Welcome to our free sample essay on functional level strategy of Coca-Cola company! You’ll find corporate and business level strategy of Coca-Cola, their marketing strategy and planning.
Coca Cola Functional Areas Essay Abstract
The operations of every company are aligned with its strategic goals and objectives. Such are the operations of the Coca-Cola Company, whose every function is aligned towards the fulfillment of its strategic goal. Aligning company operations to strategy seems to be working for the company as it is the world’s third famous brand. Thus, this report seeks to analyze all the key functional areas of the business and how they are applied to fulfill the company’s strategic objectives. Among the areas that will be evaluated are the vision and mission of the company, the internal and external environments, competitive strategy, global strategy, and corporate social responsibility, as well as leadership activities.
Functional Level Strategy of Coca-Cola Essay Introduction
Some key economic indicators are practical in explaining the present position of the soft drinks industry in the United States. These are market size, profitability, and growth rate (Agnese, 2014). Over time, the market size of the industry has been evolving with the present standing evaluated at about 46.8% of the non-alcoholic drinks industry (Agnese, 2014). While the industry is open to making many profits; various obstacles make it impossible.
Ideally, the growth rate of the soft drinks industry has been described as stagnant owing to the saturation of soft drink products in the United States (Esterl, 2014). Moreover, the industry is also expected to experience a decline in the future owing to the health concerns that inform healthy eating. Thus, other competing sectors like bottled water are likely to take over the present soft drinks market share (Fremson, 2015). In effect, there will be limited profitability avenues, forcing the market leader to venture into other lines of business like confectioneries, snacks, bottled water, and sports drinks.
The Coca-Cola Company is a major market player in the soft drinks industry. The company is guided by a mission that seeks to refresh the world, inspire through happiness and optimism, as well as to make a difference by creating value. Furthermore, the company practices its vision through exercising the 6P’s which are providing an excellent working environment for its staff, to offer a range of beverage drinks to the world and to meet the needs of its customers.
The partnership is also important: the company desires to foster a winning network among the key players of the market (The Coca-Cola Company, 2016). In this bracket are suppliers and customers, with whom the company seeks to create mutual value. Another strategy point is company’s corporate social responsibility; next is profit, which explains the company’s motive to maximize the level of the benefits it makes, for the benefit of its shareholders, and the last one is productivity, which informs the company’s need to be efficient, fast-moving and carry out fast processes (The Coca-Cola Company, 2016).
All these are practiced within the core values of the company which calls for good leadership, collaboration, integrity, and accountability, as well as quality, passion, and consideration of diversity in business operations.
In comparison, Pepsi’s mission statement states that the company seeks to provide its global consumers with foods and beverages that are not only affordable and convenient but also complimentary healthy options. Ideally, this mission explains the formal nature of the business in terms of target customers, pricing, product characteristics, and market strategy. Analysis of this mission statement shows that it is more elaborate compared to that of Coca-cola, which is more traditionally tailored to explain the nature of service delivery.
Nonetheless, the Coca-Cola Company operates a winning strategy. Through the vision and mission of the business, the employees of the company are guided to constantly remember the objectives of the company and the direction it aims to take for the future (The Coca-Cola Company, 2016). Thus, the six P’s (People, Partners, Portfolio, Productivity, Planet, and Profit) are a source of information on how the company’s culture should be identified. Further, the vision and mission of the company highlight the democratic type of leadership that is present in the company.
Ideally, the company’s market segmentation strategy has enabled it to outcompete its competitors. It applies its marketing strategy depending on the market it wishes to appeal to. For instance, it seeks to strengthen volume when operating in emerging markets, as well as to make the products cheap. In the developed markets, the company’s strategy is creating a balance between its volume and price.
External Environment and Competitive Position
Analysis of the company’s external environment is conducted through Porter’s Five Forces Model. Ideally, the company faces a little threat to new entrants into the soft drinks business. Entry into the non-alcoholic beverages business is highly prohibitive owing to the high costs involved. Further, the present brands have a very strong image and markets.
There is also a low supplier bargaining power. There are so many vendors that most of the products are readily available and their cost is minimal. Moreover, there is a medium threat to the bargaining power of the buyers (Euromonitor International, 2013). There is a host of places where the consumers can find the products, some of these being the supermarkets, with many merchandising venues and vending stations. However, lifestyle changes are a key threat in this segment as it gives consumers high bargaining power (Taylor, 2010). There is also a significant threat of substitute products. Ideally, all the players in the industry offer the same product and are a natural substitute for one beverage drink. Also, competitors offer the same price.
