Information background
The Coca Cola Company is the largest non alcoholic beverage manufacturer in the world. It has its headquarters in Atlanta, USA, where the major syrup concentrates are located. Its operations depend largely on its partners run different bottling plants on behalf of the company. The company produces ready to drink tea, juices, coffee, enhanced water, and juice drinks, among others (The Coca Cola Company 1).
The company has been operating since 1886 in the United States and over the years it has expanded to other parts of the world. Its top beverages are Coke, diet coke, Fanta, and Sprite. Some of the regions where the Coca Cola has operations include Eurasia, Europe, Africa, Latin America, North America, and the Pacific region (The Coca Cola Company 2).
Based on the company’s 2010 annual reports, Coca Cola is worth 25.5 US billion dollars, making it the largest non alcoholic beverage company in the world (The Coca Cola Company 7). This report is a SWOT analysis of the Coca Cola Company aimed at identifying the competitive advantage and market positioning of Coca Cola.
Strengths
Brand image: Coca-Cola is the largest manufacturer, distributor, and bottling company of non- alcoholic beverage in the world. One of the company’s strengths is that it holds 42% of the market share based on the ranking of the carbonated soft drinks in volumes ( Esterl 2010).
With is fame and availability in the different parts of the world, Coca-Cola has been able to establish a strong brand image. This has helped to develop its corporate image, and hence a competitive advantage.
Brand Positioning: Coca-Cola has been able to establish a strong brand position in the market. As a result, the company’s brand, Coke, leads the market share with 17% compared to Pepsi-Cola which is ranked third with 9.5% ( Esterl 2010). The Coke brand enjoys a sizeable market share because the company has emphasized on TOM. Due to Coca Cola’s strategic branding efforts, the company has managed to develop a strong brand.
Diverse operations: The Coca-Cola has revenues of over $25.5 billion has managed to diversify its operations to a large scale (The Coca Cola Company 7). Since 1886, the company has been expanding globally and in the process, it has sold its trademarked beverage. The Coca Cola Company operates in more than 200 countries in the world (The Coca Cola Company 34), and the number is expected to increase.
This is another source of strength for the company because it helps to increase its market share. The company enjoys a large consumer base, in which out of the 52 billon beverages consumed in the world, 1.7 billion belongs to Coca Cola (The Coca Cola Company 1).
Infrastructure and manufacturing: The Coca Cola Company has well established manufacturing and bottling plants in the world. For instance, it operates and owns 32 major syrup manufacturing plants and beverage concentrates in different parts of the world (The Coca Cola Company 34). Furthermore, the company has 37 operations and 95 canning and bottling plants across the globe.
Other than the beverage bottling and manufacturing plants, the company also posses water bottling plants and juice manufacturing plants (The Coca Cola Company 2). The large scale production units assist the company to satisfy the huge demands from its consumers thus increasing revenue.
To satisfy the increasing demand from the emerging markets, the company has developed a tactical plan “for building a new plant in the south of France to make soft drink concentrate and for building another canning plant in Durnirk” (Griffin 78). The expansion of the plant is an indication that the company has become stronger and is gaining a larger market share.
As part of strengthening its weaknesses, the Coca Cola Company has acquired new independent bottlers (Griffin 78). So far, the company’s bottling and extensive manufacturing plants have made it possible for Coca Cola to gain a competitive advantage over its competitors. The bottling systems and manufacturing plants have allowed the company to conduct business in different parts of the world.
Quality, price and value: The Coca Cola Company has managed to produce quality products that are affordable to all the consumers. This has been achieved through the adoption of attractive packaging and repackaging strategies. For example, the company has changed its packaging from the bottle packaging to cans that can be accessed in different soft drinks dispensers.
This has seen the company continue to attract more customers, especially the young generations. The company has added value in its drinks through different brands. For example, the company has been able to develop and distribute a diet soda which is a healthy drink ( Esterl 2010).
This has strengthened it consumer base since the company can now serve different populations in the world. The consistency in quality brands has also strengthened its brand and brand image.
Geographical locations: the Coca Cola Company is an internationally recognized organization with offices in different parts of the world. For example, it has operations in Africa, Latin America, Asia, the Middle East, and Europe (The Coca Cola Company 2). This makes it the largest distributor and bottler of non alcoholic beverages in the world. This has been realised through its diverse and extensive supply chain management.
