The Coca Cola Company Analysis

Managerial Policy Term Report
Salahuddin and Iqbal Ali Khan
The Coca Cola Company
Table of Contents
1. Executive Summary________________________________2
2. Brief History of the Company_________________________3
3. Market Structure___________________________________4
4. Value Chain Analysis_______________________________5
5. Company Vision___________________________________9
6. SWOT Analysis___________________________________11
7. Quantitative Strategic Planning Matrix_________________19
8. Porters Five Forces_______________________________21
9. The VRIO Framework______________________________26
10. Internal Analysis _________________________________28
11. Conclusion______________________________________33
12. References______________________________________34
Managerial Policy by Shahid Zaki
Executive Summary
This report evaluates the vision, mission, values, market structure and value chain of the worlds
largest soft drink manufacturer. In addition to that the report briefly analyses the incredible
history of The Coca-Cola Company. This objective of the report is to explicate the current
strategies of The Coca-Cola Company. Through SWOT analysis the report analysis different
types of strengths the company has, its weaknesses, the opportunities that the company can
exploit and the threats that the company faces. The report also proposes a QSPM model for two
types of strategies that the company can develop in order to deal with the current challenges.
These two strategies include portfolio diversification and development of a low-calorie
sweetener. The biggest challenge that the company faces is that of the changing consumer
perception because of the growing concern for health and well-being. The report also explores
the external environment of the company through Porters Five Forces. These five forces
explore the rivalry that the company faces, barriers to entry to the beverage industry, threat from
the suppliers and buyers and, threat from substitutes. Finally the report explores the internal
analysis of the company and the current strategies the company is using to connect to its
consumers and to stay competitive.
Brief History of the Coca-Cola Company

The Coca-Cola Company is an American giant beverage corporation and it produces and
markets nonalcoholic beverage concentrates and syrups in the world. It is best known for CocaCola also famously known as Coke. Coca-Cola is a carbonated soft drink manufactured by
The Coca-Cola Company of Atlanta, Georgia, in the United States of America. Coke was
invented by John Pemberton as a medicine in May 8, 1886. But later the brand and formula was
purchased by a businessman, named as Asa Griggs Candler in 1889, who marketed it as a soft
drink, and it has dominated the soft drink market since then. The Coca-Cola Company only
produces the concentrates and syrup for various soft drinks under the corporate brand name of
Coca-Cola, which is sold to different bottlers in the world, who prepare the finish products and
sell it to the final consumers.
There are a number of products which The Coca-Cola Company produces other than CocaCola itself. Fanta and Sprite hold, besides Coke, large market shares in the world non-alcoholic
beverage market. Fanta was introduced at the time of World War 2 and Sprite in 1960s.
Studies have shown that coke is the most admired and best known trademarks in the world. In
fact, Coca-Cola is the second most understood term in the world, after OK.
The Coca-Cola Company started its business in Pakistan in 1953, with brands like Coca Cola,
Sprite and Fanta. The name used by the company was Coca Cola Beverage Pakistan Limited.
It was a joint venture between The Coca Cola International, Fraser and Navees Singapore and
Pakage Ltd.
Coca Cola has been a major player in the beverage industry since its launch and holds second
largest market share of the soft drink market in Pakistan.
Internationally, Coke produces concentrated and sells it to licensed Coca Cola bottlers. The
bottlers prepare the end product in bottles and cans from the concentrate in combination clean
water and sweeteners. But in Pakistan Coke has acquired bottling operations due to quality
control issues from local franchisees.
Market Structure
The beverage market in Pakistan has been vibrant over the past decades. Comprehensive
categorization of the industry includes aerated drinks, juices, milk based drink, tea, coffee, sport
drinks, bottle water and energy drinks. Different categories are dominated different drinks based
on their specialization and target market.
A research conducted by Dynamic Research Consultants in 2013 gives us a comprehensive
analysis of the beverage consumption in Pakistan. The following table shows the details.
The above table shows the difference in the consumption pattern which is present genders and
two age groups. The results show that tea is the most consumed beverage and it is particularly
liked among the adult age group. Females use multiple drinks compared to males, according to
the research done. Unlike the international beverage market, where energy drink consumed in
larger quantity than normal soft drinks, Pakistan market show that energy drinks are the least
used beverage in both categories. But young adults consume energy drinks more than mature
adults. Mature adults prefer drinks based on natural fruits and milk based drinks.
The soft drink market is dominated by PepsiCo with staggering 65% market share and Coca
Cola with 30% market share. PepsiCo held more than 80% of the soft drink market a decade
ago, according to Washington Journal. But it lost share to Coca Cola in the past few years
because of the huge investment Coke made in marketing its product. Both the companies are
involved in aggressive marketing and fighting for market share in beverage industry in Pakistan.
Local players like Gourmet and Amrat hold market share in single digit but are expected to pose
serious competition in the future. These and other small brands, due to their pricing strategies,
are emerging as threat to market leaders.