Finally, the industry faces high rivalry among competitors. One such competitor is Pepsi Company whose market presence in the world is immense.
Analyses of these forces of change in the industry reveal that the operations of the Coca-Cola Company have to keep evolving to keep up with the new changes. One key change has been a shift in social factors which has resulted in the development of a new product portfolio for the company (Esterl, 2014). Further, the company is safe, though it has to ensure constant updating of its processes to remain competitive. Moreover, the company should promote competitiveness by coming up with product lines that cater to the change in demographic and health needs of the consumer.
Internal Environment and Competitive Position
The SWOT analysis framework is applied in the analysis of both internal and external factors affecting the performance of the business in the industry and how well the company responds to the available market conditions.
Strengths
The Coca-Cola Company enjoys some advantages that are unique to its operations. The first is a good brand reputation. It is no doubt that the Coca-Cola company brand is widely known all over the world. Its reputation and appeal have earned the company the status of the World’s most recognized and preferred brand in the soft drinks industry (Euro-Monitor International, 2013). Despite the high preference for Coca-Cola, this is not the only brand that the company is associated with and known for. Other brands that the firm also makes are soft drink beverages like Fanta, Diet Coca-Cola, and Sprite.
Secondly, the company enjoys a large economy of scale. Ideally, the Coca-Cola Company is known to be the world’s largest manufacturing company, as well as, the largest marketer of the world’s renowned soft drink with a market base that extends to over 200 countries (Euromonitor International, 2013). Owing to this large scale of operations, the business can enjoy the various advantages that come with large purchases. In effect, the company can invest in novel markets and reap many benefits from the low cost of commodities acquired through large economies of scale.
Third, are Coca-Cola’s an advertising and marketing abilities. The company spends a lot of money in marketing, estimated at US$3.976 billion, US$3.499 billion and US$3.266 billion in 2015, 2014, and 2013, respectively (Euro-monitor International, 2013). Ideally, these expenses account for about 6.9% of the total revenues that the company makes every year. The company was the largest beverage advertiser during the year 2015 with a budget tailored to fulfill key objectives like the introduction of new products in the market, brand promotion ventures, information to the consumers on the features of the product, communicating with the public concerning the brand, and increasing company sales.
Besides the advertising expenses, the total expenses that the company incurred in 2015 in marketing are about US$6.8 billion, equivalent to about 15.4% of the total income that the company made for that period (Euro-monitor International, 2013). Moreover, this cannot be compared to the expenses of Coca-Cola’s rival company, Pepsi, which spent just US$3.9 billion of its marketing budget and ended up making about US$63 billion in profits.
Another strength that the company enjoys is an extensive product portfolio. Ideally, the company has about 500 brands for consumers located in over 200 countries (Euro-monitor International, 2013). Among the products that the company offers are regular beverage drinks, tea, energy drinks, coffee, juices, and water. Over time, the company has ensured to create a strong product portfolio and is now the owner of one of the top four brands in the non-alcoholic sparkling beverage category. These are Fanta, Sprite, Coca-Cola, and Diet Coca-Cola. Overall the brand is estimated at the cost of 81.6 billion dollars and is the third valuable brand in the world. Therefore, the company can enjoy good bargaining power and loyalty among its customers.
The fifth strength is a broad distribution channel. Through its distribution channel, the company makes sales of about 2 billion unit cases distributed all over the 28 countries across the three continents that the company operates. There are more than 2500 independent manual distribution places in Africa that have led to the creation of jobs for an estimated 11,000 people (Euro-monitor International, 2013). Besides the income attained from marketing, the distribution channels contribute $500 million in revenues for the company. This implies that the company enjoys a great financial position which provides it with an opportunity to increase its competitive advantage through marketing and product development.
Weaknesses
PepsiCo is the leading competitor to the business of Coca-Cola Company. Coca -Cola does not possess any sustainable competitive advantage that makes it’s business different from that of PepsiCo. For instance, the market capitalization of Coca-Cola is 184.3 billion, while that of Pepsi is 142 billion, yet there are no distinct differences in the key performance indicators of the two (Euro-monitor International, 2013). Pepsi Company also possesses a range of valuable brands like Lipton, Tropicana, Gatorade, and Starbucks beverages. Nonetheless, the company’s lack of a distinct competitive advantage only shows that it is at constant risk of losing its market share to PepsiCo.
