Discuss about the International Business and Competitive Strategy for Coca-Cola.
Introduction to Coca-Cola Company
The Coca-Cola Company’s background can be traced back to the year 1986. World over, Coca-Cola leads in the production, marketing and distribution of non-alcoholic beverages and their associated raw materials such as syrups and concentrate. The coca cola company operates in more than 200 countries globally. The head office of the company is based in Atlanta, Georgia, and its subsidiaries are a source of employment to about 30,000 people globally. The Coca-Cola products are available in every country of the world, and the drinks are the most preferred world over (Vaid, 2015). Coca-Cola faces competition from other beverage companies such as Cadbury- Schweppes, and PepsiCo. However, Coca-Cola claims the biggest market share with 47% of the world market followed by PepsiCo at 21% and Cadbury Schweppes at 8%.
Achieving competitive ability is the aim of many organizations. Mauri and Figueiredo (2012) defines competitive advantage as the service or a product for which the consumers trust better compared to similar offers from competitor organizations. Michaels Porters Five Forces model indicates that a competitive analysis is achieved through the analysis of various competitors in a given industry. Also the analysis of threats associated with emerging business in the industry and risks associated with the introduction of substitute products that are likely to attract the suppliers and customers. For any business to succeed, certain strategies are necessary to help the business encounter the five competitive forces. Organizations embrace the five basic competitive strategies including growth, innovation, alliance cost leadership and differentiation. Also, an information system is key amongst these five strategies (Magretta, 2012). The international markets play a vital role in organizations profitability. The link between the market forces to the company’s strategies influences organizational performances in all regions covered. The main variables in the business include the target market, competition, market position, and the consumers (Czinkota & Ronkainen, 2013).
For an organization to succeed in its operations, both its tactics and strategy need to work in harmony with the aim of providing optimum returns at high efficiency. The strategies and tactics need to be designed based on a careful consideration of the environment. Businesses that do not follow these tactics are likely to die (Meyer, Mudambi, and Narula, 2011). About the Coca-Cola's performance, the company keeps growing and making profits because of its way of doing things i.e. by focusing on the desired effect and giving the intended result. Its success is also associated with its commitment to doing the right thing through their ability to work well without wasting resources and time.
The success of the Coca-Cola business can be associated with some things. The company has a good network of independent business people who drive the agenda of the Coca-Cola business in their native countries. These business people run locally operated bottling and distribution activities. In this way, consumers enjoy many experiences depending on their individual preferences and locations. In response, the coco cola company is embracing some approaches that are both tactical and strategic, to help it expand and maintain its market share. The profitability and effectiveness of the Coca-Cola business are facilitated by their big share in the product market as well as their competitive position (Jurevicius, 2016). The profitability of an organization is based on the organizational market share. This increased profitability is dependent on the scale of economy and increased learning experience that leads to efficient and effective productions techniques. Also, the unwillingness and inability of the customers to take risk contribute to comfort factors hence preferring to stay with the market player.
The quality policy for Coca-Cola targets to maintain the status of the organization as a fully sustainable beverage company, through their involvement in environmental care and stewardship. The commitment by the management to create value for both stakeholders and the society for part of the objectives of the organization. The organization has drafted several statements regarding its practices on quality that helps in sustainability, diversity, increased wellness and health, and improved environmental conservation. The company operates both globally and nationally in the area of soft drinks and non-alcoholic beverage. The company also targets to acquire new segment of the market by providing safe and healthy products hence increasing consumer confidence in regards to purchasing behavior. There are enough quality objectives in the Coca-Cola system; again it doesn’t demean the management target of positioning the organization in the world map based on the quality of the product (Jurevicius, 2016).
The Coca-Cola Company has a tactical toolkit that provides a standardized approach to its marketing strategy. External factors, external factors have an effect on an organization positioning strategy. According to Porter's model, five competitive factors govern the rule of competition. Such rules exist in any industry operating either in the international or domestic market. These five forces include new competition in the market, the bargaining power of buyers, the rivalry between organizations in the same sector, the threats associated with substitutes and product replacement and the bargaining power of suppliers (Magretta, 2012).
To succeed, the organization needs to consider not only the industry structure but also to position itself within the industry. The positioning is beneficial in that it determines the competitive advantage of an organization. Such benefits include; low cost and nary market (Nair, 2011). In Coca-Cola, the company practice cost leadership as well as differentiation strategies. The differentiation strategy is achieved product quality, recognition and high brand image. Besides, the company has invested a lot in the promotion and packaging tactics. These serve as a way of differentiation with other organizations. The Coca-Cola contoured bottle, for example, is an international symbol, revitalizing the bottled as decided in 1999 was considered Coca-Cola's bottle marketing strategy.
