The Coca-Cola Company was founded in the year 1886 and has since then developed to be the world’s leading manufacturer, marketer, and distributor of beverages concentrates and syrups. It has operations in more than 200 countries worldwide boasting of over 230 brands.Its headquarters are in Atlanta USA where it accounts for 30% of its profits and the rest are from outside markets.
It has over 30,000 employees worldwide; and the products are all found everywhere them the most popular products globally. The company has basically dominated the soft drinks industry for a century a fact that brings in the question of how it does so.
One of its executive’s say’s that the tactic is being popular, offering affordable products and winning customers trust and loyalty. “Its stock is listed on the NYSE and is part of DJIA, S&P 500 Index, the Russell 1000 Index and the Russell 1000 Growth Stock Index. Its current chairman and CEO is Muhtar Kent” (Murden, 2005, p. 38).
The soft drinks industry is mainly dominated by three major companies Coca-Cola Pepsi its closest competitor and Cadbury-Schweppes; Other major players are Cott ambev, among others.
Evaluating the external and internal environment of the coca-cola company
A company performance is largely dependent on its external and internal environment both of these must be favorable and well coordinated for the entity existence. The external environments include the competitors, government.
The external environment
Economy
According to Coca-Cola’s management reports Coca-Cola’s products are end user products, and hence are affordable to the consumers limited income and even consumers themselves view them as an inexpensive pleasure; they say that “ even in a temporary environment of steady or slightly declining disposable income, Coca-Cola’s research suggests that consumers are unlikely to forgo soft drinks” (Kono,1994, p. 85).
The company also does research on consumer spending trends and has established that the amount that consumers are willing to spend on consumer products is rising meaning that their incomes are also increasing.
Another economic factor determining the company performance is inflation; one of its executives has cited that, “Inflation is a factor in many markets globally and consequently impacts the way the company operates. we believe that we are able to adjust prices to counteract the effects of increasing costs and generate sufficient cash flow to maintain our productive capacity” (Johnson, & Whittington, 2008, p. 76).
Political
Coca cola just like any other company has legal and political issues surrounding it, mostly for Coca-Cola it is mainly usually about health and safety of products and consumer rights. There have also been a lot of new competitors emerging in the industry and the big companies are seeking to maintain their market domination.
For instance, the Singapore government has been keen on preventing big entities like Coca-Cola from suppressing small domestic growing companies by putting in place policies and controls regarding this issue. Coca-Cola inc. Asia also faces problems concerning local laws in its operations: “there are price controls, foreign exchange controls, advertising restrictions lack of infrastructure and political instability in the Asian markets.
Revenues from Asia sales are exposed to currency fluctuations, which are particularly adverse with a stronger U.S. Dollar (USD)” (Zyman, 2000, p.106). Particularly in Asian countries revenues from soft drinks are very minimal and the governments here charge high taxes on them because they consider them as health hazards.
Social and demographic issues
The Asian society is also another determinant of Coca-Cola Inc. success since soft drink consumption differs with age. Soft drinks for such a long time have been related mainly with the young generation as people age they reduce on soft drinks consumption. In the majority of Asian countries the populations have been on the rise and the biggest increase is in the youth segment.
Coke management has observed that the: “The Asian continent is getting younger and young people are the most enthusiastic purchasers of consumer products” (Kotler, 1986, p. 24).The company has therefore made sure that their products are easily accessible to them and also embarked on advertisement channels that are youth friendly especially through the technology. Technology has taken over the worlds activities and everything now is becoming automated.
Transport, communication, machinery, security among other sectors are now easily done and controlled. This has made the world to be more integrated and since youth from all regions always behave the same this has just made it easier for Coca-Cola business to succeed in Asia. They like similar music, fashion, and consumer brands; with this knowledge the company is ready to market to this group using its unique trademark using the above utilities.
Coca-cola has also created a good social relation with its external environment by developing products which are in line with the diverse social needs of the local. For example Coca-Cola has launched a new diet drink for sport energy which has become very popular with the local sports community (Pendergrast, 2007, p. 20)
Competitors
Coca-Cola has always been indistinct on how it looks at its competitors; its comments on the industry are always brief and general, such as: “The commercial beverages industry, of which the soft-drink business is a part, is competitive” (Tracy, 2000, p. 65) and hence it rarely says anything about its rivals.
Their soft drinks are very competitive and equally have a very high demand than any other commercial drink globally. Coca-Cola says that they concentrate on “Advertising and sales promotional programs, product innovation, increased efficiency in production techniques, the introduction of new packaging, new vending and dispensing equipment, brand and trademark developments and protection are important competitive factors” (Hong, Shieh, 1987,p. 3).
The company rivalry with its major competitor has been advantageous to the two companies at the expense of the other competitors since all the attention is given to the two therefore cutting out the rest.
