Coca-Cola is a multinational company that was established in 1886. Since then, the company has been of the major seller of non-alcoholic beverage drinks, carbonated in particular. The company has long-standing history of using pricing strategies, extensive advertisements, and franchising model to sustain competition and improve its sales revenue (Fioleni, 2015). This critically analyses the current strategic actions that Coca-Cola has been utilizing to gain competitive edge over its rivals. The paper also provides overview on the challenges the company has been facing as well as the alternative strategy to improve performance.
Currently, Coca Cola strategic actions sit on a five-legged stool of increasing profit growth, increasing brand marketing, enhancing efficiency, simplifying the company, and refocusing on the core business models (Coca-Cola Company, 2016). With markets in over 200 countries, the company play a significant role in growth plans. In order to drive revenue and profit growth, Coca Cola has adopted a number of tactics. First, the company employs segmented revenue growth strategies based on the market type. The company also aligns employee incentives adequately in order to improve employee satisfaction. In addition, the company has recently been focusing on the emerging markets by increasing volumes, keeping their products affordable, and building strong foundation for future success. In developed countries, the company relies price/mix and manufacturing of “small and more premium packages” like aluminium and glass bottles (Coca-Cola Company, 2016). The Company’s strategy to segment markets is an ideal approach since it has the efficacy to drive revenue growth. Statistics show that the company recorded a 4-percent increment of revenue in 2015 and overall increase in value share due increased price/mix strategy (Coca-Cola Company, 2016).
Additionally, Coca-Cola Company has invested substantial amount in branding and business. According to Rieger et al (2016, p.62), healthy business growth necessitates continuous investment. Coca-Cola has ostensibly maximized media advertisement, in terms of quality and quantity. In 2016, the company spent at “more than $250 million” in media advertisement— in pursuit of developing impactful ads (Coca-Cola Company, 2016). Besides, Coca-Cola has invested substantial amount in expanding beverage portfolio. The company has also forged alliance with Monster Beverage Corporation as a way of improve its position in energy drinks category (Coca-Cola Company, 2016). According to Ferrarese (2017, p.21), multinational companies form strategic alliances in order to sustain competition, expand their market share, and penetrate new markets. To improve its brand, Coca-Cola has also increased manufacture of other products like premium organic cold-pressed juices and ultra-filtered milk. The company has also acquired other beverage companies, for instance, “China Green Culiangwang— a plant?based protein beverage brand” (Coca-Cola Company, 2016). Fitzroy et al (2011, p.153) observe that well-established companies can acquire other companies in the same industry to diversify its products, reduce competition from, and impose barrier to new entrants. From 2015, Coca-Cola has intensified global marketing of the Coke Trademark, Coke Zero, and Diet Coke. Since the launching of “Taste the Feeling” in 2016, the company has improved customer experience in refreshments and personal connections (Coca-Cola, 2016).
On efficiency, Coca-Cola has been rebuilding growth momentum by increasing investment, marketing, and financial flexibility. The company has launched “zero?based work” criterion as a strategy to reduce cost (Coca-Cola, 2016). Zero-based work involves envisaging the business based on the notion that the organizational budget starts at zero and that it must be justified annually instead of carrying over the levels established in the previous year. The company has also reduced expenditure in non-media advertisements like in-store promotions. Currently, the company is focusing its resources on supply chain across the globe. In 2015, Coca-Cola realized “$600 million productivity improvement,” which was invested in branding and partly rewarded to shareholders (Coca-Cola, 2016). The company should increase productivity and continue with savings techniques to enhance efficiency. According to Reddy (2014, p.287), productivity should not be perceived as “an event or a series of events,” but as a continuous process that enables the business to grow stronger and better.
Coca-Cola Company has also been simplified by taking deliberate steps to reshape the business. Ryan (2014, p.43) observes that consumer’s tastes and preferences has become more dynamic, coupled with proliferation of in supply chain and retail landscapes, which have spawned an ambience where precision, speed, and employee satisfactions determine the winner in the market place (Statista Portal, 2018). To adjust to the external dynamics, Coca-Cola has worked on its operating structure by identifying areas that they could be smarter and more efficient. The company has gotten rid of a layer of functional management hence connecting its regional business units directly to headquarters. In addition, Coca-Cola has been working on streamlining critical internal processes and removing impediments that could inhibit its effectiveness and responsiveness. Considerably, the company has been seeking to enhance employee satisfaction to create most productive, exciting, and fulfilling career development– by nourishing innovation, learning, and growth. The company should strengthen its strategy in improving employee satisfaction to enhance their commitment and passion.
Currently, Coca-Cola is refocusing on its core business model. In order to refresh beverage brands, the company has established expansive portfolio that includes more than 500 brands. Top on the list of its brands are juice drinks, juice coffee, tea, sports drinks, sparkling drinks, enhanced dehydration drinks, and value-added dairy. These retail sales brands generate at least one billion annually. The company has been able to “lead the world’s most sophisticated system of independent bottling partners” and create value for its retail and restaurant customers (C0ca-Cola, 2016). Coca-Cola has acquired a number of bottling partners in order to optimize manufacturing, improve performance, enhance distributing systems, and refranchise bottling territories in their previous independent status. The company has strategic plans to improve its bottling systems in East and South Africa as well as China.
