers’ expanding needs, Coca-Cola FEMSA has become a one-stop shop for its

retailers by offering a complete beverage portfolio - including carbonated soft drinks,

bottled water, juices, orangeades, isotonics, teas, energy drinks, milk, coffee and even beer

in some markets such as Brazil.

Collaborative customer relationships. As an organization, Coca-Cola FEMSA continually

looks to deepen its customer relationships. Our company is working closely with its largest

clients to develop stronger multi-faceted relationships. Among the company’s initiatives, are

tailoring its extensive portfolio of products and packages for their stores - based on the local

market’s socioeconomic demographics, relevant consumption occasion and the store’s

distinctive characteristics. We partner with our customers on multiple fronts-from

knowledge management and capabilities development to go-to-market and point-of-sale

execution-to ensure each and every shopper’s trip counts.


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Channel Marketing. In order to provide more dynamic and specialized marketing of our

products, our strategy is to classify our markets and develop targeted efforts for each

consumer segment or distribution channel. Our principal channels are small retailers, “on-

premise” consumption such as restaurants and bars, supermarkets and third party

distributors. Presence in these channels entails a comprehensive and detailed analysis of the

purchasing patterns and preferences of various groups of beverage consumers in each of

the different types of locations or distribution channels. In response to this analysis, we

tailor our product, price, packaging and distribution strategies to meet the particular needs

of and exploit the potential of each channel.

Multi-Segmentation. We have been implementing a multi-segmentation strategy in the

majority of our markets. This strategy consists of the implementation of different

product/price/package portfolios by market cluster or group. These clusters are defined

based on consumption occasion, competitive intensity and socio-economic levels, rather

than solely on the types of distribution channels.

Client Value Management. We have been transforming our commercial models to focus on

our customers’ value potential using a value-based segmentation approach to capture the

industry’s potential. We have started the rollout of this new model in our Mexico, Brazil,

Colombia and Central America operations.

Go-to-market strategies. We continuously evaluate our distribution model in order to fit

with the local dynamics of the marketplace and analyze the way we go to market,

recognizing different service needs from our customers—from traditional mom-and-pop

retailers to modern hyper and supermarkets—, while looking for a more efficient

distribution model. As part of this strategy, we are rolling out a variety of new distribution

models throughout our territories looking for improvements in our distribution network.

Flexible sales and distribution models. We use several sales and distribution models

depending on market, geographic conditions and the customer’s profile: (1) the pre-sale

system, which separates the sales and delivery functions, permitting trucks to be loaded

with the mix of products that retailers have previously ordered, thereby increasing both

sales and distribution efficiency, (2) the conventional truck route system, in which the


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person in charge of the delivery makes immediate sales from inventory available on the

truck, (3) a hybrid distribution system, where the same truck carries product available for

immediate sale and product previously ordered through the pre-sale system, (4) the

telemarketing system, which could be combined with pre-sales visits and (5) sales through

third-party wholesalers of our products.

Full Operating Potential. More with less is a key part of the Coca-Cola FEMSA corporate

culture. The company continually seeks to optimize manufacturing and distribution capacity

to maximize operating efficiency, adapting its organizational processes to address changing

competitive, economic, and sociopolitical environments. In addition, we rely on state-of-

the-art market intelligence systems that enable the company to execute and refine its

channel-marketing and multi-segmentation strategies, consistent with customers’ and

consumers’ purchasing patterns and preferences.

Managerial expertise. We focus on management quality as a key element of our growth

strategy and remain committed to fostering the development of quality management at all

levels. Both FEMSA and The Coca-Cola Company provide us with managerial experience. To

build upon these skills, we also offer management training programs designed to enhance

our executives’ abilities and to provide a forum for exchanging experiences, know-how and

talent among an increasing number of multinational executives from our new and existing

territories.

Sustainable Development. Sustainable development is an important pillar of our Company’s

strategy. We continually develop programs that ensure the creation of social and economic

value by fostering the quality of life of our employees, promoting a culture of health and

well-being, supporting our surrounding communities and minimizing our operations’

environmental impact.