Pakistan is an agricultural country and famous for its fruits. Exploiting this fact, different
companies have ventured into the juice industry. Consumers associate nutritional value to
products made out fruits and there is no Custom Duty on locally manufactured juice products for
export; these serve additional motivation for companies to exploit the juice market.
Coffee is popular among urban population and it has very small market share in Pakistan. The
major player in coffee market is Nescafe, which is also the earliest coffee brand in Pakistan. The
market growth is sluggish and there has been no innovation to improve the market share so far.
As mentioned earlier, energy drinks are the least consumed beverage in Pakistan. Energy
drinks are different from regular drinks because they contain stimulants which increase brain
activity of a person who consumes it. Energy drinks are quite popular in the west because of the
intensified work schedules and high stress level. People, instead of getting proper rest, resort to
stimulants like energy drinks. But life is Pakistan is slow compared to the West and hence this
trend has not prevalent to a great extent. Redbull holds major share of the market and in 2012 it
held more than 60% in Pakistan. PepsiCo has introduced Sting and it has created niche for
itself. The market share of Sting is increasing with time.
Value Chain Analysis

Coke operates in more than 200 geographic locations with more than 3000 products. It is,
therefore, very important for Coke to develop a superior value chain system to reap benefits.
Coke is not just the simple soft drink that is consumed. It is not only the name and product itself
that matters in a company but value chain that helps the company to reach the final product.
Value Chain is model is used to separate into parts pertinent value generating functions or
activities.
Nonalcoholic beverage industry contains 5 activities in their value chain which are given below.
1. Inbound Logistic (Suppliers)

Coke invests a huge amount of money in product quality. Because of that, Coke pays special
attention to the raw materials that are bought. Some of the well-known suppliers of Coke include
Jones Lang LaSalle, IBM, Ogilvy and Mather etc. Besides offering products in satisfactory
conditions, the companies that do business with Coke, also, have to follow a set of strict
guidelines. Suppliers provide materials such as ingredients, machinery and packaging etc to
Coke. This makes sure that the suppliers of Coke follow a pattern of quality. Here are some of
the examples which are required of the suppliers:
- Compliance with laws and governmental regulations
- Strict prohibitions against child labor and overtime work
- Proper health and safety conditions to employees.
Doing this, Coke is trying to create the Coca-Cola quality pattern which is something that can be
extended to all their products.
2. Outbound Logistics (Buyers/Customers)

The most important part of the value chain is the set of activities required to reach customers.
This set includes warehousing, transportation and management of distribution. Coca-Cola has
one of the best distribution systems in the world. Distribution system at Coke can be considered
a strong competitive advantage. Coke owns lease and operation in over 800 plants around the
world. It offers more than 3500 beverage products in more than 200 different geographic
locations. However, Coke cannot achieve it alone. Coke is only responsible for the production of
the syrup that is used in their products. The final product is prepared by bottlers who put the
syrup into bottles and cans. Coke has more than 350 bottling partners in the world, which range
from gigantic companies to small family owned operations. The guidelines that were earlier
mentioned are also valid for the bottlers. The fact that Coke outsources some of its operations is
an important advantage in the distribution channel, because it creates lighter and flexible
company.
3. Marketing and Sales

There is a fierce completion in the industry between different beverage companies. Coca Cola
owns four of the world top selling drink brands in the world. Creativity has paid off Coke in a vital
manner. Coke has attached itself with happiness and has produced some of the best marketing
campaigns in the world. Coke invests up to 14% of its profits in communication. Coke has been
trying to build a lasting and deeper relationship with customers over the past few decades. The
most recent example of it, would be the personalized bottles in Pakistan. The campaign was a
huge success and the sale of Coke increased over the nights.
4. Operations
The main operation at Coke consists of production of syrup, which is used in Coke (Coca Cola
2006). Other than that, along the value chain, bottling operations, distribution and sales are also
impacted by the company. Managing the operations outside the production of syrup becomes
very challenging. Coke addresses this challenge by continuously working with their partners and
lessening the effects through comprehension of the complete environmental impact of their
business.
5. Services
Services include the maintenance and enhancement of value and which includes customer care
and support, installations of machines etc. and training of teams. Coca-Cola has a wide range of
customers from retailers and restaurants to independent businesses and vendors. Coca-Cola
endeavors to provide tailored services to each group of its customers.
Mission, Vision and Values
Mission of Coca-Cola Company:
- To refresh the world in mind, body and spirit.
- To inspire moments of optimism and happiness through our brands and actions
- To create value and make a difference.
Clear and concise declaration of business strategy in few sentences is an evidence of effective
mission statement. Mission statements are present-based statements and the purpose of
existence such statements is to convey a sense of why a company exists, to both members of
the company and external community.

Coca-Cola has an effective mission statement and it covers all the important elements of a good
mission statement. The idea of refreshing the world in mind, body and spirit sends a clear
message about the purpose of existence of the company. Coca-Cola has associated itself with
happiness since a long time. The mission statement clearly encompasses happiness as part of
what Coca-Cola stands for. Spreading happiness and optimism has been the core objectives of
Coca-Cola and the mission statement beautifully expresses it. The last of the mission statement
discusses creation of value and making a difference in the lives of the customers. It can be
either by refreshing the minds, bodies or spirits of their customers or by spreading optimism and
happiness. The mission statement elegantly captures it.
The Coca Cola Company Vision

