Coca-Cola's Strategy - Essay Example

• Strategic Cascade of the Organization

The Coca-Cola Company is a U.S.-based multinational corporation dealing with beverage production and distribution. It is the world’s leading beverage company and the fourth most valuable brand according to Forbes (2015). The company operates 20 brands in more than 200 countries of the world including Coca-Cola, Fanta, Sprite, Dasani, etc. Coca-Cola recorded a net income of $7.4 billion in 2015, and it has employed over 700,000 employees worldwide. This background information of the company shows that its performance is significantly high. Therefore, Coca-Cola must have exercised a successful strategy to outperform competitors in a highly competitive business environment.

Coca-Cola’s strategy is driven by a roadmap consisting of a vision, mission and values that will shape the business in future to adapt to the trends and forces of the industry (The Coca-Cola Company, 2016). The mission of the company is to refresh the world, inspire happiness and optimism, and create value. This mission acts as a purpose and standard against which the company measures its decisions and actions. In terms of vision, the company has set things to be accomplished including inspiring employees, producing portfolio of quality products, satisfying customers’ needs, developing networks, being a responsible citizen (The Coca-Cola Company, 2016). Maximizing long-term returns, and being a highly effective, lean and fast-moving organization. The company’s strategy is also guided by a culture of leadership, integrity, collaboration, integrity, passion, diversity, accountability, and quality.

In his book, ‘what is strategy?’ Michael Porter suggests that superior performance is achieved through operations efficiency and competitive strategy (Porter, 1996). According to Porter, operations efficiency is important but not sufficient to achieve superior performance. Operations efficiency is concerned with best practice, flexibility, productivity frontier, and benchmark competition (Porter, 1996). On the other hand, competitive strategy involves delivering a unique mix of value and performing activities differently from competitors. The superior performance of Coca-Cola has been promoted by both operations efficiency and competitive strategy.

To achieve competitive advantage, a company needs to have a target customer and provide products or services that meet the needs of that customer. However, Coca-Cola does not have a specific customer. It sells beverage products to all age groups and geographical locations with thirst to be quenched. Coca-Cola is flexible; it adapts its marketing strategy to meet the local needs of consumers across different locations in the world (Anders, 2011). Targeting a wide range of customers is important for the beverage industry because it allows the company to attract a large pool of consumers regardless of age, gender or geographical location.

Coca-Cola’s value proposition is enhanced through a secret formula that blends different ingredients to produce refreshing beverages to quench the thirst of consumers. Coca-Cola produces a portfolio of brands with unique taste and quality at relatively low prices (affordability) in order to satisfy the needs and desires of consumers (The Coca-Cola Company, 2016). The value proposition is also enhanced through strong brands which have won the trust and loyalty of consumers. Furthermore, value proposition at Coca-Cola has been promoted by customer appeal and customer service customers can easily access their drinks. The company’s products are also improved to appeal customers by considering feedback from consumers through customer survey. These strategies enhance value proposition for the customers.

Coca-Cola’s products are positioned in the competitive (undifferentiated) market segment with affordability and quality (Anders, 2011). The company uses a competitive positioning strategy to gain competitive edge in the beverage market. Coca-Cola’s diversified portfolio is essential to meet the needs of different customers. They are produced with a tasty and refreshing touch to meet the needs of all customers. The quality of products is high and prices are low compared to other competitors in the market; the company maximizes on economies of scale and operational efficiencies to achieve low production costs and low prices. The value of Coca-Cola’s brands is also reflected in marketing communication in terms of brand awareness especially through the media (Anders, 2011). Coca-cola advertises its brands through print and mass media.

Sustainable business is also enhanced through an effective competitive strategy that delivers a unique mix of value through different sets of activities. Coca-Cola drives sustainability by acting as a responsible citizen. By helping to build sustainable communities, the business wins brand loyalty and a good image that can enhance competitive advantage (Randall, 2000). Such brands are built on quality, health and safety to ensure that the company outperforms its competitors. Sustainable sourcing of products also promotes operational efficiency and lowers production costs, leading to lower prices for consumers that help in creating competitive advantage.

• SWOT Analysis

Strengths

One of the strengths of Coca-Cola is brand equity or strength. The company has maintained top five positions for a long time in terms of brand value. Interbrand and Forbes ranked the company in the first position in 2011, and position four in 2015. Its global presence is also a good strength for the company because it has presence in all but one country worldwide. Its brand identity is one of the largest worldwide. The company also has a strong valuation. Furthermore, Coca-Cola definitely has the largest market share in the non-alcoholic beverage industry worldwide. The company’s market share has been enhanced by the undifferentiated marketing strategy and portfolio product development (Anders, 2011). Coca-cola also has a strong customer loyalty due to its strong brands, product quality and effective marketing strategies.