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Corporate Strategy & Business Level Strategies

Making the essential moves to different businesses and achieve an appropriate kind and type of

diversification is very important for a business and a key part of Coca Cola’s corporate strategy is

making decisions on how many, what are the types and on which specific line of business the

company should be in. This may involve deciding to increase or decrease the breadth of

diversification. This corporate strategy may involve closing down or opening up of a line of different

other businesses (LOB). Corporate strategies initiate actions to boost the combined performance of

the businesses and the company has diversified into many different businesses by strongly involving

itself into pursuing rapid growth strategies in the most promising LOB's. They have kept their core

businesses healthy; initiating turnaround efforts in weak-performing yet promising LOB's and

dropped the LOB's that are no longer attractive or profitable with respect to existing structure of the

company and market demand. Coca Cola has pursued many ways to capture valuable cross-business

strategic fits and has turned them into competitive advantage. For example, transferring and sharing

related technology, procurement leverage, operating facilities and distribution channels - All such

changes and establishments are a vital part of Coca Cola’s corporate strategy.

The various strategies pursued by Coca Cola that have been instrumental in making it the world’s

largest brand in the beverage industry are:

Differentiation Strategy (Business Level)

There are many bases on which a product can be differentiated. However Coke has differentiated its

product on the following base:

1. Product Differentiation: Coke differentiates its product from its competitors on the basis

of brand, quality and taste. Coke does mass production but at the same time has been able

to retain its distinct formula that presently no one has been able to imitate or replicate fully.

2. Image Differentiation: The Coca Cola logo is a vital too for image differentiation as it

establishes a brand name in the mind of the consumer. It is the brand’s identification,

signature and image.

3. Price Differentiation: Prices are kept competitive with Coke’s biggest rival Pepsi Co.

Therefore, we can say that it has a mix of low cost and differentiation at the same time.

Innovation Strategy

Coca Cola, since its birth, has been as successful as it is today because of its ability to systematically

innovate and deliver new products with respect to the ever changing market. The trends of the

market are not constant; they change every quarter. Keeping that in mind, Coke moved from a single


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core product to a comprehensive beverage offering. As of now Coca Cola offers nearly 400 different

products – the reason for it still dominating the beverage industry around the globe.

Globalization Strategy

Technology is continually changing the way businesses operate. The trends and methodologies

which are responsible for making businesses more feasible and profitable for the purpose of

expansion are given strict emphasis. Presently, Coca-Cola is able to exploit large revenue

opportunities by participating in a global market - Coke products are delivered in 200 countries

around the world.

Related Diversification

Coca Cola started their business from sodas and then went into power drinks, bottled water, and

healthy drinks like Minute Maid and ice teas.

Concentration Strategy

Coke has been able to maintain a consistent formula for its drinks, especially Coke. This indicates

their consideration for their loyal customers who do not want to lose the essence of the original fizzy

taste of Coca Cola.

Cooperation Strategies

Joint Venture:

Coke joined forces with different suppliers and bottlers such as Femsa’s popular JV.

Beverage Partners Worldwide: the joint venture partnership between Coca-Cola and Nestle

was created in 2001.

Acquisitions:

Coca Cola has a long history of acquisitions. For example, the acquisition of Minute Maid in

1960.

The Indian cola brand Thums-Up in 1993.

In 2001 it acquired the Odwalla brand for $181 million.

In 2007, it acquired Fuze Beverage for an estimated $250 million and etc.

These acquisitions shows Coca Cola’s success in the market because most of them have been seen

successfully adapting with Coke’s business strategies.


http://en.wikipedia.org/wiki/Fuze_Beverage

http://en.wikipedia.org/wiki/Odwalla

http://en.wikipedia.org/wiki/Thums_Up

http://en.wikipedia.org/wiki/Minute_Maid

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Strategic Alliances:

Coca Cola has been extremely active in strategic alliances over the years. - The most noteworthy

alliance being with McDonald’s.

Growth and Expansion Strategies

Direct Exporting

Coca Cola has entered into foreign markets in various ways. Among them, the most common

approaches are Direct Exporting, Licensing and Franchising. Besides beverages and special syrups,

Coca Cola also directly exports its merchandise to overseas distributors and companies which has

been an integral part in creating the brand’s global presence successfully.

Licensing:

Coca Cola markets internationally as well by licensing bottlers around the world - supplying them

with the syrup needed to produce the product.