Secondly, the company is likely at risk of losing its brand image. The brands that the company produces are highly carbonated sugar drinks that are slowly losing market share, with more consumers aligning towards healthier options. The values that the company reflects do not resonate well with the numerous health concerns expressed about obesity (Bond, 2013). Even though the company has resorted to developing low carbon drinks, it might take quite some time before these drinks gain market share.
Opportunities
There is an emergent market in the area of healthy beverages like diet soft drinks and the consumption of bottled water. Owing to the demographic changes in the market composition of the company’s customers it is likely that most of them will resort to milder drinks like water, also rising health concerns imply that most people are resorting to taking water.
Threats
The company is facing a critical threat in the change of consumer tastes and preferences. It is hard to sell to people that have changed their desire to consume your product and now want another product the company is not offering.
Water scarcity is another threat that the firm is facing. It is becoming increasingly difficult for the company to keep up with the water issue amidst all the criticisms it is receiving regarding the exploitation of this valuable resource.
Moreover, government legislations are always evolving with one such threat emanating from the need to report the adverse and negative constituents in the company’s soft drinks (Bond, 2013).
Finally, the problem of saturation in the soft drinks market is making the company’s profit levels decline. In effect, the market has reached an overmaturity stage that even product differentiation is not able to remedy the problem. The sales and revenues of the company will likely continue to dwindle even in the years to come.
Nonetheless, the Coca-Cola Company has positioned its key competency through proper brand management. The company has done an excellent job of marketing its brand. However, it is increasingly becoming difficult for the company to maintain its competitive position considering all the factors affecting its productivity. Thus, the company can minimize costs, especially the marketing budget that is so high as compared to its competitors in the industry.
Competitive Strategy
Coca-Cola’s competitive capabilities are achieved through the company’s strategy and tactics which are complementary to each other resulting in a high level of profits. Ideally, the company is applying differentiation strategy and cost leadership as its core generic strategies. For differentiation, the company attempts to differentiate its product by making them unique from the offerings of the other products. It does so through the unique product tastes and application of intensive marketing strategies.
The second strategy is cost leadership. The company is not only ensuring cost leadership through attaining large economies of scale but also through learning. The application of Ansoff’s matrix further shows that Coca-Cola applies various strategies. Initially, the company applied a market development strategy which aimed at ensuring penetration into foreign markets. Then, it delved into new product development through diet coke and later started to diversify its portfolio by coming up with various carbonated soft drinks like Fanta, Sprite among others. The application of these strategies ensures that the company consistently maintains its competitive position.
The soft drinks industry is presently in its maturity stage. This implies that there are minimal changes a company can apply to gain a new market share. However, the company can respond to present consumer trends and shift towards new product development as a generic strategy to tap into the emerging healthy needs market.
Strengthening the Competitive Position
With the increase in competition in the soft drinks industry, the Coca-Cola Company had to come up with a complimentary strategy to reinforce its already strong competitive strategy. In effect, the company chose to harness the idea of globalization through the exploration of newly emerging markets. This strategy involves focusing resources of the company’s mega brands, creating a standardized product for the market, and officially dissolving the presence of boundaries that existed between Coca-Cola in the United States and the international markets. Further, over time, the company has since evolved its global strategy choosing to apply differentiation to every market segment (Banutu-Gomez, 2012).
For big emerging markets like India and China, the company has lowered the price of its products making them affordable to the general population. In effect, it uses local inputs and makes modern creations of the bottles, as well as upgrades its logistical and distributional operations for the rural-based areas. Ideally, the company utilizes a different strategy for different parts of the world.
This complimentary strategy by Coca-Cola is both defensive and offensive. First, it is offensive in the sense that it aims to create and curb a new market before its rivals in the business do so. On the other hand, it is defensive in the sense that the United States is highly saturated, and Coca-Cola seeks to establish new markets to maintain its leadership position ahead of PepsiCo. Owing to the saturated nature of the soft drinks industry in the United States, I would advise that the Coca-Cola Company pursues another complementary strategy to ensure competitiveness in the market. One of the strategies would be product diversification. I would advise that the company diversifies into the area of non-carbonated soft drinks and other health drinks to keep up with the new consumer trends.
