Business Scope of Coca Cola
The journey of Coca cola began way back in 1886, when Dr. John S. Pemberton created a unique tasting soft drink that could be traded at the soda fountains. He shaped a syrup that is flavored in nature which he took to a pharmacy in his neighborhood and assorted it with the carbonated water, deeming exceptional by the people who taste it. He along with Frank M. Robinson named it “Coca-Cola” along with designing its trademark and discrete script that is still being used today.
Coca cola has been considered the number one manufacturer of soft drinks at global level, selling approximately 1.5 million beverage servings every single day. Its trademark red and white is probably the well-known symbol of brand existing in the world. Coca Cola has its headquarters in Atlanta, making four of the crest five soft drinks in the world where coca cola is positioned at number one, followed by the Diet Coke, Fanta and Sprite. Business Scope:
No other company has the ability to match the aura of Coca Cola which is considered to be the largest beverage company in the world, employing around 146,200 people. It is being recognized as the world’s most recognized brand, with reports suggesting 94% of the world’s people recognizing it (Ladas et al., 2013). Such is its power that it spends more money on advertising than the combined spending of Microsoft and Apple. In 2011, its net revenues stood at $46.5 billion which was equal to the 76th largest economy in the globe. With over 500 plus brands, Coca Cola surely has scope for more where it is the number 1 manufacturer of gleaming beverages and juice-drinks and prepared to drink coffees.
The major products of the Coca Cola brand can be listed as Fanta, Diet Coke, Coca Cola- Zero, Dasani, and Minute Maid. It is a company that owns more than 500 brands that speaks highly of the volume of the organization.
Coca cola has been operating in the most persistent distribution scheme, providing around 400 beverage products in more than 200 countries across the globe. Around 70 per cent of the sales are being produced outside the North American territory with revenues being assorted as follows: North America at 30 per cent, Middle-East, Eurasia and Europe at 31 per cent, Asia at 24 per cent, Latin America at 10 per cent and Africa staggering at 4 per cent (Rothaermel, 2015).
Coca Cola’s Products and Distribution Network
These regulations takes in the ingredients that are permissible to be used in the product, the ways the product is being manufactured, the place where it is produced along with the additional laws anxious with the quality and healthiness effects of the products. Government has set probable fines if the organization like Coca Cola and PepsiCo fails to meet the required standard of laws related to production, development and allotment.
The manufacturing firms generate lot of wastes which should be taken care of. It is the responsibility of the organizations in reducing waste and work in a legal manner. Any change in the waste management laws should be highly considered by the organizations in updating their processes to put up with the law.
At times of recession, the soft drinks industries do experience market shocks. Since the year 2008, the industry have been struggling to reclaim the previous strength it displayed where the industry is anticipated to take the positive path with an extension of 37 per cent by 2017, the highest in terms of increase since 2008 (Fung, 2014). The income of consumers has changed over the years and people have become more conscious on spending on items that are not much essential, not necessarily that the industry of soft drinks suffers from such facts.
For the soft drinks industry, the raw materials cost is a factor if the economy for definite materials is stated to be weak. In this industry, sugar and carbonated water makes up most of the substance (Mialon et al., 2016). However, there is presence of many perspectives and essence such as ascorbic acid, pectins, saponins and aspartame.
Age needs to be considered as an important characteristic while evaluating the choice of the consumers which is generally being done by organizations like Coca Cola. The older generation of people is more health cognizant and has a tendency to incline towards the nutritional factors between the products (zero-calorie or diet options). In case of the younger generation they are more inclined towards products that are fun, hip and new. They see things like celebrity approval, commercials that are attractive in nature playing a significant role for the younger generation in making a decision regarding the products. Coca cola has segmented its products according to the classification of its customers.
One third of the population in America is obsessed and there is a strong connection between the consumption of soft drink and the corpulence. Dieting has become very profitable, a trend that is becoming popular forcing the soft drinks business for creating fresh products meeting the penchant of consumer.
Factors Affecting the Beverage Industry
Organizational firms are able to get hold of important information and suggestive of the consumers about potentialities or the present new products (O’Connor, 2015). The organizational firms for reaching out to the global audience should keep the advertising costs low.
Advancement in technology helps in creation of new brands and other product lines for meeting the preference of consumers. Improvement in logistics assists products in moving through the channel of distribution in an efficient manner. This helps in minimizing the cost of distribution while mounting information of sales to consumers.