The premium pricing policy as applied in many markets has also allowed the Coca-Cola Company to thrive. To become a low-cost producer, an organization. These include removing all extras from the product and reduce frills. The design of the product such as the use of alternative raw materials can help reduce cost. Operational and production processes employed by an organization can also help the firm reduce its cost of operations (Nash, 2010). Also, the use of manufacturing systems, distribution networks, product innovation and cheap labor can also help an organization reduce cost.
Cost leadership quadrant as a positioning strategy by the Coca-Cola Company is achieved both through research promotion and development, learning and their experience both in operational and manufacturing processes. The efficient manufacturing systems and distribution networks have greatly contributed to low-cost production. The Coca-Cola Company has a huge geographic presence. Based on its geographic strategy, the organization has a clear, strategic evolution (Jurevicius, 2016).
Adaptation involves a continual improvement in an organization which is achieved through a change of companies local and preferences. It is that is used by most organizations. The strategy of adaptation is essential for all products in the whole world (Collis, 2015). The plans involve creating changes not only in products but also in policies, expectations for success as well as in business positioning. Adaptation strategies can also focus on geographies, products, and vertical stages within the value chain as well as market segments as a strategy to reduce the effects of regional differences. Also, focus on reducing cost has been used in adaptation theory. Through design flexibility, manufacturing costs can be reduced thus leading to reduced variations in supplies. The introduction of the optimized production platform and modularity may help cut costs (Collis, 2015).
Coca-Cola Corporation applies adaptation strategies to its global operations to penetrate new markets and grow revenues. Adapting to new markets requires the company to customize services to replicate local market environments. Adaptation activities include adjustments in policies, positioning, and externalization, among others to replicate requirements in foreign countries. One of the strategies includes franchising that enables local firms to provide products and services to new customers (Lee, 2010). The franchised companies earn Coca-Cola brand a local perception and promote easy penetration in new markets. Domestic firms are also involved in the distribution of the of Coca-Cola products. Local intermediaries have a deep understanding of the customers, geographies, and population dynamics. As a result, Coco-Cola benefits from services of local supply chain players. Adaptation strategies are appropriate for the company to avoid unfavorable outcomes that are likely when a foreign firm has little understanding of new markets.
Coca-Cola seeks to generate maximum value through benefits of economies of scale. Production activities are capital intensive, and strategic location of bottling plants is desirable. Coca-Cola has established local processing plants and franchises to centralize operations and realize economies of scale. Centralized activities such as purchasing and distribution enable the company to operate in large-scale and reduce costs (Gui 2010). For example, the regional operations minimize the number of workers and equipment that ultimately lower costs. Also, centralized functions facilitate the development of advanced logistic capabilities that attains improved control and efficiency. Aggregation methods enable Coca-Cola to earn competitive advantages over rivals such as Pepsi as well as local soft-drink manufacturers. Moreover, aggregation is helpful in controlling standards and safeguard proprietary properties (Schlegelmilch 2016). Production centers follow similar procedures that help maintain high quality necessary for offsetting competition.
Coca-Cola does not employ the arbitrage strategies significantly. This failure is associated with the nature of products that are supplied from America to safeguard propriety information from leaking to the public. Following this, the company does not seek for ingredients from regions where there is cheap labor or factors of production. Although there is little use of arbitrage ideas, the company can increase outcomes from the benefits of new policies (Mauri, and de Figueiredo 2012). For instance, some of the ingredients can be produced in regions with favorable economic conditions that can ultimately increase financial gains. Another suitable area of adopting arbitrage is in the administrative functions. The company is subject to varying regulations such as taxes from different countries. Arbitrage policies would enable Coca-Cola lower requirements such as taxation and regulations.
Summing up, there are a lot of opportunities in the international market for Coca-Cola Company. With its current marketing strategies, the organization is better placed to compete with its rivals and maintain its status as the leading producer and marketer of soft drink beverages. The organization has employed the use of many strategies such as communication advertising, market segmentation, product differentiation that has increased its competitive ability. Coca-Cola also embraces the five basic competitive strategies including growth, innovation, alliance cost leadership and differentiation. The information system is also a key factor amongst these five strategies
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