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Strategic Management Of Coca Cola

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Question:

Discuss about the Stratgic Management of Coca Cola.
 
 

Answer:

Introduction:

It is a well-known fact that Coca Cola Company has emerged to be one of the most recognized organizations in the world. Founded in the year of 1886, the company has witnessed unprecedented success and incredible recognition in the market of non-alcoholic beverages and syrups. The success of the organization in terms of both the stock price as well as profitability in the last few years has helped the company emerge to be one of the most successful companies in the market of beverage products, operating successfully in more than 200 countries (Karnani 2014). Although the organization has been operating its business in the international market with considerable success, it is highly important to analyze the strategic objectives of the company and evaluate the implications of the same. Since the company is encountering cut-throat competition from some of the rival giants of the industry, it is important to analyze and evaluate the strategic objectives of the company.

Brief Background of the Company:

Coca Cola is a leading company in the soft drink industry that operates its business in more than 200 hundred countries. The strong brand recognition that the organization has accepted all over the world, has largely helped the company gain wider acceptance among the masses. While the organization has focused on creating the vision that intends to spread unalloyed happiness and joys in the life of every person, it keeps on creating a sense of positivity by engaging in a variety of Corporate Social Responsibility Acts. While the mission statement of the organization states that the objective of the company is to achieve huge revenue earning capacities, it also intends to create enduring value for each stakeholder associated with the company. The organization has multiple brands, such as Diet Coke, Fanta, DASANI, Minute Maid and many more (Archer et al. 2013). Although the organization encounters tough competition from some of the rival brands, such as Pepsi Co, Monster Beverage Corp. and Suntory Beverage & Food Ltd., the company has been adopting innovative marketing campaigns, interesting CSR activities, effective promotional programs as well as cost controlling strategies that have been helping the organization gain competitive advantage over the rival giants (menon and Yao 2017).

Core Business:

Just like any other organization, even Coca Cola has a primary area or activity in which it intends to focus its business operations. Coca Cola Company has emerged to be the most successful company operating in the soft drinks industry of the world. The core business of the organization focuses primarily on the sale of beverages that includes protein-packed dairy products, juice products, spirits as well as other forms of soft drinks (Pfitzer et al. 2014). Although the organization has also been operating its business in other business areas, such as production and sale of packaged drinking water, its focus has been on the production of beverage products. The manufacture and sale of business of beverages form the core business of the organization (Muturi 2015).

Organizational Structure:

The organizational structure of an organization plays an integral role in the success of any company, as it is the structure of the company that determines exactly the process in which the tasks get allocated, or supervised within a company. Since Coca Cola is a multinational company, operating in more than 200 countries, the organizational structure adopted by the company is Separate International Division Structure. It should be noted here that the company has strictly divided its continental operations among five divisions:

  • The Eurasia and Africa Group
  • Europe Group
  • Latin America Group
  • North America Group
  • Pacific Group (Ferie 2014)

Now, since it is not possible to supervise and monitor the performance of the business activities across each region of the world, Coca Cola Company hires the staffs for each of the five stated regions, that work in isolation from the head office of the organization. The organizational structure of the company can also be explained with the help of the diagram below:


Figure 1: Organizational Structure of Coca Cola

Source : (Carvalho 2015)

As it can be understood from the above diagram, Coca Cola follows a structural design that is very close ad akin to the functional design of an organization. While the CEO remains at the top of the organization, various subordinates manage the various business activities of the organization, such as finance, marketing or HR activities across different regions of the world. The Coca Cola Company ensures strong authoritative control over the regional managers and working staffs of its each regional branch. The divisional managers of the company are responsible for conducting business in the particular regions of the world. Each of the five different operating groups, mentioned above are again further subdivided into regions, the works of which are assigned to local heads. By allowing local job decisions to be taken by the local heads of the regional branches, the higher management authority of the organization can choose to reflect over and focus attention on long-term planning.

