Introduction
The Coca-Cola Company has been in operation for the past 113 years and is a market leader in the beverage production industry with five hundred still and sparkling products. The company takes up 48.6% of the total beverage market share with Pepsi its closest competitor commanding just 20.5% of the market share. The Coca-Cola Company has the third highest brand value after Apple Inc. and Google Inc worldwide with a 6.5 billion net income at the end of the 2015/2016 business year. Porter’s generic strategies are a combination of universal strategies that apply to the production of any good or service in any industry (Baker, 2014). Porter posits that the most important determinants of a firm's profitability are the state of the industry it operates in and the firm's position in the industry and that optimal positioning accrues maximized returns. He further postulates that the firm's strengths can be classified into cost advantage and differentiation the application of which results in the rise of the three generic forces. The forces are cost leadership, differentiation and focus which are applied by firms to achieve a competitive edge and increase the market share in the industry.
The coca cola company uses the differentiation generic strategy as its primary strategy to sharpen its competitive advantage (Kotler & Keller, 2016). Since the company’s inception in 1886, Coca-cola has differentiated itself as a market leader and the world’s biggest manufacturer, distributor and marketer of non-alcoholic beverages and syrups. The employment of the differentiation strategy is evident in their brand positioning and in the strong brand equity which has been as a result of the heavy investment in advertisement and the communication efforts (McKee, 2014). The Company's brand awareness is huge, and the brand association which has been facilitated by celebrities and sponsorship of events like the Olympics set it apart from their competitors (Mooradian, Matzler & Ring, 2014). The Coca-Cola Company has 35,000 brands which are unique and easily identifiable in the market. The differentiation strategy is also evident in the packaging of the Coca-cola products which has been facilitated by invention and innovation over the years (Baker, 2014). The products have over the years evolved to fit the consumer changes in tastes and preferences with the packaging evolving from the old heavy bottles to aesthetically pleasing portable plastic bottles. The differentiation strategy is, therefore, evident in the sales and marketing strategies which have led to the establishment of a company with high brand equity, unique brand association and a strong brand loyalty (Kotler & Keller, 2016). Considering that Coca-Cola is already well established around the world the cost leadership strategy is not necessary since they have a big market share, strong brand loyalty and brand differentiation (McKee, 2014). The Focus strategy is inapplicable because the company produces different beverages for different consumer groups.
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A SWOT analysis forms a critical part of the sustainability of any business since it identifies the strengths, weaknesses, opportunities and threats that a business faces for increasing the company's competitive edge (Baker, 2014). The Coca-cola Company's SWOT analysis highlights the company's areas of competency and points out the areas that need improvement. The company's high brand equity and brand valuation are major strengths for the company. Coca-Cola is the third biggest company and is valued at $73.1 Billion (McKee, 2014). The Company’s brand valuation gives it a competitive advantage since it enables the company to undertake research and development activities for innovation and invention in the production process. It also affords the company the capital to operate on a large scale which facilitates the maximization of economies of scale for increased profitability (Kotler & Keller, 2016). The strong brand equity is favorable to the sales and creates brand loyalty which is critical for customer attraction and retention. The strengths facilitate the implementation of the differentiation generic strategy (Mooradian et.al., 2014). The company’s strong brand equity avails the funds necessary to run the effective marketing and communication strategies, product development and funds the research and development undertakings (West, Ford & Ibrahim, 2015). These efforts result in the creation of a unique brand which is innovative, in line with consumer tastes and preferences and inspires customer loyalty for the retention and expansion of the company’s market share.
The direct and indirect competitors and the health risks associated with coca cola products are two of the major weaknesses of the coca cola brand (Baker, 2014). Pepsi is the major direct competitor for Coca-Cola while companies that produce substitute drinks like the star bucks are indirect competitors. The consumption of high-sugar carbonated drinks has also been linked to obesity, diabetes and other lifestyle diseases (Kotler & Keller, 2016). These challenges have negative effects on the company’s market share, profitability and affect the sales volume of coca cola products (Mooradian et.al., 2014). The product differentiation generic strategy rides on strong corporate reputation since the consumers are attracted to products which add value to their lives. If a competitor uses low sugar levels as their unique selling proposition and has the resources to widely market their product, the coca cola company could lose their customers (McKee, 2014). The weaknesses, therefore, affect the brand image and negatively reflect on the company's differentiation strategy.