The vision statement of Coca-Cola consists of 6Ps, which are described below.
- People: Inspiring each other to be the best we can be providing a great place to work.
-Portfolio: Offering the world a portfolio of drink brands that anticipate and satisfy peoples
desires and needs
- Partners: Nurturing a winning network of partners and building mutual loyalty
Planet: Being a responsible global citizen that makes a difference by helping to build and
support sustainable communities
- Profit: Maximizing long-term return to shareholders, while being mindful of our overall
responsibilities
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- Productivity: Being a highly, lean and fast-moving organization.
A vision statement must not be confused with a mission statement. Mission statement, as
discussed earlier, is concerned with the present-based activities. While on the other hand, vision
statement is concerned with the future-based activities. The core purpose of the existence of
vision is to inspire and give direction to the employees of the company.
The vision statement of Coca-Cola consists of 6Ps, which include people, portfolio, partners,
planet, profits and productivity. This statement is detailed and focuses on all the important
elements of the environment in which the company operates worldwide. It is inspiring and
promises to produce products which will fulfill the needs and desires of the customers. The
vision statement demonstrates that Coca-Cola will collaborate with its partners in order to
maintain a sustainable environment. Coca-Cola promises to keep the environment clean and
great emphasis has been put on nature and it has been kept above profits among the 6Ps of its
vision statement. Finally, the focus is on being productive and efficient. The world energy
resources are limited and Coca-Cola promises to conserve as much energy as possible by
being efficient and productive and investing in latest technology for production and
manufacturing of its products. It also promises to work with its partners to achieve a sustainable
environment.
Besides, the positive characteristics of the vision statement of The Coca-Cola Company, there
are some flaws in it, without which the vision could have been perfect. For example, the biggest
problem with the vision statement is that it is very long. Short and precise vision statement is
better than long and ambiguous one because it helps in understanding the goals and objectives
of the company with great ease. It also helps the internal members of the company to remember
what the company stands for and where it is going to go in the future. The longer the vision
statement the more confusing and vague it gets.
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The Coca Cola Company Values

Leadership: The courage to shape a better future
Collaboration: Leverage collective genius
Integrity: Be real
Accountability: If it is to be, its up to me
Diversity: As inclusive as our brands
Passion: Committed in heart and mind
Quality: What we do, we do well.
The Coca-Cola Company has a set of 7 values which act as a binding tool for the company. The
culture at the company is formed with the amalgamation of these values. These values help the
company create leaders and employees who help the company grow. The value system
encourages the members at the company to be real and honest with what they do. It also
encourages the members to be accountable with whatever task they undertake. Diversity is
recognized as one of the most important elements for the success of the company and it is
encourage on all levels. Like all businesses need passion to be truly successful, The Coca-Cola
Company has also included in its value system the idea of passion. It encourages its members
to be committed in heart and mind about what they do. It also encourages it customers to do the
same in its communications. The final element in the set of values for The Coca-Cola Company
is about good quality product and services provided to customers. Coca-Cola has a commitment
to make products which are of the highest standards and comply with international and local
laws.
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SWOT Analysis
Strengths:
One of the Top Global Brands
Coca Cola is one of the most valuable brands in the world. It preserved its top position for 13
successive years when finally in late 2013 Apple and Googles brand values surged up to take
the top two positions. Currently, Coca Cola Company is ranked the 3rd best global brand in
terms of value by Interbrand. Apple and Google occupy the top two positions with Apple being
number one in 2014. Coca Cola has a brand value of $81.56 billion with a 3% increase from
2013 (1).
Strong Marketing
Coca Cola Company has very effective and penetrating marketing capabilities that have helped
the company get an unprecedented global exposure. Wherever you go in the world, chances
are that you would see a Coca Cola ad somewhere, or at least the people of that particular area
would recognize the Coca Cola brand image. The amount of money that Coca Cola pours into
its marketing campaign is unsurpassed by any other rival brand or any beverage company. In
fact, the only company that comes close is PepsiCo. Coca Colas robust marketing capabilities
have earned the company both revenue and brand recognition. They have also helped in
introduction of new products and in creation of customer awareness about new offerings and
product features. The Coca Cola Companys annual advertising spending was $3.499 billion,
$3.266 billion and $3.342 billion in 2014, 2013 and 2012, respectively. Advertising expenses
accounted for 6.9% of total revenues each year.
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Advertising budget of key beverage companies
Source: Financial Reports
Largest Market Share in Beverage

Coke controls 42% of the total carbonated soft drink market, compared with Pepsi's 30% in the
US, which is the biggest market for carbonated drinks. Worldwide, Coke controls 25.9% of the
total market share while PepsiCo controls 11.5% (2). Coke is a clear victor when it comes to its
rivals in terms of market share. Despite the decades long war between Coke and Pepsi, Coke
has somehow managed to stay on top and be the market leader.
Most Extensive Distribution Channel

Coca Cola operates in more than 200 countries and with this many countries on its serving list it
has to have a far-reaching distribution setup. The companys servings per day is a surprising 1.9
billion. It manufactures and sells concentrates, beverage bases and syrups to bottling partners
who sell the final product to the consumers (Coca Cola).
Customer Loyalty
Through its marketing campaigns, such as Share a Coke campaign, Coca Cola has brought its
customers together to bring out the companys essence of sharing happiness. These campaigns
are intended to touch people emotionally and connect with the customers in a way that makes
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them feel special. Coca Cola uses happiness as an emotional cue to bring its customers closer
to the brand.
Corporate Social Responsibility