 

Organizational Culture:

The organizational culture of a company, that is the set of beliefs and ideologies underlying the business purpose of a company, largely determines the extent to which the stakeholders are motivated to work for the company. The organization embraces a Winning Culture at workplace, whereby the company demonstrates a healthy, employee-friendly workplace culture that encourages moral values such as honesty, integrity and collaboration at workplace. The employee-friendly culture helps in ensuring high quality workforce. The inclusiveness is also an integral aspect of the organizational culture of Coca Cola. The all inclusive culture of the company helps it to hire diverse people, enriched with a variety of talents and ideas. Since Coca Cola operates in a truly global world, it has the ability to encourage diversity at workplace,  so as to operate in a fully multicultural nation.  Besides, the organizational culture of the company is also considered to be a futuristic one, that exhibits a clear understanding of the changing society of the present world. The company intends to promote as well as inspire happiness as well as optimism (Muturi 2015). Besides, it is also important to mention here that Coca Cola also follows an employee-friendly culture that helps the employees voice their own opinions and explain their viewpoints, rather than merely working in conformity with what the management authority expects them to do. Seen in this context, the organization enables the employees freely ventilate their ideas, participate in the business-related activities, as well as express their innovative ideas in the business (Rowlinson and Hassard 2015).

Leadership Style of the Organization:

Strategic thinking is highly important for any organization that intends to sustain itself in future, and there is no denying the fact that strategic thinking is always inextricable related to effective leadership of an organization. As it is a known fact that the vision is futile if an organization does not have effective leaders to execute the same. Considering this, it s important to evaluate the leadership style as followed in Coca Cola. Since positivity, optimism and happiness guide and underline the basic motto and working culture at Coca Cola Company,  the company usually follows a laissez faire leadership style in each region of the world. As per the laissez faire style of leadership, the workers in specific regions of the world are being allocated with a set of objectives, that they are expected to accomplish within the given period of time as per the Key Business Indicators Index (Mooji 2013). The managers as well as the directors of the organization prefer to choose a relaxed form of leadership whereby they tend to leave the managerial decisions in the hands of the subordinates as long as they are able to achieve their KPI targets. It is because of the lack of autocratic leadership style, that the employees feel motivated to contribute to the success of the company in their own ways.

 

Strategic Objectives and Challenges:

Internal Analysis (Value Chain Analysis):

            Value chain analysis is useful to separate the business operation into a series of value generating activities by identifying the important activities in which a business engages. Once the factors are evaluated, the same is used by the company as a defensible competitive advantage  (Caplan et al. 2016). The steps involved in the production of the cold drink can be stated here:

  1. The raw materials are collected and then they are sent for the manufacturing of the cold drink. In this process, the health and the safety of the particular ingredients are checked and processed thoroughly (Ghosh and Shah 2015).
  2. The operational and the logistic include the sending of the bottled drink to the particular places from where the drinks can be directly supplied to the consumers (Caplan et al. 2016).
  3. Next comes the packaging and the bottling of the product. It is one of the most important part of the complete production process and it includes a safety care that the particular organization does not have to face any kind of issue (Chalikias and Skordoulis 2016).

With the detailed analysis, it can be easily said that the Company has been utilizing its prime operational activities well. It is the values of the organization that has lead the organization to reach the position where it is present at the particular time (Parmigiani and Rivera-Santos 2015).

VRIO framewok:

The internal analysis of the Organization can be made here by the means of VRIO framework.

  1. Value: If the distribution channel of the Organization is considered, it can be said that Coca Cola focuses more on the distribution of large markets like restaurants rather than the consumers directly. Thus, it can be said that the retail operation is more important for the organization. It is by the means of the particular distribution method, the company has been able to strengthen its distribution network largely (Rothaermel 2015).
  2. Rarity: The market size of Coca Cola is considered as rare because the company operates in a large distribution network. There are number of activities that the organization has to do before the final product is set for distribution. As it has been evident that the Company is only responsible for the manufacturing of the drink and that the bottles are manufactured somewhere else, it becomes important for the Company to build up a good relationship with these manufacturers as well (Meyer and Peng 2016). An efficient distribution channel has only helped the organization to maintain a good relationship in the market of its operation.
  3. Imitability: If the product of the Company is considered, there are a number of companies that imitate the products produced by the organization. There are a number of strategies like the push and pull strategies that are imitated by other organizations (Peng 2016). However, the size and the scope of the Company cannot be imitable by other organizations of the same nature.
  4. Organization: If the organization is taken into consideration, it has to be said that Coca Cola has been dominated by the market share. Coca Cola has a good market share overall the globe. The Company has been using the raw material available in different parts of the countries where the particular company operates (Meyer and Peng 2016). In fact, it is only by the means of availing the resources at the particular places of operations, the Company has been making profit.

