Strategic Management Assignment Coca-Cola and its Global Success Strategy

Introduction
Coca-Cola is the product that has given to the world its best-known taste was born in Atlanta, Georgia, on May 8, 1886. Coca-Cola Company is the worlds leading producer, vendor and distributor of non-alcoholic beverage concentrates and syrups, used to manufacture nearly 400 beverage brands. It sells beverage concentrates and syrups to bottling and canning operators, distributors, fountain retailers and fountain wholesalers. The Companys beverage products comprises of bottled and canned soft drinks as well as concentrates, syrups and not-ready-to drink powder products. In addition to this, it also produces and markets sports drinks, tea and coffee. The Coca-Cola Company began building its global network in the 1920s. Now working in more than 200 countries and producing nearly 400 brands. Coca-Cola Company and its network of bottlers comprise the most sophisticated and pervasive production and distribution system in the world. This unique worldwide system has made The Coca-Cola Company the worlds premier soft-drink enterprise. From Boston to Beijing, from Montreal to Moscow, Coca-Cola, more than any other consumer product, has brought pleasure to thirsty consumers around the globe. For more than 115 years, Coca-Cola has created a special moment of pleasure for hundreds of millions of people every day. The Company aims at increasing shareowner value over time. It accomplishes this by working with its business partners to deliver satisfaction and value to consumers through a worldwide system of superior brands and services, thus increasing brand equity on a global basis. They aim at managing their business well with people who are strongly committed to the Company values and culture and providing an appropriately controlled environment, to meet business goals and objectives. Mission of Coca Cola is: To create consumer products, services and communications, customer service and bottling system strategies, processes and tools in order to create competitive advantage and deliver superior value to;

Environmental Analysis
Environmental analysis helps to understand what is happening both inside and outside the company and to increase the probability that the strategies it develops will appropriately reflect its organizational environment. (Lehman & Winer, 2008) Michael Porter states that: An industrys profit potential is largely determined by the intensity of competitive rivalry within that industry. It is obvious that use of this model enables to see the market

conditions more adequately, while analyzing the most relevant forces affecting the companys performance. (Lehman & Winer, 2008) Michael Porter provided a framework that models an industry as being influenced by five forces. The strategic business manager seeking to develop an edge over rival firms can use this model to better understand the industry context in which the firm operates. (Ansoff, 2007) Applying Porters 5 forces allows the potential attractiveness in terms of profitability of the company. The analysis below will concentrate on the industry from Coca Cola perspective: Bargaining Power of Suppliers: Inputs, such as materials, labor, supplies, etc. are standard rather than unique or differentiated. This allows variable substitutes of inputs readily and resulted in numerous potential suppliers. Suppliers themselves will find it hard to enter business like Coca Cola and perform function in-house. Since Coca Cola is producing at large scale, to suppliers, this business is very important; however the cost of purchase has significant influence on overall costs. This requires company to carefully choose its suppliers to suppress cost problem. Most of the suppliers in the industry are the strategic partners of different players in the industry and there are many suppliers available. Therefore the suppliers are not in a position to threaten the companies. Bargaining Power of Buyers: There are a large number of buyers and customer relative to the number of firms in the industry, each with relatively small purchases. However, there is no cost incurred in switching suppliers. Coca Colas product is very unique to some degree and has accepted branding. However, customers are very highly sensitive to price, therefore choosing the most cost efficient suppliers are very crucial to minimize cost, thus maximizing profit. The buyers are also not in a position to bargain the prices from the companies as there are a few dominant sellers in the industry who have the major market share of non-alcoholic drinks. Threats of Substitute Products: It cost the customers nothing to switch to Coca Colas substitutes, such as coffee, tea and juice. Besides, there is a high potential of customers to substitute companys products. Existing Degree of Competitive Rivalry: COCA COLAs main rival is Pepsi on the world market and national small brands in national markets (Natakhtari and Zandukeli in Georgia for example). When prices change, the effect on beverage industry towards the consumption of soft drink is drastic. Although the product is not complex, which makes it easier for other companies to compete against Coca Cola; they do not own a share in the market as large as either Coca Cola or Pepsi are. This is because it is hard to commit into this industry, as it will be hard to get out of this business, involving specialized skills, facilities and long-term contract commitments. Capital needed to enter the business line is very large. This will result in less competition, thus enabling COCA COLAs chance to gain more market share. The intensity of the rivalry in the industry is not very strong as the products are differentiated. Threats of New Entrants: Large companies like Coca Cola and Pepsi, have a cost or performance advantage in the beverage industry, because of established brand identities. Beside Pepsi, there are proprietary product differences in the industry. The capital needed to enter the industry and to be frontline in the industry like Coca Cola today is very expensive, for the reason to build production plant, managing the company, commercialization, etc. and also a long time frame to build the confidence and loyalty in the target market. Newcomers also face difficulty in accessing the distribution channels and it may be more

costly compared to what Coca Cola has to pay, given their level of experience in the industry. Licenses, insurance and qualifications are difficult to obtain. However, upon entering the industry, newcomer can expect a strong retaliation in the market. When this happens, their position may pose a threat to Company and Coca Cola may find more challenges in implementing strategies to obtain more market share and maintain customers loyalty. Overall, Coca Cola are not competing mainly against Pepsi. The fight is against its substitutes. A new entrant is also not likely to be successful because of possible retaliation from the existing industry players. There are many substitutes available to non-alcoholic beverages therefore this lowers the attractiveness and profitability of the industry. But the relative pricing of the substitutes are higher therefore the industry does not suffer.