The Global Marketplace
The present global strategy the company applies is “One Brand, One image.” For instance, it utilizes one market campaign and tailors it to the needs of the local population (Esteryl, 2014). Ideally, the company operates an international differentiation strategy where it offers the product depending on the local setting in emerging markets. Such is reflected in the business of the company in China and Hong Kong. This strategy has been effective for the company as it fosters local integration with the people, making them feel like a valuable part of the brand (Esterl, 2014).
The Coca-Cola Company could learn from the operations of Pepsi to sustain its global markets. One way would be through trying to be as local as possible. The company could try to incorporate advertisements in local languages, as well as use local personalities that the people are conversant with. This way, foreign customers can relate to the company at a personalized level.
Corporate Strategy: Business Diversification
The Coca-Cola Company is not new to diversification. Diversification has been the cornerstone of the company’s successes since the first time it acquired a minute maid in 1960 when it was experiencing stalling growth. Even though the business is now stable bringing over about 1 billion in sales volume every year through Fanta, Sprite, vitamin water, and PowerAde, the brand is presently stagnating (Fremson, 2015). For instance, in the first quarter of 2015, the company was able to experience just a 1% growth rate in the company’s brand, 8% for Coca-Cola zero and 8% decline in the purchase of Diet Coca-Cola. Moreover, the company’s revenue declined by 7% in Europe, resulting in a loss of 722 million dollars (Wehring, 2015).
As a result of the previous diversification success, I suggest that the company undertakes diversification in the same line of business specializing in non-carbonated beverages. This will help to revamp its shares and tap into the new market of healthy living people.
Ethics, Social Responsibility, and Environmental Sustainability
The Company’s sustainability report for the year 2015 stated that it is committed to enforcing sustainability in the hearts of all the company shareholders, and in the community where they operate. Ideally, the company’s sustainability framework pegged on three words, “Me, We, the World” and sought to increase the women workforce in the company, create sustainable projects and promote the well-being of the people in the hopes of curbing obesity (Bond, 2013).
To align with these goals, the company tries to enforce sustainable practices by partaking in world life protection (The Coca-Cola Company, 2013). Other ways are through the development of the pet bottle that is fully recyclable and helps avoid environmental pollution. About its sustainable goal of enforcing water stewardship, the company is striving to improve efficiency in how it uses water (Coca Cola, 2016). By 2008, the current average water use per liter was about 1.67 liters (Coca Cola, 2016).
Employee wise, the company is keen on developing its workforce as a foundation for its success. In effect, it has come up with social programs that are keen on retaining and enhancing the skills of its workforce (Coca Cola, 2016). It has also increased the level of engagement with company employees and has sought to improve equality and diversity issues. Overall, the company strives to ensure that its CSR program is effective by coping with all the basic rules of sustainability. Most of its programs are aligned towards enforcing employee sustainability, keen on the protection of the environment, and natural resources (The Corporate Social Responsibility Newswire, 2016).
However, there is a gap in how effective the company is in the gender equality issues as addressed in its sustainability report for 2014. Ideally, there is little information that supports the company’s alignment with increasing the level of women employees in the enterprise. In effect, I recommend that the company should reconsider the composition of its workforce and develop a structure that will enable equitable recruitment of people from both genders.
Strategy Execution: Building the Capability to Execute Strategy
The Coca-Cola Company applies the same procedure in its recruitment, selection, and training process. The hiring and training process aligns with the company’s strategic objective of enforcing teamwork. One of the selection processes is through interviewing. The interview processes of the company seek to determine the experience of the employees applying for the post. Being that the company is more experience-oriented, the HR department seeks to evaluate how a new employee can contribute to the process (Journey, 2016).
Ideally, Coca-Cola’s human resource is a team. Thus, new employees applying for a position are taken through group exercises to determine how effectively they can tie in with teams. After recruitment, the Coca-Cola Company provides four types of training. These are skills training, leadership training, technical training, and functional training. The training seeks to ensure that the new employees hold the competence required by the company, and they improve productivity as well. Technical training is designed to improve the employees’ technical skills so that they are highly productive at their job.
The Coca-Cola Company takes most of its employees through a leadership training program. The aim is to ensure that the employees are ready for future managerial positions, through training in management skills assessment, management assessment, executive assessment, and many others (Journey, 2016). Functional training is done at the company to ensure that the staff can attain more expertise for their positions. In effect, the company launched Coca-Cola University, a virtual and global university for all learning and capacity development. Ideally, the CCU also considers best practice in the field and researchers on major process improvements to elevate the company developments. (Journey, 2016).