Franchising:

Among the different types of franchising, Coca Cola has been using a manufacturer-sponsored

wholesaler franchise system whereby the finished products are sold to the retailers in the local

market directly.

Channeling:

Coca Cola has managed the company’s marketing and sales strategy within their previously defined

channels. The Company operates three primary delivery systems that are:

Bulk delivery for large channels such as supermarkets, mass merchandisers and club stores.

Advanced sale delivery system for smaller channels like convenience stores, drug stores etc.

Full service delivery for their full service vending customers.

Functional Level Strategies and Implementation

Seeing the magnitude of Coke in terms of the size of the company and its presence globally, the

functional level strategies pertaining to this soft drink powerhouse carry vital significance. The

functional strategy relates to the direction a functional area namely Marketing, Human Resource,

Operations Management and Finance would need to adopt to attain Coke’s proposed corporate and

business unit objectives/strategies. Moreover, uniformity with other functional strategies is also very

important - The rule of thumb, always: maximize resources and productivity.


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The functional strategies are the measures or ways to implement the tactics of the business. For

example when Coca Cola decides that it is going to add a new product to its portfolio, the ‘functions’

will make strategies in order to make the new product successful and gain market share – Attain

market leadership in a new market to increase global market share or snatch the market share from

the players present in the market in which the new product is being launched.

How will the functions make strategies? This is how it would work with respect to Coke’s various

Corporate and Business-level strategies:

Functional and Operational Level Implementation of Differentiation Strategy

Owing to the fact that Coke differentiates itself on the basis of product, image and price, the

functional strategy is required to back that tactic. In terms of differentiating itself on product, R&D

and market research is of the utmost important. Not only is it important to understand the changing

preferences of their target audience but also their satisfaction with the current offering. Being

proactive is vital. Moreover, the operations and supply chain need to be responsible for the mass

production of the global drink to service the demand created. In terms of image differentiation, the

marketing functional area takes top priority. The marketing efforts, be them active TVC’s, CSR

activities or subtle subliminal indicators, maintaining Coke’s unique brand elements is of the utmost

importance. Since Pepsi has always been a direct rival on Coke’s radar, managing and matching price

with respect to competition is also extremely important. This is because not all consumers are loyal

customers and product switching would be quite easy for the price-sensitive audience. To ensure

this competitive pricing, the Finance function would need to expertly manage budgets – where to

increase investment with respect to supply chain and marketing and where to cut costs.

Functional and Operational Level Implementation of Innovation Strategy

Since Coke finds itself in the midst of a dynamic and demanding global audience, the need to

innovate is not just a tool for growth but a prerequisite for survival. On a functional level, having to

innovate would require allocation of the right budget to various departments or product lines, R&D

to understand present and future customer preferences, Marketing to create a push or pull with

respect to the market and product offering the operations management to ensure that the idea is

turned into a product and readily available for consumption.

Functional and Operational Level Implementation of Globalization Strategy

Coca Cola products are delivered and appreciated in 200 countries globally. This not only requires

functional efficiency in terms of finance and operations management, but also marketing and

research to understand various cultural do’s and don’ts along with coming up with a message that is


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in line with Coke’s core ideology and relatable to a diverse consumer-base. Coke’s core message is

‘sharing happiness’ – an emotion or state that is common to all cultures. The fact that happiness is

shared over an aftari table in the sacred month of Ramadan for Muslims or with a turkey dinner over

thanksgiving for a Christian state is something that is altered with respect to cultural, religious and

social variability.

Functional and Operational Level Implementation of Diversification, Expansion and

Growth Strategy

Coca Cola started out as mere black-colored soda in a glass bottle but has expanded into energy

drinks, health-oriented fresh juices, bottled water and culture-specific beverages since. For example,

Coke launching Limca in India was to cater to the local population’s preference and identification

with lemon and soda. The R&D, market efforts, standardization of the formula needs to be efficiently

coordinated. The functional level strategy has to be adventurous enough to create some ripples in

the minds of the local population and yet be disciplined enough to stay within the limitations of

Coke’s core philosophy and global outlook.

