The Strategic Positioning of Coca Cola

STRUCTURE:
1. The Coca-Cola Company as a world leader
2. Strategic Positioning of Coca-Cola
2.1. Operating globally vs. acting locally
2.2. Coca-Colas distribution model
2.3. Differentiation strategy vs. cost leadership strategy
2.4. Margin vs. volume strategy
2.5. Segmentation: broad coverage strategy vs. focus strategy
2.6. Growth strategy
3. Conclusion

Miriam Kamper, Sabina Mazyar, Dina Yertoleu, Nurzhan Baizhigitov

1. The Coca-Cola Company as a world leader

The Coca-Cola Company that was founded by Asa Griggs Candler in 1892, 6 years after
doctor and pharmacist John Stith Pemberton had invented the recipe in Atlanta/ Georgia,
USA, is the leading manufacturer, marketer and distributor of non-alcoholic beverage
concentrates and syrups world-wide. The milestone for a success story, that is circulating the
world, has been laid. Coca-Cola currently reaches people in over 200 different countries and
its brand value is estimated at 80.68 billion US dollars. Its headquarters are located in Atlanta
but its subsidiaries employ almost 30,000 people around the whole world. Today, The CocaCola Company can be seen as one of the most visible companies in the world and its bestknown product Coca-Cola has meanwhile become the worlds favorite carbonated soft drink.
The question arises how it was possible for the firm to achieve such a great success worldwide and how they continue holding this leading position in the soft drinks market. As an
approach to answer this question, it is taken a look at Coca-Colas strategic positioning in the
following.

2. Strategic Positioning of Coca-Cola

In order to examine Coca-Colas strategic positioning, first of all the market in which the
company operates is defined. The relevant sector is the global carbonated soft drinks market
since its pricing has an impact on the price of other suppliers of carbonated soft drinks but
does not affect the prices of all kinds of beverages, such as tap water. Coca-Cola clearly
dominates this market with a market share of 47%, followed by Pepsi-Cola with 21% and
Cadbury Schweppes with 8%. Other major suppliers include Cott and AmBev, as it is
illustrated in the table below.

As the three leading companies account for 76% of the total market share, this indicates that
the concentration in this industry is high, meaning that only a few companies have a very
high market share. The Coca-Cola Company currently amounts to almost 50%, and is thus

market leader with a large lead to its competitors. Consequently, the reasons for the
companys international success are to be analyzed.

2.1. Operating globally vs. acting locally

A firm has to decide if it aims at standardization or adaption of their prepositions for specific
markets. Coca-Colas great success is often attributed only to the firms global, standardized
operations since it is one of the most globally active international companies and 80 percent
of its sales come from outside the United States. In order to achieve high cost effectiveness
many of Coca-Colas activities are controlled centrally. However, not to forget that in order to
think globally, a company must act locally, as Coca Colas chief marketing officer Sergio
Zyman stated in 1999. Meeting the demands of local tastes and cultures is a challenge with
more than 230 brands in nearly 200 different countries. Therefore The Coca-Cola Company
has delegated decision making largely to individual markets. And the majority of the firms
bottlers are native to the nations in which they are located, as for example in Turkey. On top
of that, even though Coca-Cola is maintaining its global brand strategy, it is communicated
differently in each country.
To conclude, according to the president of The Coca-Cola Companys Eurasia and Africa
Group Ahmet C. Bozer, it is significant to find the best combination of global and local
actions. Quality standards, for instance, can be seen as both local and global. Whereas on
the one hand, the successful firm has its own global, rigorous, quality control standards, on
the other hand they adhere to local government safety regulations.