Coca-Cola Company has been facing a number challenges, both from with and external environment. One of the most threating challenge to the company is the increasing health awareness on the carbonated drinks (Thusyanthy, 2018, p.192). Most of Coca-Cola revenue is generated from sale of carbonated beverage drinks across the world. However, the overall increase in sales revenue of the carbonated drinks has slowed down for past five years due to increasing health concerns and publicised reports that consumption of carbonated drinks is detrimental to health. Another challenge has been increased competition. Thusyanthy (2018, p. 189) attests that non-alcoholic beverage industry is one of the most competitive industry. Coca-Cola has been experiencing stiff competition from its long-term fierce rival Pepsi and other bottled water and juice-selling companies.
Besides, the company has been facing water scarcity in some parts of the world. Water is a key ingredient of Coca-Cola products and therefore its scarcity may hitch the company’s operations (Statista Portal, 2018). Moreover, the non-alcoholic beverage has become more dynamic. The business has been changing due to emerging concerns on health, changes in consumer lifestyle, pricing, and increased similar products. Another challenge is increasing cost of energy. Bottling partners operate in large number of trucks as well as electricity and other energy sources to facilitate bottling process. Inflation of energy prices is inimical to the company’s profitability (Statista Portal, 2018). On internal environment, the company has been experiencing difficulties in distribution field due to poor internal communication, customer loyalty problem, and high cost of distribution process.
Although Coca Cola Company has responded to negative health publicity by manufacturing Coke Zero and Diet Coke, the response is still adequate. Therefore, the company should intensify research on how to manufacture drinks that have no health side effects (Carpenter and Sanders, 2014, p.120). In addition, the company should increase its engagement in corporate social responsibilities (CSR) particularly in the emerging markets. CSR activities increase the company’s relationship with public, which opens windows for the business to increase its sales (Chandler, 2017, p.241). Most Coca Cola competitors are not actively involved in CSR activities and therefore the company should identify the gap and maximize the opportunity. To overcome issues of energy scarcity, the company should adopt renewable energy sources to underscore efficiency in its operation (Carpenter and Sanders, 2014, p.146)
The proliferation of the new technology into businesses has reshaped marketing strategies across the globe. Coca-Cola should strategize on how to utilize digital platforms to increase sales revenue. Recent study shows that the number of consumers purchasing online has been steadily increasing and there are high chances that the rate will still move on upward trajectory (Aguilo-Aguayo and Plaza, 2017, p.108). The company should also integrate technology in making decisions, supply chain management, and modernization of internal systems to enhance efficiency. In addition, the company should foster efficiency by creating a culture of accountability, ownership, and performance.
References
Aguilo-Aguayo, I., & Plaza, L. (2017). Innovative Technologies in Beverage Processing (1st ed.). Wiley.
Carpenter, M., & Sanders, G. (2014). Strategic management: Concepts and cases. Harlow: Pearson Education.
Chandler, D. (2017). Strategic corporate social responsibility: Sustainable value creation (4th ed.). Los Angeles: SAGE.
Coca-Cola. (2016, April 27). Five Strategic Actions. Retrieved from https://www.coca-colacompany.com/stories/five-strategic-actions (Accessed on 2018 June 10)
Feloni, R. (2015, June 12). 7 brilliant strategies Coca-Cola used to become one of the world’s most recognizable brands. Retrieved from https://www.businessinsider.com/strategies-coca-cola-used-to-become-a-famous-brand-2015-6?IR=T (Accessed on 2018 June 10)
Ferrarese, W. (2017). Endogenous Mergers and Leadership Acquisition in Cournot Oligopolies. SSRN Electronic Journal. Retrieved from https://poseidon01.ssrn.com/delivery.php? (Accessed on 2018 June 10)
Fitzroy, P. T., Hulbert, J., & Ghobadian, A. (2011). Strategic Management: The Challenge of Creating Value. Hoboken: Taylor & Francis.
Reddy, A. C. (2014). An Experiment in Self and Product Concept Congruity: Self-Coke-Pepsi. Marketing Horizons: A 1980’s Perspective. doi:10.1007/978-3-319-10966-4_84
Rieger, F., Benade?, J., Van, N. P., & Institute of Certified Bookkeepers (South Africa). (2016). Corporate strategy. Cape Town, South Africa: Edge Learning Media.
Ryan, D. (2014). Understanding digital marketing: Marketing strategies for engaging the digital generation (4th ed.). Kogan Page.
Statista Portal. (2018). Topic: Non-alcoholic Beverages and Soft Drinks. Retrieved from https://www.statista.com/topics/1662/non-alcoholic-beverages-and-soft-drinks-in-the-us/ (Accessed on 2018 June 10)
Thusyanthy, V. (2018). ‘Health Consciousness and Brand Equity in the Carbonated Soft Drink Industry in Sri Lanka.’International Journal of Business and Management, Vol.13. no.3, pp.188-211. doi:10.5539/ijbm.v13n3p188
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