Over the years, Coca Cola has engaged in various development programs. The company has
focused on energy conservation, recycling, health and water provision. It has a Corporate
Governance Rating of 8.5/10. Sustainability is one of the main goals of the company and thus it
has engaged in improving its public image in countries where it operates. For example, in 2011,
through their Operational Excellence (OE) projects, the company recycled 571,897 m3 of water
in Turkey, Kazakhstan, Pakistan and Jordan. Furthermore, also in 2011, the company provided
130,915 hours of training regarding health and safety to a total of 18,826 employees in Turkey,
Azerbaijan, Kazakhstan, Jordan and Pakistan (3).
Weaknesses:
Focus on Carbonated Drinks
The consumption of carbonated drinks has shrunk in US, China, Brazil and other countries
because of the increased health awareness amongst the consumers, especially the American
consumers. The number of people who consume Coke soda, which accounts for 70% of the
companys sales, has declined in US because of the alarming rate of obesity in the country.
People have become more health conscious and are shifting to healthier substitutes such as
fruit juices. There is a fundamental shift in consumers taste and, as a result, soda sales are
declining. Sales of soda fell 3% by volume in 2013, to the lowest levels since 1995 (4).
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Undiversified Product Portfolio

As the global trends are shifting towards healthier choices, Coca Cola is having a hard time
convincing its customers to consume its carbonated drinks. While its biggest competitor,
PepsiCo, has diversified into snacks and healthy drinks, Coca Colas focus has not shifted from
its carbonated drinks. This can be a cause of concern for the company in the long run as
PepsiCo has made a substantial effort in cutting the global market share of Coca Cola.
Brand Failures
Coca Cola is attributed with one of the biggest brand failures. In the 1970s, the company, vexed
by the competition, introduced a new formula and rebranded its product Coke as New Coke.
The public was soon outraged and the company was forced to go back to its original formula.
Today, Coca Cola has more than 500 brands and it keeps on experimenting on new ones.
Some of the failed Coca Cola brands include Surge, Sprite Remix, OK Soda, Citra, Vault, Tab
Clear, and Coca-Cola BlK (5). Coca Cola C2, introduced in 2004, is yet another famous brand
failure. C2, which was introduced to target 20 to 40 year-old men, had half the calories and
carbs than the original Coke but was soon rejected by the consumers (6).
Strengthening Dollar
In 2013, Coca Cola missed its revenue target and its growth rate declined. One of the reasons
for this decline is accredited to the strengthening of dollar against foreign currencies. The
weakening of foreign currencies has suppressed the overseas earnings of the company.
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Opportunities
Bottled Water
Availability to clean drinking water is scarce in many parts of the world. The consumption of
bottled water in the US has grown in the last five years. In 2012, for example, total U.S. bottled
water consumption increased to 9.67 billion gallons from 9.1 billion gallons in 2011 while sales
increased by 6.7 percent in 2012 (7). Again, this growth has come about as a result of increased
health consciousness in the American consumers. Growth in the consumption of bottled water is
not only limited to US but to the rest of the world as well where people do not have easy access
to clean drinking water. This represents an opportunity to Coca Cola for future growth. Coca
Cola has its own bottled water brand, Dasani, which has a thin global market share but has a
strong standing in the US market.
Demand for Healthy Food and Drinks

While growing health awareness is a threat to the company, it also represents an opportunity as
Coca Cola has the financial capability to diversify its product portfolio to introduce healthy
products such as fruit juices and healthy snacks. The companys biggest market, US, is fighting
obesity and heart related diseases resulting from drinking carbonated drinks and eating fast
food such as burgers. Coca Cola is under pressure due to these changing consumer
preferences, but the company can make use of this situation and introduce healthier options.
Although, the consumers perception of the company would be challenging to turn around, but
then again Coca Cola has very strong advertising.
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Growing Beverage Consumption in BRIC Countries

Although, the sales of soda are falling in US, they are taking up in emerging markets such as
Brazil, Russia, India and China. In Pakistan, the beverage industry is burgeoning as more and
more people are consuming soft drinks and juices. Coca Cola has the opportunity to focus on
these markets as the demand for soft drinks in these markets has not yet reached the saturation
stage.
Threats
Changes in Consumer Preferences
The market for fast food and carbonated drinks is facing a number of challenges due to
changing consumer preferences. Health awareness around the world has, and especially in the
US, has prompted people to be chary about what they eat. Government administrations have
formulated tighter regulations regarding food labeling and dietary information that is hurting the
sales of calorie, sugar and fat rich food products. Consumers are careful about what they are
consuming and because of the shift in consumer perception, the market for healthy and fresh
food is growing.
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Water Scarcity
Water scarcity is a growing concern around the world. Millions of people dont have access to
clean drinking water, yet the beverage companies are using more and more water to use for
their products. Coca Cola has been criticized for using large amounts of water for its production
in water scarce countries such as India and China. In June 2014, Coca Cola was forced to shut
down one of its bottling plants in northern India after locals censured the company for using too
much water (8).
Product Labeling
Food and beverage companies are legally required to disclose product information on its labels.
Coca Colas products are not healthy and they can lead to adverse health issues. Luckily, the
company has finally realized and accepted the negative side effects that arise from consumption
of its products such as coke. In fact, in a recent advertisement they openly confess that Coke is
not healthy for you and that it can make you fat. More strict regulations have forced Coca Cola
to come out as open and forthright about the side effects of its products such as obesity and
diabetes epidemic.
Competition
PepsiCo is taking a head-on competition with Coca Cola. The two giants have been fighting
over market share for more than a century and none of them seems to be willing to give up
anytime soon. Consequently, both the companies have done everything possible to bring their
competition down but so far Coca Cola holds the upper ground. But Coca Colas position is
threatened more than ever by its greatest rival due to increased challenges that have served to
strengthen the position of PepsiCo compared to Coca Cola. For example, while Coca Cola was
busy strengthening its position, PepsiCo realized the changing consumer preferences earlier
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and diversified its product portfolio to include healthy snacks and drinks. Coca Colas position is
vulnerable more than ever and it would have to tweak its strategies in order to stay on top.
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Quantitative Strategic Planning Matrix