Advancement in technology helps in production and improvement in quality of the matters of efficiency in bottling operations. Volumes of high product necessitate top-level automation in the manufacturing process. Technological progression helps in increasing the efficacy of capital and employees that helps in increasing the productivity. High cost involved in technology can work as an entry barrier for the new competitors.
The government has shown enough concern regarding the health issues that might crop up from the consumption of these carbonated soft drinks. The government is coming up with the implementation of restrictive laws. Big players like Coca Cola and Pepsi have been abiding by the rules and regulations of the government and are focusing on maintaining standard quality of their products.
The Porter’s five forces helps in examining the organization or the industry’s competitors. These Five forces can assist the investors and analysts in getting an idea of the factors that could have a major impact on the profitability of the company.
Coca cola’s biggest rival that one can think of is PepsiCo with both of them engaged in stiff competition with each other since the late 19th century. Both the organizations make use of the same ingredients in their pergola products with similar sort of offerings. As per Foster, Coraiola & Suddaby, (2016), in the non-soda segment too, the companies have shown enough interest in products like the orange juice and the bottled water. Pepsi has the better opportunity to merge ahead because of its diversified product line like Doritos, Rice-A-Roni changing the way it generally competes. Coca cola do not possess such opportunity. There is presence of some other cola bands like Dr. Pepper having unique flavors. The trend might take a shift towards less caffeine beverages leaving Coca Cola quite vulnerable, though the loyal customer base it has would just save it for them. This risk in this area is moderate.
Competition Between Coca Cola and PepsiCo
Another possibility is the fact of new entrants in the beverage industry with Coca Cola and PepsiCo having certain licensing deals along with permits to position their products n the fast food chains and other distribution channels. New entrants would be required to spend or invest more to have a recognition like that of Coca cola which is not always possible.
Moreover, people are shifting towards healthier options where the new entrant can cause certain disruptions for the big players. Entry of several new organizations might cause fragmentation affecting the Coca Cola’s product line, possessing a threat to the company. Investors need to keep an eye on this matters.
In the market of bottled beverages, buyers do possess certain amount of bargaining power that might influence the bottom-line of Coca Cola. Coca cola is not in the habit of selling its products to end users, it channelizes its products through the various distribution agencies, vending machine companies, grocery stores and college campuses (Nestle, 2016). Demand for a product leads to purchase, though Coca Cola needs to focus on the end price that consumers are ready to pay. Their pricing strategy should be such that customers keep coming back for their products. It states low pressure zone on the bargaining power of buyers.
The beverage company along with the contracts that it has with its suppliers in securing prices, suppliers do possess certain power, some of which might be not in their control. Sugar is a main commodity with its price varying over viability and time. A few natural disasters might influence the raw material cost of Coca Cola as these disasters affect the sugarcane harvestation. The contracts that the company has with its suppliers make these effects minimal. The suppliers of Coca Cola are neither concentrated nor differentiated. Coca cola is one of the biggest customers for their suppliers.
Coca cola needs to keep track of the product that acts as its substitute. For instance, customers might start drinking more of coffee instead of the carbonated Coke. The rise of Starbucks is an example on how much the present day consumers have taken a liking on such items, once provided with the right ambience and flavor. Just for this reason only, Coca Cola have stake in Green Mountain Coffee Roasters, the Keurig makers.
Buyers becoming more health conscious are another reason why Coca cola need to check on its product line and come up with products that are healthy in nature. Coca Cola is a massive organization, but the investors still need to guarantee and be aware of the competitive landscape in which the organization has been operating.
Threats and Opportunities for Coca Cola
It has strong brand image
String brand assortment
High loyalty of customers
Exclusive work division
High company evaluation
Coca Cola’s most significant strength has been its brand image and the high brand consciousness. The brand has its existence in every part of the world having high popularity. In the beverage industry, Coca Cola has the biggest market share amounting to 48 per cent along with the strong portfolio of product that it has in its kitty. People are becoming concern with their health and are indulging in more health related drinks for which Coca Cola introduced Coke Zero Sugar, Lilt Zero and Powerade Zero. It has come up with options of low calorie in all its major brands. The company together with their bottling partners is ranked among the world’s top 10 classified employers. Its impressive record in the global stage is much dependent on the strong network distribution of its. Adding to that is their unique advertising and marketing strategies. Viral marketing along with social media campaigns, Coca Cola has made the best use of everything for attracting customers.