Weaknesses

One of the weaknesses of Coca-cola is low diversification. The company does not diversify its products like Pepsi which has diversified to snacks to allow customers to enjoy a combination of snacks and drinks at the same time (Anders, 2011). Secondly, the company has not responded adequately to the health needs of consumers. It produces carbonated drinks which are likely to cause obesity and other health problems. Another weakness of the company is water management problems. The company has faced several lawsuits due to its water management approach as people complain about the company for using too much water even in areas with low water capacity.

Opportunities

One of the opportunities of Coca-Cola is the emerging markets of middle class in developing countries. Some countries in Africa and Asia are facing increased purchasing power and the rise of the middle class as their economies improve. This improvement in the economies of developing countries increases the demand of consumer products like drinks, leading to higher market potential for the company. Another opportunity for the company is diversification. Coca-Cola is making multimillion contracts with restaurants to sell drinks. The company can achieve superior performance by diversifying to health and food businesses such as fast food products which go hand in hand with current beverage products (Anders, 2011). The sale of healthy food and drinks is also another opportunity for the company. People are becoming more health-conscious due to advocacies and changing lifestyles. Therefore, the company can tap the potential of health products demand in the market.

Threats

Coca-Cola’s major threat is competition. Its major competitor is Pepsi which sells non-alcoholic drinks in the global markets. Pepsi has diversified its products, giving a bigger challenge to Coca-Cola which is still concentrating on drinks only. Moreover, the company faces the threat of legal issues. It is facing lawsuits for its alleged over-use of water resources which may lead to environmental problems. The company has to balance between meeting its water needs and protecting water reserves for the benefit of communities (The Coca-Cola Company, 2016). Fresh water shortage is the company’s major threat. With the increasing influence of climate change on the environment, water is becoming a scarce commodity that the company needs to utilize natural efficiently to promote sustainability.

• Internal Environment

Coca-Cola has a unique internal environment with key values and decision making procedures that make it successful in the market. The company is characterized by a vertical structure, a unique value system, and a strong culture of diversity and flexibility (The Coca-Cola Company, 2016). These internal environmental factors are hereafter explained in terms of structure, systems and culture.

Structure

The organizational structure of Coca-Cola is somehow complex due to its global complex. It can be considered as a divisional matrix. Ashkanasy et al (2000) define divisional structure as a collection of functions that engage in the production process. Coca-Cola is highly flexible, a characteristic that is often common in divisional structures. The company operates regional divisions such as Eurasia, Europe, Latin America, Latin America and the Pacific.

Figure 1: Coca-Cola’s Organizational Structure (Anders, 2011)

From the figure above, it is clear that Coca-Cola’s organizational structure is vertical and complex (Anders, 2011). Led by the President who is located at the headquarters, the company’s management is vertically structured to allow information to flow from top to bottom. The decision making of the company resides at the top management while day-to-day routine decisions are made at the middle level of the management structure. The top management is comprised of corporate staff, marketing, manufacturing, and Finance departments led by line managers. The President acts as the figurehead and leads the executive committee in making key strategic decisions of the company.

They make strategic decisions of their departments aligned to the overall organizational strategic decisions. This structure is consistent with the company’s strategy because a vertical and complex divisional structure is good for undifferentiated marketing strategy and single product line. The divisional structure based on geographical location is also essential for the value creation and meeting customer needs in different markets.

Systems

Coca-Cola has a system of 700,000 customers is a complex one covering over 200 countries and six regions (The Coca-Cola Company, 2016). The top management provides overall strategic direction of the company and support the regional divisions. The division managers develop plans but they should consult the headquarters first before implementing them. For example, if the Eurasia and Africa Division manager wants to start an advertising campaign they develop a plan of implementation and communicate with the top management to seek approval.

The Coca-Cola Company operates a system of six regional divisions and 250 bottling partners and multiple local channels that enable the company to have a global reach and meet the local needs of customers in all global markets. The company manufactures and sells concentrates, syrups, and beverage bases to bottling partners who blend them to meet the local needs of consumers. The company also manages its brand marketing initiatives worldwide using well trained diverse marketing professionals.