The company can, however, incorporate more leadership training for women staff. Analysis of the leaders in the company reveals that there are more men leaders than there are female leaders. The company must investigate why this is so, and whether female counterparts can be trained on the job, to be equally efficient, as well as, qualify for key leadership positions.
Strategy Execution: Managing Internal Operations
The company is a leader in people’s development as it chooses to invest in people more than processes. Specifically, the company values its human resource as this is the greatest source of income and innovation. A critical best practice in the processes of the company is that they seriously train their staff and do not leave anything to chance. Besides job orientation, the company ensures that every employee is trained in leadership management skills as there is potential for leadership positions in the company, as well as structured succession plans. Managers further motivate their teams by giving them the ability to communicate their skills and innovations from time to time.
They enjoy working in positive environments, enjoy medical benefits, travel allowances among others. Ideally, there is democratic leadership with the management operating through constant team engagements. Every employee is part of the wider goal.
Owing to the large-scale nature of operations, the Coca-Cola Company applies the use of various information systems to monitor its processes across the world. Among the common systems used by the company are the SAP R/3. The application of this system enables the company to make quick decisions and reduce its operating costs. Ideally, all the entities and departments of the company have a common system that makes the reporting and dissemination of information an easy task. The use of these systems also ensures that the employees and management are on the same level of information.
Moreover, the company offers an appealing compensation package for its executives with the salaries of the top three executives being as follows: The executive vice president of the company who is also in charge of bottling and investments earns 7,555,375 dollars, the company CEO earns an estimated 14,590,571 dollars, executive vice president for North America region earns 4,980,458, while the president and chief operating officer earn 6,787,880 dollars (Morningstar, 2016).
Other monetary benefits that these executives enjoy are retirement plans, rewards, and recognition through bonuses and reimbursement of education benefits. Other non-Monetary benefits that these executives enjoy are health and welfare benefits through various forms of insurance covers, protection for their dependents through cover remunerations, paid lifestyle benefits like paid vacation and holidays, telecommuting, and health club discounts among others (Morningstar, 2016).
In effect, the compensation package of the Coca-Cola Company is exemplary as compared to the other player’s industry. It merits a rating of about 8/10 considering the benefits that its employees enjoy. Nonetheless, the analysis of the payments has revealed that there is only one female executive and her salary is way less compared to the other executives. In effect, the company should consider harmonizing these salaries so that the pay does not show such a significant disparity among genders.
Owing to the present global economic conditions, I foresee several changes in the issues analyzed above. First, the company will likely have to cut down on the compensation packages of its top executives to reduce operating expenses.
Also, the future human resource trends are moving towards flexible work patterns. Therefore, the Coca-Cola Company is likely to restructure its processes to allow their staff flexible work schedules.
Strategy Execution: Leadership
A strategic analysis of the Coca-Cola Company necessitates fundamental changes in the process and functional management. First, the processes of the company about marketing have to change shortly. This is a critical issue as concerns cost reduction. Ideally, the company has stagnated owing to the present challenges like a change in consumer preferences, fluctuation in foreign currency among others. In effect, it is necessary that the company can mitigate operation costs to continue enjoying profits.
Secondly, it is imperative that the company comes up with a differentiated product, or aligns with another key player in the beverages industry. Ideally, the company needs to diversify and stop over-relying on carbonated and sugary products as they are fast becoming outdated. Ideally, the company should consider starting a product line in bottled water.
The leadership of the company should also focus on developing a unique competitive strategy that will enable the company to outcompete the operations of its competitor, Pepsi. Among some of the possible ways the company can do so, could be through reducing the compensation package, carrying out internet marketing as this is the present global force among others.
Coca Cola Goals Essay Conclusion
The operations of the Coca-Cola Company are directly aligned with its strategy. Ideally, all the company’s operations are aligned towards the fulfillment of its mission and vision, as well as its strategic intent. Presently, the company is the world’s third famous brand and a market leader in the soft drinks industry. However, all this is straining the budget of the company as it overexerts its financial capacity. In effect, the company is tasked with the responsibility of cutting down expenditure and looking for other ways to grow its product line. It should also consider intensive global marketing to widen its revenue base, as well as, cut down on its executive pay rate. The alignment of these issues may result in future profitability.
References
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