Finances: the company has a large capital base that it uses to finance research and developments. For example, the Coca Cola brand is worth 25.5 billion USA dollars (The Coca Cola Company 7). The huge capital base gives it a competitive advantage over its competitors.
Capabilities and competence: the Coca Cola Company invests heavily in the latest technology and engineering to ensure that it produces quality products to its consumers. For example, the company developed the diet coke brand as a result of high levels of investment in technology ( Esterl 2010).
In China, the company has invested heavily in technology and has been able to produce innovative beverages that meet the high demands of the Chinese market. In addition, the company has an excellent workforce that supports the development and research to produce quality products.
Weaknesses
Poor popularity: the Coca Cola Company has more than 400 brands and the most popular are Coke, Sprite, and the Diet Coke (The Coca Cola Company 2). This implies that the rest of the brands remain unknown to the larger population. The other brands also need to be converted to popular drinks like Coke and Sprite. As a weakness, the low popularity reduces the company’s capital.
Heal issues and concerns
In this day and age, people have become more health conscious and as a result, they are now turning to products that are less sugary or those that have no adverse effects on their health. This jeopardizes the market for Coca Cola products, like Coke.
Since the company depends heavily on sugary syrups and sweeteners, the demand for Coca Cola products may reduce drastically, and this could result dwindling profits (The Coca Cola Company 13). This is because health practitioners and advocates have been on the forefront campaigning for health living and a reduction in the consumption of sweetened products.
Bad publicity and reputation
Because of the numerous lawsuits and complaints the company has received over the years, this has led to a bad public image and publicity. According to the India Resource Center (2011), the company has been accused of depleting water in India instead of conserving the environment. The dependency on water has led to the depletion hence the bad reputation and bad image.
Dependence on exhaustible resources
Coca Cola plants depend heavily on water for its manufacturing processes. In the company’s annual report 2009/2010, the company has raised the concern of water scarcity as it is becoming a limited resource under the current climatic conditions (The Coca Cola Company 13).
Pollution, over-exhaustion and poor management of resources, has raised concern about the company’s operations. Given that the condition of low water quantity and absence of quality water continues, Coca Cola’s major ingredient will be affected immensely.
Over dependence and reliability
The greatest portion of Coca Cola’s business is dependent on its bottling partners (The Coca Cola Company 13). The decisions made by some of these companies may affect Coca Cola’s operations. For example, the company has no mandate over these bottling companies.
Therefore, the bottling plants can make their decisions without consulting the Coca Cola Company. Other actions like distraction as a result of strikes and stoppages in the bottling companies may have an adverse effect on the profitability of the Coca Cola Company (The Coca Cola Company 13). Therefore, Coca Cola has to maintain closer relationships with its partners as its profits and startup capital depends on them.
Own known vulnerabilities
The Coca Cola Company operates in an industry that is exposed to unknown vulnerabilities. Its operation in different parts of the world are exposed to uncertainties like terrorist attacks, bombings, natural catastrophes like disease outbreaks, earthquakes, political unrests and instability, sanctions, and new operational rules and regulations.
Cash flow and start-up cash-drain
Most of the bottling and manufacturing plants are not owned by the Coca Cola. The company depends heavily on cash flows from its associates operating on its behalf.
Given that the company only produces concentrated syrup and distributes it to the different bottling plants, this is a weakness as its cash flows and other capital gains depends on the operation of these bottling and manufacturing plants. The company also relies heavily on the establishment of operations in emerging and developing markets (The Coca Cola Company 13).
Continuity and supply chain robustness
The Coca Cola Company has a robust supply chain that is responsible for the supply of syrup concentrates to different plants in the world. The bottling plants are not independent in the development and manufacture of syrup concentrates.
This implies that the company has to rely heavily on the supply chain. As such, its disruption owing to natural disasters or other unprecedented calamities may affect the company’s operations and profitability. Also, the supply of the products in developing and emerging economies should be able to compliment the demands (The Coca Cola Company 13).
Reliability of data and plan predictability
The Coca Cola Company mainly depends on market prediction and data reliability. For example, the company relies on the “value at risk methodology for its quantitative and qualitative disclosures about market risks” (The Coca Cola Company 85).
It also depends on the collected data to predict and forecast sales and the demand for its products in the developing and emerging economies. The emerging economies may not turn to be as predicted hence affecting the company’s profitability and operations.