The Coca-Cola Company has opportunities in the untapped market in the developing countries, improvement of their supply chain and boosting the sales of their slow moving products (Kotler & Keller, 2016). The company has an opportunity to expand their market share in the Asian and African markets in countries where the rate of economic growth and development and consumer spending levels are going up (Baker, 2014). The company also can bring down the cost of production through streamlining their supply chain to eliminate redundancy and obtain inputs at the lowest prices for profit maximization.These opportunities if tapped will increase the company’s sales volume, market share and maximize profits by bringing down the cost of production (Kotler & Keller, 2016). The company, therefore, has opportunities to utilize in those areas to improve the product differentiation strategy by building a stronger product portfolio at effective costs.
The threats facing the company include competitors, raw material sourcing, and the federal regulators. Water is one of the main ingredients of the Coca-cola Company’s products and has been a contentious issue for the company (West et.al., 2015). They have been accused of using large volumes of water and water pollution in their production process. With the changes in the environment and the fall in water levels globally, the decrease in this natural resource is a threat to the productivity of the company because without it they will not be able to produce (McKee, 2014). The competitors threaten the market share of the coca cola company while the federal regulators look to increase taxes on sugar drinks and sodas (Kotler & Keller, 2016). The increase could lead to a reduction in profits and threaten the production capacity of the company in the long run (Mooradian et.al., 2014). These factors affect the differentiation strategy negatively since they lead to lowered production levels and fear of uncertainties which adversely affect the decision making and implementation process in the company.
Strategic choices are the decisions that guide a company’s future by responding to current issues that arise from its immediate and macro environment (Kotler & Keller, 2016). The Coca-cola Company should concentrate on increasing revenue and profit maximization to leverage the strong brand equity and improve their brand valuation. The company should implement segmented growth strategies to increase sales and tap the ready market in developing countries (McKee, 2014). The company should use the appropriate marketing mix tools to retain and increase their big market share which will help improve their key strengths (Mooradian et.al., 2014). The strategic choices, however, will not fully align with the differentiation generic strategy. The concentration on increasing the output volume could lead to the compromising of the production procedure resulting in the production of substandard goods which are not unique (West et.al., 2015). The concentration on increasing the sales volume should, therefore, be balanced so as not to compromise quality for quantity.
The weaknesses of competition and the health hazards of the coca cola products should be shored up by investing more money in research and development efforts to spur innovation and invention (Baker, 2014). The process will facilitate the production of more unique products and enable the company to come up with ways of adjusting the sugar levels in the drinks. The result will be more superior products which will give the company a competitive advantage over the competitors and more healthy less sugary products (West et.al., 2015). This move will also reduce the sugar taxation threat since the purchase of the input will go down exponentially. The strategic choice will align with the company’s generic differentiation strategy (McKee, 2014). It will give the company a competitive edge and lead to product development through research and development.
The Coca-Cola can leverage its strengths and shore up its weaknesses through the adoption of a preemptive generic strategy in the untapped developing countries' markets (McKee, 2014). The strategy would ensure that the company increases its market share to retain the strong brand equity and valuation strengths while dealing with the competitors’ challenge by capitalizing on the first-mover advantage. The establishment of a market share before the market becomes saturated with competitors would make switching costs for customers’ expensive, act as a market entry barrier and maximize on the monopolization of suppliers (West et.al., 2015). The company can minimize the environmental threat of water shortage by investing in water harvesting and recycling technologies (Baker, 2014). The move would provide water security and increase brand loyalty and equity if done as part of the company’s corporate social responsibility efforts.
Conclusion
In sum, the Coca-cola Company is the third largest company in regard to brand valuation and a market leader in the beverage production industry. The company employs the generic differentiation strategy to achieve a competitive edge and increase their market share. The company's key strengths are its high brand equity and strong brand valuation while its key weaknesses are the competitors and health hazards related to the consumption of the company's products. There are opportunities in the untapped developing countries market and in the supply chain improvement as well as in the slow moving goods while the threats are from competitors and government regulators. The strategic choices the company should take are increasing sales and profit maximization and the adoption of the pre-emptive generic strategy for penetration in the new markets.
References
Baker, M. J. (2014). Marketing Intelligence — Research for Marketing. Marketing Strategy and Management, 146-166. doi:10.1007/978-1-137-34213-3_6
Kotler, P., & Keller, K. L. (2016). A framework for marketing management . Boston: Pearson.
McKee, S. (2014). Power branding: leveraging the success of the world's best brands . New York, NY: Palgrave Macmillan.
Mooradian, T. A., Matzler, K., & Ring, L. (2014). Strategic marketing . Williamsburg, VA: Good Dog Publishing.
West, D. C., Ford, J., & Ibrahim, E. (2015). Strategic Marketing: Creating Competitive Advantage . Oxford: Oxford University Press.