With the detailed analysis of the internal environment of the organization, it can be said that Coca Cola utilizes all kinds of facilities available in the market in order to carry out its operational activities. In addition to this, the company has an efficient team of expertise that actually put the organization in the position that it hails today.

External Analysis (Porter’s Five Forces):

According to Porter’s, there are major Five Forces that actually determines the profitability of a company within an industry. As commented by Crane et al. (2014), the weaker is the force, greater the opportunity for the Organization to perform better in the firm. The Five Forces of Porter’s analysis for Coca-Cola can be done here.

  1. Threat of new entrants: It has been found that Coca Cola is at a much higher and stronger position in the soft drink industry. Thus, the threat for capturing the market of the particular industry is low because Coca Cola has domination in the market already (Latif and Parker 2014). However, there still remain certain threats related to the size, price and the brand image distribution of the Company.
  2. Threat of Substitution: If the substitution products are considered, bottled water, sports drink and in fact coffee and tea can also be considered as a substitute to Coca Cola. In fact, there has been growth of various types of sports drinks and coffees and tea options that can be consumed by the consumers (Latif and Parker 2014).
  3. Threat of Suppliers: Suppliers of Coca Cola include the manufacturers as well as the secondary packaging suppliers. The Company itself is engaged in the manufacturing of the soft drink and not in the manufacture of the bottles (Hassan et al. 2014). This is the reason the Company has a high threat of bargaining power for the suppliers.
  4. Bargaining power of buyers: If the large scale buyers are considered, then they are the large scale grocers, restaurants and discount stores as well. The actual process of selling the soft drinks takes place from these grocers (Hassan et al. 2014). The bargaining power of the buyers is high because there are a number of substitutes that the particular drink can easily replace.
  5. Competitive rivalry: There are already huge numbers of rivals in the market that include Pepsi Co. and other soft drinks like diet coke and Fanta are the main competitors of the product. Therefore, the Company has great threat in terms of other products in the market (Latif and Parker 2014).

Evaluation of the Current Strategic Position:

With the detailed analysis that has been gained from the understanding, the SWOT analysis of Coca Cola can be done here.

Strengths

The strengths of the Company include the valuation of the Company. The value of the Company is as high as 79.2 billion dollars. This value is much higher than the other companies in the market (Masterman 2014).

It has a global presence and a big market share.

The promotional means undertaken by the Company such as the promotion using celebrities add benefits to the image of the Company.

The Company also has a large base of loyal customers that has enhanced the distribution network of the Company (Grant 2016).

Weaknesses

Presence of some strong competitors like Pepsi acts as great weaknesses for the particular Company.

There are no health drinks that the Company manufacturers and thus, there remains the chances that the Company has to deal with a number of issues related to the value of the product (Grant 2016).

Opportunities

There are a lot of opportunities for the particular business if the Company goes for product diversification. As it has been found, there are opportunities for coming up with a number of health beverages and packaged drinking water as well (Hassan et al. 2014). The Company also need to improve its supply chain management to reach the market more effectively.

Threats

The threats of the Company include the improper sources of the raw materials that are required for the production of the drink. With the issues like changing temperature and climate, the Organization has been found to face certain threats (Hassan et al. 2014). In addition to this, the competitors in the market also act as the major threats to the business activities of the Company.