Key Factors
Attractiveness
Score
Strengths
Weight
Total
Score
Portfolio Diversification
One of the Top Global Brands
Strong Marketing
Largest Market Share in
Beverages
Most Extensive Distribution
Network
Customer Loyalty
Corporate Social Responsibility
Focus on Carbonated Drinks

Undiversified Product Portfolio
Brand Failures
Strengthening Dollar
Total
Key Factors
Bottled Water
Demand for Healthy Foods and
Drinks
Growing Beverage
Consumption in BRIC Countries
Total
Score
Develop a healthy,
low-calorie sweetener
4
0.6
4
0.4
3
0.24
0.15
0.10
0.08
4
3
3
0.6
0.3
0.24
0.12
0.36
0.36
0.10
0.10
2
2
0.2
0.3
3
3
0.3
0.3
0.6
0.4
3.1
2
2
-
0.3
0.2
2.7
Weaknesses
0.15
4
0.10
4
0.05
0.05
100
Attractiveness
Score
Opportunities
0.1
4
0.2
4
Total
Score
Attractiveness
Score
Total
Score
0.4
0.8
2
4
0.2
0.8
0.1
0.3
Attractiveness
Score
Threats
3
Total
Score
0.6
0.6
2
2
3
0.3
0.2
0.45
2.85
2
3
3
0.3
0.3
0.45
2.95
Weight
0.1
Key Factors
Weight
Changes in Consumer
Preferences
Water Scarcity
Product Labeling
Competition
Total
0.2
Attractiveness
Score
0.15
0.1
0.15
100
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Porters Five Forces