Opportunities
Globalization and technology: Because of globalization, the world has become a global market. Coca Cola products are now available in different parts of the world. The company has new emerging markets in different parts of the world like the Middle East and Africa (The Coca Cola Company 2).
These are potential opportunities from where the company can increase its operations and presence. Advance in technology offers the company the opportunity to sale its products online to the upcoming generation.
Because of advance in technology, the company has been in a position to develop the Diet Coke which is an innovative drink. This has gained a market share and will continue to be consumer’s favorite brand because of the changing lifestyles. People are becoming health conscious and watching their health by avoiding high sugary and calorie beverages.
Therefore, the company has a great chance of gaining a great market share and large consumer clientele. The company invests a lot in information and research for product development. This offers the company the chance to continue expanding its market share.
Competitors’ vulnerabilities: Any mistakes and mis-sharps on competitors like Pepsi acts as an advantage to the Coca Cola Company.
For instance, the fall in the sales of Diet Pepsi and the Pepsi Cola in 2010 by 5.2% and 4.8% saw Coca Cola increase its market share are become the leading over with its Diet Coke Brand. Since then, the company Diet Coke has been dominating with a share of 9.9% followed by Pepsi Cola with 9.5% ( Esterl 2011).
Niche target markets
The Coca Cola is finding comfort in the new target markets in the world. For example, its sales were reported have increased in new markets like China, Russia, Brazil, and Turkey (Wheatley 2005). Brazil was ranked as the third new found niche after the United States and Mexico where sales increased by 14% (Wheatley 2005).
This geographical expansion into the emerging global markets has been as a result of increased market volume demands in these economies. Also, an increase in Coca Cola products in Mexico which is located in a desert has made it to be ranked as the second largest consumer of its products in 2005 (Wheatley 2005).
Partnerships and agencies, distribution
The presence of willing and trust worthy partners, offers Coca Cola the chance to expand its business in different geographical areas. The issuance of major contracts to its partners gives the company the opportunity to continue with increased sales and remain ahead of its competitors.
The diverse distribution channels have led to the company’s expansion and reliability by its consumers. Consumer loyalty gives the company the reason to establish more expansions in different parts of the world.
Seasonal, weather, fashion influences: The demand for Coca cola products is mostly influenced by season, weather, and fashion. For example, most of the ready- to- drink products of the Coca Cola Company are marketed during second quarter and the third quarter calendar (The Coca Cola Company 10). This offers the company an opportunity to increase its sales during this time of the year.
It can also target its consumers during the warm and humid months of the month to increase sales. Through advertisement and collaboration as a promoter of games like the 2012 Olympic Games in London, the company gets an opportunity to sell its products to the large number of people who will be attending.
Threats
Coca-Cola faces rivalry and competition from other competitors in the market. For example, Pepsi which is currently ranked second after Coca-Cola (Esterl 2011) is its largest competitor. Pepsi has been trailing behind Coca cola behind and noting its moves with counter effective strategies.
For example, after Coca-Cola Diet coke overtook the Pepsi Cola in 2010, the company has been investing heavily to produce low calorie natural sweeteners (Esterl 2011). This is seen as a threat since currently; Pepsi-Cola is ranked third with 9.5% market share and the Coca-Cola Diet Coke second with 9.9% (Esterl 2011).
Other competitors other the Pepsi include Dr Pepper Snapple with 16.7% market share, Cott with 4.8 % and natural beverage 2.8%. Although the Coca Cola has a 42% of the market share, it still faces stiff competition from these emerging companies.
Lawsuits: The Coca Cola has been facing numerous lawsuits that are threatening the publicity, reputation, and the daily operations of the company. For example in 2009, Pepsi sued Coca-Cola on claims of false attacks (Glovin and Stanford 2009), the claims were that the company was attacking Pepsi through false advert.
Based on the lawsuits, Pepsi was claimed a huge monetary compensation which has the likelihood of affecting the company’s financial ability. In 2007, the company was reported to have compensated consumers who had bought drinks containing benzene (Associated press 2007). This was after lawsuits were filed against the huge beverage producer on the basis that benzene had the capability of causing cancer.
Political effects: Coca –cola operates in international markets that are prone to political changes. For example, civil wars can avert it operations thus reducing the sales and profits of the company. The unfavorable political and economic conditions like boycotts, political unrests, political activism, and economic instability have the capability of affecting the profitability of the company (The coca cola company 19).