Table: SWOT analysis of Coca Cola

(Source: Created by the Author)

As it is evident from the Porter’s Five Forces Analysis, it is clearly evident that Coca Cola Company has gained sufficient recognition in the global market, and consequently the organization is not likely to encounter strong competition from the new entrants of the market. The kind of brand recognition that the company enjoys is incomparable and cannot be outrivaled by an emerging organization, given the fact that Coca Cola is an old, and a well-established organization. It is worthwhile to mention here that the organization has taken several steps to ensure that the company is able to maintain its global brand recognition. In order to distinguish itself from the competitors, such as PepsiCo and others, Coca Cola Company has been spending a lump sum amount of more than $250 million for the purpose of promoting the brand of the company (Wang 2015).

 


As far as the competitive forces are concerned, it is clear that the organization does encounter cut-throat competition from some of the greatest rival giants of the industry. First of all, ever since the 19th century, Coca Cola and Pepsi Co have been battling in the global market, since the product offering of both the organizations is quite similar, such as orange juice as well as bottled water (Powell and Gard 2015). Besides, the very famous Dr. Pepper Snapple Group is also a major competitor of the organization that has also established much recognition in the realm of soft drinks and juice market. Keeping into consideration, the competition the organization encounters from these companies, it does require to adopt the objective of sustained competitive advantage. Keeping into consideration, the fierce competition in the market, Coca Cola keeps on adopting innovation in its products as well as strategies. The organization for example has adopted the product diversification policy whereby, unlike any of its competitors, the company has been able to offer a wide variety of 400 brands in more than 200 countries across the globe (Wilson and Wilson 2017). Besides, Coca Cola has always been well aware of the fact that it does face fierce competition from equally recognized companies, such as PepsiCo, and hence the company intends to employ effective distribution systems that helps it to make it accessible to the distant and remotely connected areas where the competitors’ products cannot easily reach. For example, the organization delivers its products even to the remotest localities of the African Continent. It is also needless to state that the organization also adopts a very competitive price policy, whereby the products are charged at a very low price. In fact, it is worthwhile to mention here that during the span of 1886 to 1959 a bottle of coke was available at the expense of a mere five cents (Shemwell 2016). Hence, the organization has always been able to gain consumer loyalty by keeping its price at a minimal level, and it should continue to do the same in future. Besides, the organization has also engaged itself in a variety of CSR activities that helps the organization gain competitive edge over the other companies.

As far as the VRIO framework is concerned, it has been observed that product differentiation is an important resource possessed by Coca Cola. As it is self-evident from the above discussion that the brand differentiation is a rare resource possessed by Coca Cola, and as and when a consumer thinks of buying a cola, the very first name that usually strikes his mind is that of Coca Cola. However, yet the organization may not be able to enjoy competitive advantage considering the fact that the product is equally imitable. In fact there are at least hundreds of generic colas available in the market that can imitate the taste of the beverages. However, the organizational brand image cannot be stolen, as Coca Cola keeps on reminding people how a Cola drink can open a bottle of happiness for them. Consequently, the company enjoys much greater brand recognition, which is not imitable, and hence it should further strengthen the marketing strategy. As far as Coca Cola is concerned, it becomes clearly evident that brand differentiation acts as the most effective resource for Coca Cola that should be exploited to the fullest by the organization. Besides, the distribution network of Coca Cola is also very huge, and consequently it is rare as well as less imitable (Ireland and Ashton 2017). The management authority of the organization has been well-aware of the fact that the push and pull distribution strategy adopted by the company can be easily imitated by some of its competitors as well, and this is the reason why the company has ensured that the size of the distribution channel is too huge to be imitated. Besides, in order to get best advantage of the available distribution network, the Coca Cola Company has also started entering foreign markets, that have not been explored so far by the rival brands, such as the market of Mexico and the African Continent.