1. Threat of New Entrants
Beverage industry is largely dominated by Coca Cola and PepsiCo. These two
companies are very well established and have developed extremely strong brands over
the years through their extensive marketing campaigns. Both companies have spent
billions of dollar on advertising alone. Such high expenditure has discouraged
competition from other companies because the competitors know that Coca Cola and
PepsiCo will do everything possible to beat their competition. Therefore, threat of new
entrants is low.
New entrants would have to have huge amount of capital to setup the plant and
advertise their products. There are high fixed costs associated with plant and equipment
such as the cost of trucks, warehouses, production facilities and labor. In the presence
of Coke and Pepsi, it is highly unlikely that new entrants would want to enter this market.
Soft drink market is fully saturated and there is little potential for growth. Yet, small scale
companies that produce soft drinks or water are popping up here and there. These small
companies do not represent any kind of threat to Coca Cola. And in case any company
has enough financial muscle to compete with Coca Cola then Coca Cola will use
retribution tactics.
Coca Cola represents one of the strongest brands in the world and its brand equity is
extremely high. Furthermore, its brand loyalty is also unprecedented. There is not much
incentive for new entrants to compete in this industry because their growth is hindered
by the two market leaders. Coca Cola sells its product through retailers whom the
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company pays good incentives to push its products. Retailers are willing to take Coca
Colas products because they know it will sell. They wont be willing to sell the products
of a new unknown entrant. Coca Cola has extremely strong forward and backward
linkages and it would be difficult for new entrants to persuade suppliers or retailers to
break up any type of contract with Coca Cola.
2. Threat of Substitutes
Beverage industry is teeming with various types of substitutes such as tea, coffee, water,
juices etc. Threat of substitutes is therefore is very high. All of these substitutes
themselves are involved in aggressive marketing campaigns such as Tapal tea in
Pakistan. The intensity of threat is different for different substitutes. This intensity
depends on the culture and geography, for example, coffee is a very famous beverage in
the US and it represents a greater threat of substitute to coke than tea. But in Pakistan
its the other way around. These substitutes satisfy the caffeine needs as much as
carbonated drinks and their health benefits are also superior or at least not as
destructive. For example, coffee has actually been shown to contain salubrious benefits
and therefore its consumption is on the rise giving way to big coffee brands such as
Starbucks and Gloria Jeans. Even in countries like Pakistan, where more than 90% of
people drink tea, the market for coffee is increasing as more and more young people are
going to coffee shops.
Healthier alternatives such as fruit juices have threatened the soft drinks industry.
Energy drinks such as, Gatorade, have increased in popularity. The product switching
cost is very low because none of the substitutes are exorbitantly costly than soft drinks.
Anyone at any time can easily switch to any one of the substitutes without any type of
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loss. Consumers dont see much difference in value when it comes to beverages as they
are only differentiated by their taste and promotional activities.
Beverage industry attempts to keep the customers within the industry, which means that
the advertising effort from one company helps to increase the sales of other related
companies. For example, a company that is advertising its coffee will eventually end up
increasing the coffee sales for other companies as well because of the low switching
costs associated with coffee.
3. Threat of Suppliers
Raw materials that are required for the production of beverages include sugar, flavor,
color, caffeine and packaging etc. Most of these are basic commodities which are easily
available. A lot of suppliers are out there selling these raw materials and they cannot
compete over price because the prices of these commodities are fixed. It is very easy for
the company to shift from one supplier to another because of the low switching cost.
Furthermore, these raw materials are standard products that are used by all the other
related companies. For example, there are no alternatives for sugar and the sugar that
one supplier sells is no different from the sugar that another supplier sells. Suppliers
want to keep favorable relations with the companies because the companies usually buy
in bulk and the suppliers dont want to risk their contracts by trying to get greater
bargaining power. Threat of forward integration is also low because the suppliers cannot
afford the high capital associated with the setting up of an entire production plant.
However, when it comes to packaging and bottling, the situation is a little different. Coca
Colas bottling contract is with Coca Cola Enterprises which is the largest bottling
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company in the world. Coca Cola owns 36% of Coca Cola Enterprises which includes
the CCEs entire North American business (Coca Cola). Although, Coca Cola has
acquired 36% of CCE, CCE still has substantial control over the bottling operations.
Coca Cola introduces new products frequently and for every new product it needs new
bottling and packaging. The frequency with which Coca Cola introduces new products
gives CCE significant bargaining power because it has to deal with all the operational
complexity that arises due to new products that require a huge amount of new bottles.
Thus, as far as bottling is concerned, CCE has the greater bargaining power and
represents a threat of supplier because no other company can produce as many bottles
for Coca Cola as CCE does. Overall, the threat of supplier, therefore, is moderate.
4. Threat of Buyers
in large volume. The changing consumer perception, however, has given consumers
more bargaining power as they are now moving towards healthier choices. Consumers
can easily switch to a different brand that suits their demands. However, in some cases,
such as in the cases of vending machines and convenience stores, the bargaining power
of consumers goes down as they are looking for a quick purchase. Also, because the
prices of the substitutes are similar, individual consumers usually dont make their
buying decision based on price but based on taste and health benefits. The overall
bargaining power of buyers is high because the big buyers of the Coca Cola products
are different types of retailers and these retailers buy in bulk at lower prices. Retailers
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carry the products they know would sell, so if the consumers are more inclined towards
buying a product that is healthy then the retailers would want to carry that product. So it
ultimately comes down to the final consumer and the final consumer has the freedom to
choose whichever beverage he/she wants to consume.
5. Threat of Rivalry
The soft drinks market is largely dominated by Coca Cola and PepsiCo. These two
players have the greatest market share both locally and globally. In 2014, Coca-Cola
classic was the number one selling soft drink in the US followed by Pepsi and Diet Coke.
Pepsi has been successful in securing the second position after been third for many
years. Currently, two of the top 5 selling soft drinks belong to Coca Cola (9).
Rivalry from other players apart from PepsiCo is very low. But PepsiCo represents the
greatest threat. The two companies have been involved in a century long war and their
rivalry is legendary with both companies still trying to take the lead. They compete on
advertising and differentiation because competing over price is not a good strategy as
prices are comparable and the rivalry is so intense that if one reduces the price then the
other has to do the same. But the two companies do compete over price in certain
situations, especially when it comes to their global expansion strategies.
The scope of the competition for Coca Cola is global due to its presence in around 200
countries. To stay relevant both locally and globally, Coca Cola engages in huge
marketing campaigns. These marketing campaigns are well received all over the world
and Coca Cola is considered to be one of the most innovative advertisers. Coca Colas
huge investments in advertising has paid off well as it has become the most valuable
brand in the world. PepsiCo is pouring huge amounts of money into advertising as well
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as both companies are trying to differentiate themselves. In Pakistan, Pepsi has been
successful in securing its position as the cricket sponsor while coke is focusing more on
music with its coke studio initiative. Pepsi tried to take away Cokes positioning in music
through its campaign Pakistan Idol but coke still has the upper hand. Consequently, the
threat of rivalry is high because of PepsiCos resilience and determination to take over
Coca Cola to become the number one beverage company in the world.
The VRIO Framework

Marketing
Valuable
Rare
Imitable
Organization
Yes
Yes
Yes
Yes
Temporary Competitive Advantage

Coca Colas marketing skills are very valuable as they serve to deal with external threats
presented by its competitors. Through its aggressive and costly marketing, Coca Cola has been
able to both mitigate external threats and exploit opportunities in the global soft drink industry.
Coca Colas marketing is also rare as no other company has the same marketing capabilities as
Coca Cola and the company has created some of the best marketing campaigns for any soft
drink company. However, the marketing capabilities are imitable by its competitors like PepsiCo
that also has some really strong marketing capabilities backed up by financial muscle. The
company has successfully exploited its marketing capabilities to support its organization and
create value for its shareholders.
Distribution
Valuable
Rare
Imitable
Organization
Yes
Yes
No
Yes
Sustained Competitive Advantage
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Distribution is an extremely important aspect for Coca Cola and for this reason Coca Cola has
developed the most extensive distribution system in the world. This distribution network is rare
because of its global presence and efficiency. Coca Cola produces syrup which is sent to the
bottlers who then sell the bottled drink to different retailers in different parts of the world. The
company uses the push and pull distribution strategy that is unique when it comes to its farreaching network. Such a huge distribution channel is very difficult to imitate as its competitors
would have to spend billions of dollars to develop such a vast network. Coca Cola has
efficaciously exploited its distribution capabilities to enter foreign markets such as India and
Mexico.
Differentiation
Valuable
Rare
Imitable
Organization
Yes
Yes
Yes
Yes
Temporary Competitive Advantage