Suppliers
“The principal raw material used by the soft-drink industry in the United States is high fructose corn syrup, a form of sugar, which is available from numerous domestic sources” ( Mikkelson, 2007, p. 22). The other major raw material used in Asia is sucrose which is also very abundant locally hence there are no importation costs.
The other material that is also locally available is the sweetener “aspartame.” It was expensive before the 90’s as it was patented to one company the NutraSweet Company, a subsidiary of the Monsanto Company but it lost the rights therefore allowing other sugar industries to supply it and since then it has become cheaper.The coca cola company popularity and market domination in the region has enabled it to get it at even lower prices than its competitors.
Buyers
The consumers of Coca-Cola products are the legitimate buyers of the company, but the role of the bottlers to whom the company sells to its concentres and syrups cannot be overlooked. These bottlers are the medium through which the company product gets to the consumers. Before the 1980’s ,Coke’s domestic bottlers were generally a reservation for the family soft drink companies were not allowed to have bottling services.
However the US president than Jimmy Carter, a Coke fan, changed that by signing legislation to allow soft-drink companies to own bottling companies or territories, plus upholding the territorial integrity of soft-drink franchises. “The major ways through which the drinks get to the consumers are: supermarkets, source sales, and vending and dispensing machines.
The supermarkets account for 40% of Asia’s’. soft drink industry sales, source sales represent 25%, and vending machines approximately 13%.%. Both Coca-Cola and Pepsi use many bottling companies which are networked to distribute their soft drinks but Coca-Cola uses the company’s sales people to sell its syrups but Pepsi uses the bottling companies for their syrups.
Threat of substitutes
Soft drinks have various beverages obtainable as substitutes most of them are in retail stores but Coca-Cola still accounts for a large portion of the liquids consumption in most markets where the products are available.
Production of soft drinks is a very expensive venture and hence that is the reason as to why the industry has very few major competitors. Coca-cola and Pepsi are virtually in an industry of their own since the rest of the competitors are much localized to get to their level; this therefore leaves Coca-Cola with less continental rivalry in Asia.
However experts have predicted that the situation might change considering the trend that the consumers are taking in product preference. Most are going for the healthier options available locally hence Coca-Cola should invest more in healthy drinks especially for the older generation in the expansive Asian markets. Coca-Cola got the point recently after their profits fell and since then they have started investing in new healthier brands but still they are very minimal compared to their total number of carbonated drinks.
Internal environment
Operations
Coca-Cola inc. Asia has established regional plants for concentrate production to minimize its manufacturing and transportation costs for the last 10 years. The company is mainly involved in manufacturing activities of syrup, which is then distributed to bottling companies all over the region.
Sales & procurement
Coca-Cola enjoys Brand loyalty “Coca-Cola has sustained an overall domestic market share lead versus Pepsi, with 41% versus 31%, and Internationally, Coke is always ahead of Pepsi”. In Asia, 198O’s, the regular coke was removed from the market and the “New Coke “was launched which was less concentrated but the customers respond very negatively hence the “Coke Classic”, had to be returned to the market and that really demonstrated the brands popularity.
Coca-Cola was a bit relaxed in the 1980’s on the importance of involving itself with its bottlers while Pepsi was keenly monitoring what their bottlers were doing and supported them. Pepsi was then the leading soft drink entity and when Coca-Cola realized this it began monitoring its bottlers with a lot of interest.
Marketing
Coca-Cola has adopted an approach of an enlarged possession of its bottling operations in the region so as to achieve efficient distribution lines and make its products easily accessible. Coca-Cola invests in these bottling companies to support them in sales and marketing programs, and also to help expand successful business and information systems. In cases where the bottlers are not meeting the market demands the company gains full control of the business until it is stable then sells it back to the operators.
Human resources
Due to the high levels of literacy in Asian region, the Company has very professional and dedicated personnel, negligible labour turnover, and usually promotes the employees from inside to take up other senior positions. The company rewards its personnel very well and always advocates for the “Coke way” and hence it trains them on what the products represent and what it seeks to be in the consumer’s mind.
“Coke places a lot of emphasis on having its people “think globally, but act locally; respond daily to competitive situations; serve customers and consumers with a passion” (Johnson, & Whittington, 2008,p. 89). Overall management of the company is excellent the company is big but it is able to monitor all its activities globally.
Coca-Cola’s core resources and competences
Coca-Cola remains at the top for many reasons but the dominant factor for this is that it has a competitive advantage in its external environment hence; it’s the regional leader in soft drink production and business. Consequently, there is a differentiating factor which for coca cola is the brand “coke” which is found in all countries where it operates alongside other brands.
Therefore the company’s competiveness is largely founded on its major product “Coca-Cola” which has created a large market share in the industry because of its popularity.
Another competence is the fact that although the Coca-Cola Company is a global business it acts in accordance with the local Asian culture so as to meet the local diverse preferences of its consumers. There is a major correlation between market share and a company’s profitability, and the larger it is the more the profitability. Coca-Cola therefore has a big market share than its competitors hence it’s excellent performance in the industry. Coca-Cola has a market capitalization of three times that of its core competitor Pepsi.