Other politically related effects include the political instability in Middle East, political activism in North Africa, India, Philippines, and Pakistan has adversely threatened the operation of the company (The Coca- Cola Company 19). The political instability in Egypt, Iraq, and the escalating threats and terrorism activities in different parts are deemed to have negative impact on the company.
Environmental effects: the Coca Cola Company has been accused of having negative effects on the environment. The company has been accused of contributing to the depletion of ground water in India, in addition to water and environmental pollution (Indian resource center 2011). This has the likelihood of threatening its operations in India.
With 52 water intensive operating Coca Cola plants, the locals and the local authority have accused the company of depleting underground water leading to drought and famine (Indian resource center 2011).
The area around Kala Dera in India has been witnessing water drop (India Resource Center 2011). This is threatening its operations as the local authorities have filed lawsuits to have the company’s operating license be revoked.
Obstacles faced: Coca-Cola is facing a lot of obstacles in its operations which are threatening to dent its image. Some of these obstacles include regional and global catastrophic events like terrorists’ attacks in countries that are allied to the US (The Coca-Cola Company 22).
Natural disasters like infectious disease outbreaks (for example, SARS and influenza) have negative effects on the company’s presence in some regions. These obstacles may affect the consumers’ purchasing power thus affecting the company’s sales negatively.
Vital contracts and partners: the Coca Cola Company is involved in the acquisitions, merging, and the franchising of its business. Sometimes, the company may be affected negatively if it enters into business operations and fails to integrate successfully in those areas (The Coca Cola Company 21).
Delay in the establishment of bottling plants leads to increased liabilities which are bad for an organization. These instill pressure on the consolidated financial statements and financial records.
IT services: The advance in technology has brought both positive and negative attributes to the organizations. However, the negative attributes are seen as threats to organizations like the Coca Cola Company.
For example, the company relies heavily on IT support, networks, internet and information systems which are prone to interruptions, cyber crimes, data corruptions, and security breaches (The Coca Cola Company 20). These negative aspects are likely to jeopardize the existence, management and operation of Coca Cola Company.
Changes in regulations and laws: Coca Cola operates in an industry that is bound to changes in laws and regulations. For example, laws have been passed in the US and other countries to have ecotaxes on the non refillable containers (The Coca- Cola Company 18).
Other regulations include disposal of non biodegradable cans like the plastics cans which are not eco friendly. If the rules and the regulations are implemented in large scale in different countries where the company has operations, then the operations of Coca Cola are likely to be affected (The Coca Cola Company 18).
Financial and credit pressures: Given the current financial situation in the global markets, coca cola faces financial and credit pressures. The exchange rates and currency rates of different countries are deemed to have effects on the financial capacity of the company. Also, the increase in the fuel prices and supply of raw materials are also likely to have pressure on Coca Cola (The Coca Cola Company 13-14).
Seasonality and weather effects: the adverse weather conditions have the capacity of reducing the demand for its products (The Coca Cola Company 17). For example, cold weather in summer has temporal effects on the coca cola products demand.
This has the capacity of reducing the sales of the company. Also, the sales of the coca cola product are usually seasonal. For example, first and fourth quarters of the calendars are usually cold and during these periods, the company records very low sales.
Works Cited
Associated press. Coca-Cola settles lawsuits over benzene. Web.
Esterl, Mike. Pepsi Thirsty for a Comeback. Web. The Wall Street Journal. Web.
Griffin, Ricky. Fundamentals of Management. Mason, OH: South-Western Cengage Learning, 2012. Print.
Glovin, David and Stanford, Duane. PepsiCo Sues Coca-Cola over Powerade Advertisements (Update3). Bloomberg business Week. Web.
India Resource Center. Water Levels Continue Dropping Sharply: Coca-Cola Extracts Groundwater Even as Farmers and Community Left Without Water. Indian Resource. Web.
The Coca-Cola Company. Forward-Looking Statements. Web.
The Coca-Cola Company. Item 6. Selected Financial Data. Web.
The Coca-Cola Company. Item 7a. Quantitative and Qualitative Disclosures about Market Risk. 2010. Web.
The Coca-Cola Company. Risk factors. 2010. Web.
Wheatley, Jonathan. Coke Pops the Top off An Emerging Market“. Bloomberg Business Week. 2 May, 2005. Print.
Bibliography
The Coca-Cola Company. 2010 Annual Report on Form 10-K. 2010. Web.