The vast global presence, huge market share as well as the brand equity of the comapy is huge sources of strength of the organization. The huge market area of business operation has helped the company gain its mammoth brand name. Besides, the celebrity marketing of the organization as well as a broader target market segment of the organization has largely facilitated the growth of the company. While the competitors of Coca Cola such as PepsiCo usually focuses on the youth population, while promoting its products Coca Cola keeps into consideration the older as well as younger group of people. However, the organization has been encountering a fall in sales owing to the production of the carbonated beverages that in turn causes obesity. Since the organization was losing out to the market share owing to the lack of health beverages, the company introduced the fruit juice brand named Minute Maid as well. Besides, the organization despite being a global brand, has faced accusations and lawsuits for the inefficient supply of water, and the company immediately adopted CSR activities in the specific regions, so that its organizational reputation does not get maligned (Kamani 2014).

Recommendations for Future Growth Strategy:

A detailed analysis has been conducted on the internal and the external factors that influence the strategic business of the Company. It is on the basis of the analysis, a number of recommendations can be made that would help the Company to improve their business strategies.

Strengthening of the execution infrastructure: As it has been evident that Coca Cola operates from different parts of the world and it has different sub-segmentations for its operation. The approach made by the Company resulted in the growth in the core business. However, as a result of this growth, the organization as a whole faced issues in its organizational structure (Wilson and Wilson 2017)In order to overcome this issue, it is expected that the execution of the operation is strengthen by reducing the departmentalization and the managerial and the no managerial roles of the leaders in the organization.

Focusing on the core business: As commented by Gomez (2015), that at times it happen that the particular Company loses its focus on the core business because of the presence of a variety of sub products. Similar type of situation is evident in case of the Coca Cola Company. It has been evident that there are a number of products that the company deals with. In case, if any kind of issue occurs for any particular product, the company as a whole focuses on the particular issue (Wilson and Wilson 2017). However, it is recommended that Coca Cola should focus on a particular product, the core product, the soft drink Coca Cola rather than focusing on other products that the Company deals with.

Customer focused growth strategy: Another important strategy that can be undertaken by a soft drink company like Coca Cola is by the means of focusing on the need of the consumers of Coca Cola. It is for the same reason, recommended that the Company shall come up with better research and development strategies that shall help the company to understand the actual need of the consumers (Fung 2014). It is only on the basis of the information gained from the research certain product differentiation can be done. This shall help the organization to grow in the market.

Improving organizational capabilities: As pointed out by Fung (2014), it is also important to understand the capabilities of an organization as well because the complete organizational growth and strategies actually help in the future growth of the particular organization. As it has been evident from the analysis of the organizational leadership capabilities as well as the organizational structure, it can be said that certain improvements can be made in it. For instance, the structure of the organization can be made horizontal rather than following a particular hierarchical structure in the organization. In addition to this, it is also recommended that at certain instances when it is required, the leadership approach can be changed as well. A transactional approach can be undertaken for improving the organizational activities (Wilson and Wilson 2017). Again, if the organizational culture is also considered, it can be said that a more collective approach can be made towards the organizational leadership.

 


Other recommendations: Apart from the above made recommendations, a number of other recommendations can be made that shall increase the pace of the growth of the Organization. For example, the Company could come up with better Corporate Social Activities that would improve the image of the Company in the society (Wilson and Wilson 2017). Improved CSR activities will also help in a promotional and advertisement part for the particular organization. Again, another important factor that the organization should undertake is on the performance management. It is an important part for the evaluation of the growth strategy and overall organizational performance.

The recommendations made above have addressed all the issues that the Coca Cola has been facing in the recent time. It is expected that these strategies will be effective enough to create a better result in the overall organizational performance and activities. It is expected that if the recommendations are used by the organization than there shall be more prosperity that the Company gains in its business.

Conclusion:

To conclude, it must be noted that Coca Cola is a reputed multinational company that has achieved enormous amount of brand recognition which in turn has been contributing to the high profitability of the company. However, it is important that the organization primarily focuses on the core business products that is the beverages, instead of relying on product sub-groups as well. Besides, the organization should keep on engaging itself in more innovative marketing campaigns endorsing its products, promoting its brand by CSR activities and pleasing the consumers with a wide variety of innovative products, such as Blue Coke ad Diet Coke.

 

References

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