2.2. Coca-Colas distribution model

Coca-Cola's distribution process is a key element of its offering. The Coca-Cola Companys
products can be purchased in supermarkets and other retail stores around the world. As
mentioned above, the company is globally present and therefore, its products are available in
almost 200 different countries in the world. Apart from that, its packaging is crucial. The
products are available in cans as well as glass and plastic bottles and there are many
different sizes. This reveals again that the customer has a great choice, even if the drink
itself is the same. Additionally, the company provides supplies for fountain drinks in many
restaurants. It sells its products in thousands of pop vending machines placed in businesses
and public buildings. As a consequence, it is really easy and convenient to get to the product,
which is highly appreciated by customers.

2.3. Differentiation strategy vs. cost leadership strategy

To achieve a competitive advantage over rivals there are mainly two different strategies to be
followed: cost leadership and benefit leadership. Whereas a cost leader focuses on low
prices, a benefit leader differentiates through offering higher benefits than his competitors,
such as higher quality. The latter is also known under the term differentiation strategy.
The Coca-Cola Company follows a differentiation strategy
since a high amount of money is spent on advertising for
creating a unique brand image. Coca-Colas enormous
investment in promotion can be seen on the great variety of
their advertising campaigns, such as the one of Coca-Cola
Zero with Manuel Neuer, Germanys national goalkeeper.
Despite of the high costs it is highly effective since celebrities
and top athletes are often regarded as idols and therefore
perfectly suitable for the campaign of a brand that is said to
produce unhealthy products. Coca-Colas Diet Coke line was
a great success since it is said to taste very close to the real
Coca Cola but it does not contain any calories. Therefore it
outpaced Pepsi Cola for instance and distinguished itself from competition this way. The
brand Coca-Cola is easily recognized all over the world and due to its packaging, the CocaCola bottle has become an internationally recognized symbol. Coca-Colas good reputation
is mainly the consequence of offering a superior quality products for that the customers are
willing to pay a high price.
Moreover, The Coca Cola Company provides many differentiated products, which reveals
again that the firm follows a benefit leadership strategy. The main reason therefore is that
customers appreciate a great product variety since they have more opportunities of choice

then. The most common products are Coca-Cola, Coca-Cola Zero, Sprite, Fanta, Diet Coke
and Dasani. The Coca-Cola Company encompasses more than 500 sparkling and still
brands. On top of that, Coca-Cola produces fruit juices and sports drinks in order to offer
many differentiated products. Nevertheless, the emphasis on the soft drink industry has
helped Coca-Cola to become a quality provider.
But there are several other specials that The Coca-Cola Company offers, such as the Share
a Coke with label. These are personalized bottles with names or nicknames on it.
Although this special does not have to do anything with the quality of the drink itself, it is

regarded as a nice extra for many customers. Besides, the product is customized a little bit
this way.
Apart from that, The Coca-Cola Company sells its products at a slightly higher price than its
competitors, such as Pepsi-Cola. However, since Coca-Cola offers a clearly higher benefit
than its rivals, customers are willing to pay the higher price that is still comparable to other
carbonated soft drinks suppliers prices. The main aim of Coca-Colas pricing strategy is that
customers

perceive

the

products

as

different

but

still

affordable.

Another significant aspect in Coca-Colas case is the importance of the motivation,

healthiness and happiness of its employees. The company invests remarkably in training and
development, which customers also appreciate.

2.4. Profit margin vs. volume strategy

A competitive advantage can also be gained through pricing, meaning choosing between a
volume strategy and a profit margin strategy. The first named, also called market share
strategy, is to be implemented in case of a weak product differentiation and high price
elasticity. This mostly applies to cost leaders, since they can under-price their rivals this way.
A margin strategy is useful when having a strong product differentiation and low price
elasticity and is employed by benefit leaders that can charge a price premium.
Obviously The Coca-Cola Company follows a profit margin strategy because of the many
differentiated products costing slightly higher than the competitors.