Coca Cola has a secret recipe for Coke that the company has been using from the beginning
and the company differentiates itself on the basis of taste that has created immense value.
However, there is not much difference in the taste of Coke and its biggest competitor Pepsi; in a
blind test consumers were unable to differentiate between the two. Apart from taste, Coca Cola
has differentiated itself on the basis of creating happiness. Furthermore, the differentiation
strategy is rare because of the brands quick recall. Coca Cola has a top-of-the-mind recall and
Coke is the first drink that pops up in mind when one thinks about soda. When it comes to
imitability, Coca Colas specific products like Coke is not imitable because of its secret formula.
But there are several sodas available in the market that have similar tastes to that of Coke and
other Coca Cola products. Coca Colas differentiation strategy is therefore imitable to a great
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extent. Finally, the company uses brand value to manipulate its differentiation through taste and
color.
Brand
Valuable
Rare
Imitable
Organization
Yes
No
Yes
Yes
Competitive Parity
Coca Cola is one of the most valuable brands in the world. It is also the most recognized brand
so there is little doubt about the value of the brand. It is, however, not rare as there are other
brands that have higher values such as Apple. PepsiCo has put in a lot of time and money to
emerge as one of the most valuable brands as well and its well underway with substantial
willpower to take the top spot. Coca Cola brand is imitable because other companies can
acquire it or bring a substitute in its place, as is the example of PepsiCo. Finally, the Coca Cola
brand has brought immense value to the organization and through its advertising campaigns the
company has used the brand to expand into new markets and create greater value for the
shareholders. The company is well organized with all the important functions realizing and
working towards in line with the vision and mission of the company.
29
Internal Analysis Strategy and Competitive Advantage

Coca Cola has adopted both differentiation strategy and cost leadership strategy to compete in
the global setting and create value for its consumers as well as its shareholders. The company
derives almost 75% of its sales from carbonated drinks and, despite of the declining sales due
to the changing consumer perceptions and preferences, it continues to focus on carbonated
drinks (10). Coca Colas emphasis is on the millennials, consumers born between 1980s and
2000s. Millennials are born in the digital age and are largely technology driven. They want quick
and personalized delivery. So in order to stay relevant to this segment, constant innovation is
required because innovation is what the millennials value. Coca Cola is focusing on bringing
innovation by transforming the following areas,
1. Packaging
Packaging has been an integral part of realizing the companys engagement strategy.
The company has successfully experimented with a number of innovative packaging,
including the personalized coke packaging campaign called share a coke that was first
introduced in Australia and became an instant hit. Customized packaging was then
introduced in a number of other countries like Pakistan where the millennials loved it.
Coca Cola has introduced PlantBottle packaging that is the first 100% recyclable plant
bottle made partially from plants. The packaging was introduced as part of both social
corporate responsibility as well as to meet the happiness standards of the company.
There is constant innovations when it comes to packaging as the company is trying to
give its products a personalized touch that the millennials value.
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2. Partnerships
Coca Cola values its partners and takes constant feedback from them to keep them as a
part of the companys innovations. The company realizes the importance of its partners
in the creation of its portfolio of innovation.
3. Product and Equipment