SWOT Analysis
SWOT analysis is the overall evaluation of a companys strengths, weaknesses, opportunities and threats, and is a way of monitoring the external and internal marketing environment (Kotler, 2009). Strength Strong Brand Name: The world's most valuable brand. It is the most recognizable word across the world after Ok is Coke. Extremely recognizable branding is one of Coca-Colas 35 greatest strengths. Coca-Colas brand name is known well throughout by 95% of the world today. As did Roberto Guezieta, former cokes CEO said: Even if one day terrorists ruin all Coca-Cola factories and destroy all inventory and fixed assets, coke can still borrow from any bank enough money to reconstruct everything providing as the security our brand name. It was estimated that the Coca-Cola brand was worth $70.45billion. Corporate Identity: It has a very strong corporate identity as it is very recognized company in all the parts of the world and it is in existence since 1880s. Global Distribution: Coca cola is available in each and every part of the world as it is operating globally in more than 200 countries with its head office located in Atlanta, USA and daily more than 1.06 billion dollar are consumed around the world. The Company has a strong and reliable distribution network. The network is formed on the basis of the time of consumption and the amount of sales yielded by a particular customer in one transaction. It has a distribution network consisting of a number of efficient salesmen, 700,000 retail outlets and 8000 distributors. The distribution fleet includes different modes of distribution, from 10tonne trucks to open-bay three wheelers that can navigate through narrow alleyways of Indian cities and trademarked tricycles and pushcarts. Innovation/ New Product: company always launches innovative products like diet coke, vanilla coke and many others. Local Approach: It conducts business on a global scale while at the same time maintains a local approach which is purely visible from its advertisement. Brand Loyalty: Coca cola enjoys the brand loyalty from the customers. Financial Stability: It is there in company as it is a very old and prestigious brand. Product Quality: They dont compromise with the standards. They maintain the quality at any cost. Low Cost of Operations: The production, marketing and distribution systems are very efficient due to forward planning and maintenance of consistency of operations which minimizes wastage of both time and resources leads to lowering of costs.

Weaknesses Strong & Tough Competition: Generally on soft drinks market, globally and country specific. For instance in Georgia lemonades produced by local companies are cheaper and are positioned as healthier than coke. Substitute Products: Many infamous brands of beverage are penetrating into the market and making a substitute soft drink of coca-cola. Non Availability of all Products in Every Operating Group: Coca-cola has not concentrated on all age groups equally. Their main concentrations are basing on the choice of young generation. Low Export Levels: The brands produced by the company are brands produced worldwide thereby making the export levels very low. Opportunities Nutrition Offering. In 100 ml of coke there are 44% of Energy and 11% of carbohydrate. This nutrition gives a dividend on growing a healthy physique. Global Expansion. Expansion of the coke around the globe is highly encouraging. In one side day by day it is expanding its market and also getting into new markets other than soft drink market. As coke is enjoying so good brand name, then if they enter in any other industry with same brand name it can also succeed in that industry. Innovation. Has a potential to innovate and differentiate the company's products to sustain a competitive advantage. Product Diversification. Coke has a diversified products line in its inventory. Explore New Markets. The company is exploring new markets throughout the whole world. Customer Relation. The relations with the customers are quite congenial. So, Coke has to explore this great opportunity.

Threats Changing Trend of Healthy Eating, Drinking. People start to prefer to take juice or more nutritious beverages instead of traditional drinks. Due to the absence of other products of coke in Bangladesh, general mass may resort to other products. Substitute Products. Many infamous brands of beverage are penetrating into the market and making a substitute soft drink of coca-cola. Intense price competition: on local markets core competitive strategy employed by national brand is price cutting, which is often supported by the: by local politics.

The PEST Analysis There are many factors in the macro-environment that will affect the decisions of the managers of any organisation. Tax changes, new laws, trade barriers, demographic change and government policy changes are all examples of macro change. To help analyse these factors managers can categorise them using the PEST model. This classification distinguishes between: Political, Economical, Social, and Technological. (Drummond, Ensor, Ashford, 2007)

The acronym PEST (or sometimes rearranged as "STEP") is used to describe a framework for the analysis of these macro environmental factors. A PEST analysis fits into an overall environmental scan, which consists of significant political, economic, social and technological analysis for a firm to reach their desirable position or to attain the goals and objectives. For operating a business worldwide it is too much important, because its analysis represent the overall environmental scanning.

Coca Cola Strategies and Global Strategic Management

Multinational corporations typically adopt one of four strategic alternatives in their attempt to balance the three goals of global efficiencies, multinational flexibility, and worldwide learning. There four strategies are: Home Replication Strategy: firm utilizes the core capability or firm-specific advantage it developed at home as its main competitive weapon in the foreign markets that it enters. Multi-domestic Strategy: corporation views itself as a collection of relatively independent operating subsidiaries, each of which focuses on a specific domestic market. Global Strategy: global corporations view the world as a single marketplace and have as its primary goal the design of standardized goods and services that will address the needs of customers worldwide. Transnational Strategy: The transnational corporation attempts to combine the benefits of global scale efficiencies with the benefits of local responsiveness.

From these four strategies Coca-Cola Company follows the multi-domestic strategy. They produce products separately in diverse countries. Not all products in different countries are the same. They produce their products by following different strategy for different countries, based on the internal and external environment of the country. Coca Cola Company developed its strategy by considering the nature of the people of different countys people, culture, status and so many other related factors. Behind the reasons of following of this strategy may be that, different countries economies of scale for production, distribution, and marketing are low, side by side cost of coordination between the parent corporation and its various foreign subsidiaries is high. Because each subsidiary in a multi-domestic corporation must be responsive to the local market, the parent company usually delegates considerable power and authority to managers of its subsidiaries in various host countries.