Another strong point is that Coca-Cola Inc. Asia has been able to maintain its market share by simply going local with its products. The company is ready to cater for the diverse needs of its customers all over the continent despite their cultures and differences. For example in Singapore the company has recently launched its latest product the Minute Maid in response to the countries preference for healthy drinks.
It has also made sure that those drinks remain fresh because they are natural by use of the “aseptic processing system, which allows a substantial reduction in the time and temperature necessary for sterilization of healthy drinks and Singapore, is the first country outside Japan to use the technology” (Jacobson, & Michael, 2005, p. 264).
In Asia, Coca-Cola has met the countries cultural needs since they do not approve carbonated drinks, it has replaced them with the Asian tea and the fermented milk drinks which are very expensive to produce. Coca-Cola has also made their products accessible to the society by introducing vending machines and dispensers for their products. The company has good relations with its supplier’s, distributors, and retailers not forgetting the customers.
The company ensures that their products get to their distributors easily without using many middle men who cause delays. The company also ensures that its markets are penetrable by providing all the logistics needed in reaching to the most interior markets. Coca-Cola has also identified its majority of consumers who are the young generation, hence ensuring that the products are available to them easily.
Its major competitor Pepsi gets most of its profits from snacks not beverages and in addition to that Pepsi has popularity in USA only while Coca-Cola is more popular in Asia. Coca-Cola products are a household name and although its products are a little expensive than those of its competitors Asians still prefer them. The products are sold at a premium price but affordable and are never influenced by the competitor’s lower prices.
The company has established itself as world class by sponsoring Continental events like the local football, cricket, Olympics and the international film festivals. It also changes its advertising slogans frequently and is always standard worldwide therefore maintaining uniformity globally (Fahey, Narayman, 1986, p. 56).
Coca-Cola’s Inc. Asia current strategies
Coca-Cola has various strategies that have kept it at the top, these are: the product market strategy, the global strategy, administrative strategy, differentiation strategy, and the competitive strategy. Coca-Cola as said earlier rides on its brand Coca-Cola a unique formula that is used in preparation of its products. It sells unique product from a unique formula that has been the company’s secret for decades.
This enables it have high quality products than its competitors hence making the products prices competitive but still affordable. This brand has earned it a favorable market share and hence its profitability.
The company market share is a useful tool in influencing its suppliers for lower prices; it also enables it to sell its products at a premium price and also maintains its customer loyalty because everyone would want to stick with the major player.
Coca-Cola also has an Asian marketing strategy; which involves standard marketing in all countries in the region by offering standard products (Estell, 1999, p. 16). However, this should not affect localization in the product and also in promotion strategies so as to maintain diversity and competitiveness.
Coca-Cola has been successful with its continental strategy since the company is everywhere in Asia. Coca-Cola also has a competitive strategy by the fact that it has gained market dominance in the soft drink industry. The company posses a low supplier bargaining power and the same happens for the buyers bargaining power, hence remaining competitive.
It is therefore evident that Coca-Cola has gained itself a stable competitive position and it will be difficult and extremely expensive for competitors to displace it. The company also makes use of a differentiation strategy because it has more brands than any other company in the globe.
The diversified products suit its customers’ needs hence gaining popularity in all cultures. In all its markets there is a unique brand that is appropriate for the specific region, for example the West prefers carbonated drinks and that’s what Coca-Cola offers in the region ,in Asia however consumers prefer more healthier options and hence Coca-Cola has launched the teas and fruit drinks to cater for the market’s cultural preferences.
Coca-Cola should therefore continue introducing more brands by opening new markets this way its brand’s diversity will increase while still enhancing competitiveness (Day, 2006, p. 7-15).
New strategies recommended
Coca cola should consider developing more healthier drinks because Pepsi currently has healthier drinks as compared to them.Consumers are now more inclined towards healthier choices because of the emerging medical complications characterizing today’s lifestyle. Coca-Cola has achieved this in Asia and hence it can also do so globally.
Coca-Cola Should also improve it marketing strategies by taking advantage of influential media such as TV internet radio, and also should expand it markets in new markets such as India, Russia and china where it is having problems in enticing consumers.
The company should also expand its brands popularity in East Asia by providing snacks and Non Carbonated Beverages which are mostly offered in the area by Pepsi; it can achieve this by marketing their new brands Glaceau maker of Vitamin Water, the Fuze juices and the honest tea.
The company should also ensure that they maintain sustainability as they carry out their operations. Coca cola should find appropriate sources for their water consumption since this has been a problem in their plants in the surrounding communities. Most of the people living near Coca-Cola’s plants are complaining of water shortages because of their plants activities hence creating negative publicity which is not necessarily for the company’s business success (Burkhart, & Reuss, 1993, p. 216).
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