Coca-Cola also has a performance management system that identifies key performance indicators for the company and improvement initiatives. Company groups and associates work together to determine the feasibility of the company’s operations. Coca-Cola also has a group of called Bottling Investment Group (BIG) which invests in bottling of coca-Cola products using the leadership and resources of the company to drive long term success (The Coca-Cola Company, 2016). BIG determines the success of operations and identifies a qualified bottler to run the operations and promote growth. These internal systems of operations promote the overall strategy of the company by promoting operations and management initiatives that meet the local needs of consumers.

Culture

Coca-Cola is characterized by a culture of attitudes and behaviours that focus on quality, flexibility and collaboration. A set of values on leadership, accountability, integrity and diversity also drive success in the company’s workplace. The company’s leadership has a culture of courage to face the challenges of the market head-on. Despite internal problems, the management uses its capabilities to overcome them.

Collaboration between managers, employees and partners is also important to leverage competencies and capabilities. The value of integrity also helps the company to become real in its product offering and customer service delivery to meet the needs of consumers and achieve the company’s strategic objectives (The Coca-Cola Company, 2016). Furthermore, Coca-Cola values employees’ diversity as a way of developing inclusive teams that can create innovative products and services to meet the local needs of consumers. Lastly, Coca-Cola’s focus on quality is an essential part of the company’s culture. It allows the company to edge out competitors through superior value proposition. However, the vertical management culture of the company could impede creativity and innovation, which consequentially cause competitive disadvantage.

• Ability of the Company to Implement the Strategy

Based on the information above, it is clear that Coca-Cola has superior performance due to its effective strategy. However, there is need to improve some areas to achieve greater performance and compete effectively. The effectiveness of the company’s strategy is examined in the following categories:

Company Culture

Coca-cola’s culture is essential in achieving competitive advantage. It consists of attitudes and values such as integrity, courage, quality, collaboration, accountability, passion and diversity. These values are exhibited in the workplace through operations, management and marketing activities. These values can be analyzed in terms of Geert Hofstede’s model of organizational culture which has eight dimensions: means-oriented versus goal-oriented, internally-driven versus externally-driven, easy-going wok discipline vs. Strict work discipline , local vs. Professional, open system vs. Closed system, employee-oriented vs. Work-oriented, degree of acceptance, and degree of identification (Hofstede, 1991).

Coca-Cola’s culture is goal-oriented because employees work towards a specific goal rather than pursuing specific means. The employees are focusing on delivering customer value and business growth. The company’s culture is also externally-driven because it focuses on the customer’s needs more than the company’s internal requirements. The vertical structure of the company also reflects a strict-going work discipline which indicates that the internal structure, control and discipline are tight (Hofstede, 1991). Coca-cola is also considered as a professional rather than local company because employees are long-term oriented and professional. Furthermore, its diversity culture reflects an open system rather than closed system of the organization. Coca-Cola is also work oriented, high degree acceptance of leadership style and a high degree of association with the organization.

Employees’ behavior

Coca-Cola reflects the behaviors of effective organizational behaviors in theory and practice. In theory, good employee behaviors include courtesy and friendliness, meeting deadlines, positive attitudes, punctuality, and responsibility (Reis & Geller, 2010). Coca-Cola’s network of 700,000 exemplifies a team of responsible workforce. Employees are work-oriented and dedicate their efforts towards achievement of the company’s objectives. They are also friendly and courteous while serving customers. They develop innovative and creative ideas due to their positive attitudes and punctuality driven by strict control and discipline.

Most of these behaviors are in line with the business strategy of Coca-Cola. For example, positive attitudes and responsibility show commitment to the organization, which is an essential part of the company’s strategy of creating a strong brand image. Furthermore, courtesy and friendliness of employees allow the company to meet the local needs of customers across the company’s worldwide markets. However, the company needs to develop employees’ behaviours of openness and independence to allow them to work independently and enhance greater creativity and innovativeness.

Leadership

The leadership of Coca-Cola can be examined using the Kouzes and Posner’s Five Practices which identifies five effective leadership practices: modeling the way, inspiring a shared vision, challenging the process, enabling others to act, and encouraging the heart (Kouzes & Posner, 2013). Modeling the way involves setting principles that guide people’s associations and how people should pursue goals (Kouzes & Posner, 2013). Inspiring shared vision entails the belief that the organization’s employees can make a difference.

The first two elements of this model are clearly exemplified by coca-Cola. The company’s mission clearly shows the management’s commitment to make a difference and setting values and principles that enable the company to achieve its vision. For example, the leaders and employees are required to display courage, integrity and collaboration to attain the organization’s goals. The leaders also enable others to act by building collaborations and diversity in the workplace to enable employees meet the diverse needs of customers in different markets across the world.