Functional and Operational Level Implementation of Concentration Strategy

Coke once tried to alter its original flavor with the excuse of ‘progress and innovation with respect to

changing times’. The opposition from the consumer was quite strong. Since then, Coca Cola has

concentrated on maintaining the sanctity of their primary product. This has required strict quality

checks to ensure consistency with respect to Coke bearing its original sweetness, carbonation and

outlook (the formula behind the shade of Coke’s Red color is just as much a secret as its constituting

ingredients) while ‘Share’ and ‘Happiness’ have been constant and recurring themes in their

marketing campaigns.

Functional and Operational Level Implementation of Cooperation Strategy

Cooperation Strategies regarding coke has seen joint ventures between Coke and various suppliers

along with partnerships with other beverage makers. A cooperation with suppliers meant

coordinating supply chain efforts, creating the right amount that is in line with the generated

demand due to marketing initiatives along with the capacity of bottling units and supplier’s means of

transportation. In this form of strategy, while efficiently and effectively managing a function is

important, it is equally important to coordinate those efforts on a unified functional front. Acquiring

product lines like Minute Maid in 1960 meant creating a right balance of retaining the essence of the

citrus drink along with changing some elements to accent Coke’s own philosophy. The same

consideration is present when opting for a Strategic Alliance. For example, joining forces with


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McDonald’s as the official drink to be served with their food. In such case, the reputation of the ally

bears direct correlation to Coke’s brand image in the global market. Also, visibility of the Coke brand

name is a must for the strategic ploy to work. This includes in-store merchandising and promotional

activities like the Coke glass given away with a McDonald’s meal along with a clear visual

demarcation of its logo on the McDonald’s menu. The visual sync should be in such a way that

neither brand is overshadowed or cannibalized by the other but both coexist in the form of a

synergy. On the financial front, allocation of budget to various departments or product lines along

with getting an idea of their respective profitability is important as it becomes a source of

information for the top management to come up with long-term decisions based on present trends

and projected forecasts.

Functional and Operational Level Implementation of Growth and Expansion

Strategy

Expanding operations would require getting the right mix of labor and machinery to be able to learn,

execute and sustain in accordance to Coke’s strict evaluation of quality, quantity and consistency.

Direct Exporting puts more pressure on operations as capacity needs to be increased to satisfy the

aggregate demand of the local and foreign audience. Licensing may be a more cost-saving

alternative financially and operationally, but it also makes the company vulnerable as Coke’s

reputation would be in the hands of the licensee. The visibility of Coke’s brand name in the finished

product is also important along with the accurate information on its packaging that the final product

has been due to the result of a license agreement rather than any singular efforts either way – this is

also important for potential legal considerations. As far as franchising is concerned, Coke uses a

manufacturer-sponsored wholesaler franchise system which requires an efficient distribution and

supply chain network to be able to directly sell to the retailer without a wholesaler in the middle.

The bullwhip effect is an important consideration for Coke’s operations here as any

miscommunication of demand would have a magnified effect on the supply side which would add to

Coke’s inventory costs and reduce the product’s shelf life. Increased stock with an expiry date

around the corner would require trade promotions and discounts to clear shelf space - denting

Coke’s profits had the product been sold sooner but avoiding the off chance of a sale of an expired

product which could potentially erode Coke’s positive image in the mind of the customer.

Scenario: Coke launching a new product or product line

1. Finance: The finance function will lay out the budgets for the new product. Will give

guidelines on how much is there to spend, when and where it will be spent.


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Managing the cash inflows and outflows and help the other functions know how much do

they have in their pockets. For example: Finance department will make periodic reports to

tell whether the marketing department is overspending or not.

2. Marketing: The marketing department will make strategies to create awareness among the

potential customers. Putting out new ads on TV to be top of mind of their target market.

3. Sales: The sales team will do its best in order to get an upper hand and implement the

marketing strategies. Also the department through its sales force will go all out to achieve

sales targets set for itself by the company.

4. Human Resource: The HR department’s job is to hire right type of people for the company.

Making sure that the personnel hired have their goals aligned with the business and

corporate goals of the company.

The above example for a few functions shows how the strategies at functional level are related to

the business level. Eventually the success at the functional level helps the company attain success

and achieve goals at the business level.

Vertical and Horizontal Fit

Overall the Coca-Cola Company shows a strong vertical fit i.e. the strategy created at the corporate

level is implemented throughout all the levels of hierarchy. Whatever is done at the functional level

is actually in accordance to the goals and objectives of top management.