2.5. Segmentation: broad coverage strategy vs. focus strategy

In general, it can be distinguished between a broad coverage strategy, meaning that a
company actually covers many products, many customers and a wide geographic area, and
a focus strategy, which refers to specialization. A firm has the opportunity to specialize in
products, target a certain customer group or choose a particular geographic area. The CocaCola Company definitively follows a broad coverage strategy as it offers many different
beverages, such as fruit drinks, energy and sports drinks in many different flavors to a wide
range of customers. It does neither focus on a specialized customer group nor does it offer a
limited product variety. On top of that, Coca-Cola is sold in countries all over the world. Thus,
there is no geographic specialization either.

2.6. Growth strategy

Finally, the question arises whether Coca-Colas
business model fits into its growth strategy. There are
several possibilities, how a firm can grow internally,
that are summarized in the so-called Ansoffs Matrix.
In the beginning The Coca-Cola Company produced
one single product: Coca-Cola. Over time this
product has become established in its home market,
the USA, which reveals that the company followed a
market

penetration strategy in its first

years.

Afterwards, it was even launched into foreign markets and competed on an international
level. Internationalization can always be regarded as a market development strategy since a
firm

enters

new

market.

However, the foreign markets evolved further, meaning for Coca-Cola that it also had to think
about how to further penetrate them. They solved the problem by simply modeling new
products, namely Diet Coke, Fanta and Sprite, and thus followed also a product development
strategy after some time.
Although Coca-Colas business was originally reduced to the carbonated soft drinks market,
the company has finally chosen to broaden the definition of its business into ready packaged
liquid refreshments. Therefore, The Coca-Cola Company was able to enter markets such as
bottled water and fruit juices. This means they have successfully used a diversification
strategy.
Apart from that, The Coca-Cola Company has followed an external growth strategy by doing
several acquisitions. In 1960 Coca-Cola acquired Minute Maid, followed by Thums Up in
1993 and Barqs in 1995. Later Coca-Cola implemented further acquisitions like the one of
Odwalla and Fuze Beverage. In 1982, the company even purchased the movie studio
Columbia

Pictures,

which

it

sold

to

Sony

in

1989.

3. Conclusion
How Coca-Cola succeeds in holding the leading position in the global carbonated soft drinks
market can be answered with the results of the strategic positioning analysis.

The company has proven doing well in finding the best combination when it comes to the
challenge of meeting demands of local tastes and cultures. It does not only communicate its

global brand strategy differently in each country but also delegates decision making to
individual markets. And all this while having the core activities controlled centrally.
What also contributes to Coca-Colas enormous growth is its differentiation strategy.
The company is aware
products

of

superior

of

the fact

quality

with

that it
a

is not

higher

enough to offer

benefit

for

the

different

customers.

High amounts of money are spent on advertising, as already discussed before.

Another point is the responsibility that it has taken in the field of their employees.
Thanks to the differentiation strategy the profit margin strategy is employed. In so doing,
Coca-Cola is able to sell its differentiated products at a slightly higher price
compared

to

competitors

products

in

the

same

market.

Finally, it can be deduced that Coca-Cola is aware of constant changes in the market, such
as customer preferences, and does not sleep. It reacts to these developments in time and
permanently does efforts to grow. This can be seen when it is referred to Ansoffs matrix.
After having penetrated the home market Coca-Cola started to internationalize and
when

it

noticed

changes

in

tastes

it

evolved

new

products.

To put it in a nutshell, Coca-Cola has experienced an enormous growth over

the years thanks to the fact that the company is able to react quickly to changes in the
environment and also as it is able to adapt its business model efficiently to different
surroundings.

Sources:

http://www.strategy-business.com/article/00093?pg=all

http://www.coca-colacompany.com/brands/the-coca-cola-company

http://softdrinkcolawar.blogspot.com.es/2012/12/coca-cola-pricing-strategy.html

http://www.academia.edu/389600/The_Strategic_Positioning_of_CocaCola_in_their_Global_Marketing_Operation

http://en.wikipedia.org/wiki/The_Coca-Cola_Company

http://yourbusiness.azcentral.com/marketing-mix-coca-cola-12969.html