Coca Cola has a portfolio of over 500 products and it continually keeps on introducing
new products from time to time. The company likes to experiment with new product
designs and taste. Thats why Coca Cola introduced the FreeStyle machine that enables
various types of flavor mixes. Consumers can create their own unique flavors by
choosing from over 100 different products. This is another effort to create innovation
coupled with customization.
Coca Cola practices high degree of product adaptation because of the large number of
products it serve globally. It has to engage in product testing and development to make
sure that a certain product will work in a particular market. Through a number of new
product development programs, the company has successfully introduced new and
innovative products such as Dasani Plus, a vitamin rich flavored water. It comes with
small sachets that contain different types of flavors that can be added to the water bottle
for people who like flavored water.
Owing to the increased demand for energy drinks, Coca Cola has engaged in a long
term strategic partnership with Monster Beverage Corporation to accelerate growth in
the growing energy drink category.
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4. Customer Provocation
The company does not just want to promote happiness, it wants to provoke happiness
through social platforms where consumers can share stories that provoke the feelings of
happiness. These stories shared by many others to start a conversation and connect
people. Coca Cola is making use of interactive technologies to bring innovation that can
connect millennials together.
5. Cultural Leadership
Coca Cola takes an authentic, transparent, and sustainable approach to all
communications. The company believes in leading the culture and not just following it.
Thus means that the company promotes constructive change and healthy growth. It
does so by offering low and no-calorie drinks, promoting physical activity and by been
transparent in its labeling.
Differentiation Strategy
Coca Cola has achieved differentiation through perceived superior quality product. The
companys products are viewed better than its rivals because of the high brand image and
recognition. Differentiation in Coca Colas product is not only limited to taste but it goes beyond
to include packaging and promotion as means of differentiation. This is very evident from the
evolution of Coca Cola bottle that has become an extensively recognized symbol around the
globe. One of companys first priorities was to revitalize the Coca-Cola bottle through global
marketing. Coca Cola has been able to successfully capitalize on its brand name and other
valuable resources such as packaging better than its competitors resulting in a sustained
competitive advantage. Because of these reasons the company is able to charge a premium
price in countries where the economic conditions are favorable. For example, the is a big
32
difference in the price that Coca Cola charges for its products US compared to a developing
country like Pakistan.
Cost Leadership
The other source of the companys competitive advantage comes from its cost leadership. The
company has productively achieved economies of scale in its manufacturing system through its
extensive distribution network, research and development and through promotions. Because the
company has been around for more than a century, economies of scale are also achieved
through improved learning and experience.
33
Conclusion
Coca Cola has enjoyed the top spot for years and its brand value remained unbeatable by a
great margin until recently when Apple surpassed the brand value of Coca Cola to secure the
top position. Todays contemporary challenges have forced many companies like McDonalds to
change their strategies in order to stay relevant to its consumers. Coca Cola is also facing some
serious issues. Americans are campaigning against obesity as it is known to cause many heart
related problems. Coca Colas soft drinks have a played a substantial role in the dissemination
of obesity because of their high calorie contents including sugar. Although, other soft drink
companies including PepsiCo also face such issues, Coca Cola is particularly susceptible
because about 60% of its revenue is generated from the sale of soft drinks. Coca Cola will have
to consider tweaking its strategies in order to save its current position and sustain its
competitive advantage. The two possible strategies that the company can adopt include
diversifying its product portfolio to include healthy snacks and other food items, and introducing
a healthy low-calorie sweetener for its products to address the health concerns of its consumers
without making a major shift in its brand image. There are opportunities present in global bottled
water market, energy drinks market and healthy drinks market.
Web References
1. http://interbrand.com/en/newsroom/15/interbrands-th-annual-best-global-brands-report
2. http://www.nasdaq.com/article/coke-vs-pepsi-by-the-numbers-cm337909
3. http://assets.cocacolacompany.com/51/be/fa1c9a664de5bb38e0304d6ce2af/CCI_CSR_2011.pdf
4. https://hbr.org/2011/04/why-most-product-launches-fail
5. http://www.businessinsider.com/soda-brands-that-failed-2012-6?op=1
6. http://www.bottledwater.org/us-consumption-bottled-water-shows-continued-growthincreasing-62-percent-2012-sales-67-percent
7. http://fortune.com/2014/04/01/falling-soda-sales-not-a-trend-but-a-fundamental-shift/
8. http://www.ft.com/cms/s/0/16d888d4-f790-11e3-b2cf00144feabdc0.html#axzz3abNfj7V9
9. http://www.caffeineinformer.com/top-10-soft-drinks
10. http://www.wsj.com/articles/SB10001424052702303910404579485442244343248
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Managerial Policy Term Report

Salahuddin and Iqbal Ali Khan

The Coca Cola Company

The Coca Cola Company

Managerial Policy by Shahid Zaki

The Coca Cola Company

Managerial Policy by Shahid Zaki

The Coca Cola Company

Brief History of the Coca-Cola Company

largest market share of the soft drink market in Pakistan.

Managerial Policy by Shahid Zaki

The Coca Cola Company

Managerial Policy by Shahid Zaki

The Coca Cola Company

are emerging as threat to market leaders.

Managerial Policy by Shahid Zaki

The Coca Cola Company

Value Chain Analysis

1. Inbound Logistic (Suppliers)

Managerial Policy by Shahid Zaki

The Coca Cola Company

- Proper health and safety conditions to employees.

2. Outbound Logistics (Buyers/Customers)

3. Marketing and Sales

Managerial Policy by Shahid Zaki

The Coca Cola Company

Managerial Policy by Shahid Zaki

The Coca Cola Company

the company and external community.

The Coca Cola Company Vision

Managerial Policy by Shahid Zaki

The Coca Cola Company

- Productivity: Being a highly, lean and fast-moving organization.

Managerial Policy by Shahid Zaki

The Coca Cola Company

The Coca Cola Company Values

Managerial Policy by Shahid Zaki

The Coca Cola Company

Managerial Policy by Shahid Zaki

The Coca Cola Company

Advertising budget of key beverage companies

Source: Financial Reports

Largest Market Share in Beverage

Most Extensive Distribution Channel

Managerial Policy by Shahid Zaki

The Coca Cola Company

Corporate Social Responsibility

Managerial Policy by Shahid Zaki

The Coca Cola Company

Undiversified Product Portfolio

Managerial Policy by Shahid Zaki

The Coca Cola Company

Demand for Healthy Food and Drinks

Managerial Policy by Shahid Zaki

The Coca Cola Company

Growing Beverage Consumption in BRIC Countries

Managerial Policy by Shahid Zaki

The Coca Cola Company

Managerial Policy by Shahid Zaki

The Coca Cola Company

Managerial Policy by Shahid Zaki

The Coca Cola Company

Quantitative Strategic Planning Matrix

Focus on Carbonated Drinks