Similarly, a great level of horizontal fit can also be seen as different departments work together,

wherever needed, in order to achieve the overall goal of the firm.

Performance Measurement:

Performance measurement is the process whereby an organization establishes the parameters

within which programs, investments and acquisitions are reaching the desired results.

Coca Cola links the mission and vision to its operations and functions in a very good way. The whole

performance is managed in a very well manner in order to get best out of it. Managers and

employees are highly involved in the system to take decisions which results in employee loyalty.

Goals of the company are formulated at the higher level, than head of the departments make their

own goals accordingly, and then comes the unit office, then functional heads which generate

reports, in the end supervisors and employees also set their goals. All these incomparable policies

lead to the success of Coca cola globally.


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After the goals and strategy has been formulated, performance is measured in order to check the

implementation of strategy and goals. Monthly review is done to check the implementation results.

During review periods no changes in the goals can be changed. During the mid year stage goals can

be further refined or altered and new policies can be designed to achieve the organizational level

goals. At the final stage the performance is matched with the standards and goals of the

organization. If there are positive results with increase in overall productivity, the individual

performance of the employees is evaluated and the rewards are then given on the basis of

performance.

Critical Success Factors

Product quality and taste is a key success factor for coca cola. These both attributes are very

important to get high customer base.

Product Diversity and innovation is one of the most important critical success factors for

coca cola. Changing customer’s needs with time should be recognized by the company in

order to keep its customers satisfied.

Market share and size of the firm is also a critical success factor. Due to the high market

share coca cola has been able to negotiate with large distributers and thus making the

product available in most of the regions. In order to remain competitive it’s highly important

for the company to maintain effective distribution channel.

Company image leads to the brand loyalty which is very important for the success. Brand

loyalty in return increases the market share.


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Global expansion plays a very vital role in the company’s success. Brands that are globally

present are usually preferred by the customers.

Balance Scorecard

For performance measurement at smaller units, balanced score card is used by the company.

Perspective Goal Measurement

Financial

Firm financial growth in terms of

profitability

Reduce cost of production

Annual sales growth

Net profitability Improvement

Customer

Value creation , satisfaction , support High Market share , leading position

globally

Consistent decrease in cost of sales

Internal Business

Efficient production with waste

reduction.

Brand expansion

Consistent decrease in cost of

production , increased productivity

Number of new markets entered

Learning and growth

Innovation

Employee training and satisfaction

New products and processes added

in the company

Reduced rate of employee turnover

Performance Evaluation and Strategy Success

For a global company like coco-cola, the measures of success are defined in far broader terms than

the economic parameter alone. This is because of the diverse ways in which it affects lives of the

people around the world. Thus, it is only befitting for the company to evaluate its success based on

social and environment aspects it touches upon internationally apart from the obvious economic

indicator. For this purpose it evaluates its performance based on the Sustainability Reporting

Guidelines1 (G3.1) of Global Reporting Initiative. According to the framework present in G3.1, the

company declared itself to be of grade B+ in its 2010/11 Sustainability Report2.

1

2


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The above framework is very comprehensive and due to the constraint of time and scope of this

report, we will be only focusing on only the most important points.

Sustainability Reporting Guidelines

The goal of sustainable development is to fulfill the present needs without hampering the ability of

future generations to meet their own needs.

The three factors of economic, social &environment that concern stakeholders according to these

guidelines include: civil society, customers, employees including trade unions, local communities,

shareholders and suppliers.

Economic

Apart from the obvious economic performance indicators, which are present in annual reports, two

other less reported indicators include the company’s market presence & indirect economic impact

that determines the contribution of a company for a larger economic system.

Economic Performance Indicators: Important elements in this category include direct

economic value generated and distributed, including revenues, operating costs, employee

compensation, donations and other community investments, retained earnings, and

payments to capital providers and governments.

Market Presence: These include policy, practices, and proportion of spending on locally-

based suppliers at significant locations of operation. Other factors include hiring of senior

management from local community.

Indirect Economic Impacts: These include development of infra-structure and similar

services for the benefit of the general public.