Low diversification in Products
Low presence in health drinks category
Issues related to Water management:
The pressure of competitiveness and rivalry has mounted over the years, though Coca Cola has not made any strategic movement in beating the competition. It mainly relies on the popularity that their existing brand has achieved apart from the prologue of certain low calorie products. There has been enough growth in the segment of health and sports drinks with chances of competition growing further in future. The brand has been facing certain issues in the matter of over-consumption of water which it needs to focus on (Crane et al., 2014). The diversification in its product line compared to its competitors has been low.
Product Diversification
Packaged Drinking Water
Coca Cola has been presented with many opportunities in expanding in emerging markets. There lies enough opportunity for this brand to expand in these markets. Diversification in products into the segment of healthy drinks and packaged water can bring in enough revenue and profit for the company. Coca Cola could follow the things Pepsi did in adding food products to its selection.
Increase in labor cost and raw material
Movement towards health drinks
The competition threat existing against Coca Cola has kept increasing. Pepsi along with certain other brands like Monster beverage, Dr. Pepper have given stiff competition to the company under discussion. The possessions are getting costlier including that of water. The company has been facing a heavy rise in the production cost and in the resources for labor considered to be an important threat. The biggest threat for coca cola would be the scarcity of water (Metzger, 2014)..
Bargaining Power of Buyers and Suppliers
In case of the external factors it can be concluded that Coco Cola still remains one of the strongest brand in the beverage industry. The PESTLE and Porter’s five forces states that the organization has various opportunities and certain threats related to its growth and expansion at the global stage. There are certain things that Coca Cola must tackle on the basis of the analysis like expanding in the developing countries, innovating products addressing concerns related to effects on health and quality along with sustainability of business and diversification in supply chain.
In case of the internal analysis, Coca Cola has certain significant strengths. The brand image that it has structured over the years has helped it overcome the financial crisis. However, it needs to focus on the matter of health drink segment as consumers are becoming health conscious for which the organization should add health related items to its product portfolio. It can take a leaf out of the Pepsi’s books and introduce certain other products like chips or juices and coffee. Coca Cola should do well in continuously marketing its products so as to stay profitable and needs to focus on the matter of reducing the waste management and getting things right about the water management.
Conclusion:
This report considered the internal and external environment within which Coca Cola works and the factors that produce certain issues for the company and also present to it certain opportunities for expanding more. Such is the volume of this company that it has the power to expand to any horizon with somebody cracking a joke that the number of bottles that it produces each year if piled up at a place could lead people to moon and way back again.
Reference:
Crane, A., Palazzo, G., Spence, L. J., & Matten, D. (2014). Contesting the value of “creating shared value”. California management review, 56(2), 130-153.
Foster, W. M., Coraiola, D., & Suddaby, R. R. (2016, January). Useful rhetorical history: An ideographic analysis of Fortune 500 corporations. In Academy of Management Proceedings (Vol. 2016, No. 1, p. 12707). Academy of Management.
Fung, A. (2014). International Business Strategies: A Review and Extension of Theories. Chinese economy, 47(5-6), 116-130.
Ladas, S. D., Kamberoglou, D., Karamanolis, G., Vlachogiannakos, J., & Zouboulis?Vafiadis, I. (2013). Systematic review: Coca?Cola can effectively dissolve gastric phytobezoars as a first?line treatment. Alimentary pharmacology & therapeutics, 37(2), 169-173.
Metzger, K. (2014). The Import of Culture? The Coca Cola Company in America and Australia.
Mialon, M., Swinburn, B., Wate, J., Tukana, I., & Sacks, G. (2016). Analysis of the corporate political activity of major food industry actors in Fiji. Globalization and health, 12(1), 18.
Nestle, M. (2016). Corporate funding of food and nutrition research: science or marketing?. JAMA internal medicine, 176(1), 13-14.
O’Connor, A. (2015). Coca-Cola funds scientists who shift blame for obesity away from bad diets. New York Times, 9.
Pendergrast, M. (2013). For god, country, and coca-cola. Basic Books.
Rothaermel, F. T. (2015). Strategic management. New York, NY: McGraw-Hill.
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