Social

The social dimension deals with the impact that coca-cola has on the social systems in the places

where it operates. Such social performance indicators define how well the company deals with

issues such as labor practices, human rights and product responsibility (Customer health and safety,

compliance etc.)


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Environment

The social aspect of sustainability deals with concern of an organization to living and non-living life it

impacts through its operations. It deals with the aspect of how well a company manages the waste

and emissions that results out from the production of various goods at different sites.

Proposed Strategy

Consumer Engagement

What differentiates Coke from its competitors is the level at which is performs consumer

engagement. Notice the word used here is ‘consumer’ rather than ‘customer’ because

Coke’s direct customers are actually the distributers; however they are wise enough to

know that it is the end customer’s demand and level of satisfaction that truly matters. Due


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to this they have formulated many different marketing strategies that help them engage

customers, and that is what customers truly admire and enjoy about Coke. For example: The

latest Coke marketing campaign attempts to unite the people of Pakistan and India by

installing a Coke machine which allows you to make a friend across the border and you can

also play an interactive game with them on the spot.

Consumers believe Coke to be a full of life and fun brand which has then intrigued and loyal

at all times. This technique gives Coke its competitive edge and it something we propose

they should continue to do in the future too.

Use of Bottlers

Coke should keep on manufacturing and bottling its own products as it is doing in most

places. This ensures good quality and timely delivery. They should definitely follow this

whilst in a country where they face strong competition. Initially upon entering Pakistan they

used a local bottler and many a time a complaint was recorded about insects being found in

the bottles. This deteriorated the image of the brand in the mind of the Pakistani’s and had

a role to play in the dominance of Pepsi over Coke in the country.

Licensing

Coke should refrain from using Licensors in countries with strong competition prevailing in

them. This is because Coke mainly beats its competitors over two things: Taste and

Marketing. The marketing budget of a Licensee can never match that of a Licensor; hence

the marketing campaign created there will not be of the value that Coke is known for. This is

why they should keep the marketing in their own hands.

Africa

Although Coke is present in Africa the research showed that in 2010 the Annual Per capita

consumption of Coke in Kenya was only 39 servings. This was due to the trade barriers and

unfavorable environment present in the area. However, today the wars in Africa are ending

and they are making a conscious effort to reduce trade barriers. Coke should take a quick

step forward and step into the market fully before its competitors have a chance to,

because it has reached maturity or near maturity in many countries, and many growth

opportunities are present in Africa that will increase its global market share.


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Contingency plan: Penetrating the impoverish market can be a difficult task. Therefore, Coke shall

use Bottom of the Pyramid strategy when going into the impoverished areas. Coke can come up with

buddy packs and introduce them for the people who cannot afford the big packs. They will also have

to lower their prices in such area. Frequent sales on bulks can also be a good tact to market product.

Packaging

Packaging plays a large role in the image that is created in the minds of consumers about a

brand. Coke has previously launched limited edition packaged products which has different

names written on the bottles and the slogan was for example: “Share a Coke with Sarah”.

Limited edition packaging makes Coke stand out from its competitors and portrays the

image of it being an exciting product rather than a mundane one. It should continue to

launch similar marketing strategies.

Contingency Plan: People can become reluctant to new packaging style. Therefore heavy

advertising of the new packaging can be done to attract customers.

Pricing

Coke should price its products in such a manner that it is cheaper than water, especially in

places where water itself is a rare commodity. They should create strategies that create the

image of Coke as being a substitute of water in the minds of consumers and thereby

increase the intake of coke, making it higher than the intake of water. For example, till

recently Coke was actually cheaper than water in Saudi Arabia which is why it became the

most popular beverage in the area.

Contingency Plan: Coke has its side effects on health. Day by day, we can see that the benefits of

drinking water are being highlighted on TV and internet. The trend of healthy drinks are increasing

therefore this strategy can backfire. In such a case Coke can introduce their other brands like Kinley

and Minute Maid.

Target Market

Coke should focus their efforts on countries with a growing population thereby increasing

the total beverage consumption of their product. Here the focus is not on per-head

consumption but on total beverage consumption. This is a strategy that can be focused

upon in countries like India.


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strategic management in coke

Documents

market focus

enduring value

winning network of customers

world view focus

old aged people

winning culturetheir

quality growth

mass market product