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Custom The Coca-Cola Company essay paper sample

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The global business environment is facing drastic changes every day. Changes in operation costs, customer preferences, technology, political settings, and competition are posing major threats to various operators. To retain their position and possibly expand the business, companies are finding it necessary to re-structure their organizational and marketing strategies. This paper will critically analyze the success factors of Coca-Cola Company in both the domestic and international markets.

The Coca-Cola Company is a US based beverages company, which was founded in 1886 by George Pemberton in Atlanta, Georgia. The company majors in soft drinks. The Coca-Cola initial recipe consisted of soda water, lime, certain shrub weeds, and cinnamon. Today Coca-Cola has footprints in more than 200 countries worldwide and sells more than 400 brands (Benson 2010, p. 11). It is the global leader in its product category with an estimated market dominance of 45% market share as at end of the year 2010 (Murden 2010, p. 88). The company has also shown a dedication to philanthropic projects sponsoring wildlife reserves on Ossabow Island, the Amsterdam Olympic Games 1928, South Africa 2010 FIFA World Cup, building more than 100 primary schools in China’s district of Chongqing (Benson 2010, p. 17).

Coca-Cola has experienced little political instability effects for many years in its history. Until recently, there were few major political inhibitions, for example, the Arab League Boycotts in Israel (Rothacher 2004, p. 25). In 2003, an addition to the soft beverages category Mecca Cola was introduced to the Arab markets with the aim of competing with the Coca-Cola products.

In the recent past, the effects of the global financial crisis have affected the economical stability of Coca-Cola Company in areas such as Africa and Latin America. This is due to reduced buying power of the customers as well as higher taxation rates that lead to increased operational costs of the firm.

The currently advancing trend of preference for health drinks in most markets is affecting negatively many soft drink companies. Coca-Cola is not an exception. According to the Children’s Defense Fund, more people are finding it necessary to use bottled water and Diet Coke instead of conventionally carbonated and alcoholic beverages (2007, p. 60). Therefore, it is important for the company to invest more in diet drinks and healthier beverages as a product strategy.

Coca-Cola needs to create new products in line with advancing technology and adopt new marketing strategies to fully use upcoming technologies. Already, its products are advertised online with heavy presence in such social sites as Twitter, MySpace, eBuddy, and many more. In addition, the introduction of plastic cans was a good cost-cutting and product portability enhancing measure as consumers can now easily carry the drinks.The company also adopts community water partnership initiatives such as the watershed stewardship initiative in 2011, the Coca Cola Europe Water Footprint 2011 among others (Benson 2010, p. 10). However, there was a challenge to the company’s environmental aggravation practices in India when it was accused of ground water depletion (Rothacher 2004, p. 20).

All Coca-Cola products are patented according to standard procedures. In the global market perspective, the company’s legal standing is not threatened.

The 5-forces analysis include the following five parameters; new competitors, substitute products, buyer bargaining power, supplier bargaining power, and commercial rivalry.

New and existing entrants, for instance, PepsiCo, have affected the profitability of the firm in some notable regions such as the Latin America and African continent.

Products focused more on health are emphasized, but the company is already in the front line of formulating new health products like Diet Coke. However, industry-leading firms such as Macdonald and Starbucks among others have come up with products which substitute those of Coca-Cola Company.

As the global economy weakens, bargaining power may be expected to become weaker in some markets. With the relatively low priced Coca-Cola products coupled with the inertia of product trust, the company may make progress. The risk assessment for this force is medium.

This is probably the most sensitive force. Globally, the cost of oil is rising affecting the price of production process, for example, cost of distribution. Moreover, the bargaining power of customers has increased in terms of selling price, thus affecting the profitability of the firm.

As a result of reduced entry barriers, the number of companies offering beverage products has drastically increased. These firms sell similar to Coca-Cola Company products. Consequently, these firms reduce the sales turnover of Coca-Cola Company in some important markets (Rothacher 2004, p. 78).

The global soft beverages industry is an oligopoly industry dominated by just a few companies, mainly Coca-Cola, Pepsi, and small upcoming brands like Minute Maid. Entry into this industry is hard and product prices are easily controlled by the key competitors.

In the industry cycle, an industry can either be in the market introduction, growth, or mature stage. The soft beverages industry is currently assumed to be in the growth stage mainly due to the introduction of new products with focus on health. Some have also been estimated to be in their mature stage given the stagnation of stock prices for the industry’s main shares (Benson 2010, p. 12).

The critical success factors of Coca-Cola Company include proper strategic planning, customer knowledge, good industry evaluation, and formulation of steady goals.

Rothacher (2004, p. 28) indicates that strategic capability is the ability of a firm to survive and flourish as well as deliver future values.

For Coca-Cola Company, some of the distinctive strategic capabilities include the ability of the firm to maximize profitability and growth in order to create value for the shareholders. To achieve this, the firm has made substantial efforts aimed at transforming the commercial models in order to focus more on customer value potentials, implementing multi-segmentation strategies in the major markets, and driving innovation in products and services among other notable aspects.

There are some threshold strategic capabilities which have been proved useful to Coca-Cola Company both in the short and long run. From the initial stages, the firm has been able to plant its brand name in its field and built up its image as an integral and respectable company. This has enabled Coca-Cola Company to establish a business partnership with major companies, especially those operating in the Latin America, Asia, and Asia-Pacific region. Consequently, the company has been able to expand rapidly, thus attaining higher levels of profitability in the non-traditional markets. Other threshold strategic capabilities are achieving its full operating potential, applying go-to-market approaches, and conducting managerial expertise etc.

One of the valuable resources owned by Coca-Cola Company is its high quality marketing strategies employed in various parts of the world. For instances, in 2010, the firm was able to allocate more than 15% of its resources for marketing purposes, thus achieving higher profitability in 2011.

One of the rare resources possessed by Coca-Cola Company, in comparison with close competitors such as PepsiCo, is its brand name. Globally, it is estimated that the Coca-Cola Company enjoys over 90% of customer loyalty because of this brand name. Therefore, the brand name Coca-Cola helps the company attain bigger sales turnover (Benson 2010, p. 56).

Imperfectly imitable resources are those that cannot be copied to look as personal innovations of other companies. It is estimated that Coca-Cola Company owns more than 400 brands and operates in more than 210 countries globally. This expensive venture is hard for competitors to duplicate; thus, Coca-Cola Company may be asserted to have imperfectly imitable resources (Murden 2010, P. 89).

These are resources which cannot be substituted from available resources. For Coca-Cola Company, one of the non-substitutable resources is its employees. The employees who are located in various parts of the world are extremely dedicated to improve the performance of the company.

One of the benchmarking methods which have been used to evaluate the performance of Coca-Cola Company is through the high level of performances exhibited by the firm. The table below briefly indicates the performance of the firm for the last five years.

Year

Sales revenues  in million US$

Gross profit in million US$

Operating income in million US$

Net income in million US$

Dividend per share

Debt to equity ratios

2006

24089

15922

6303

5081

1.23

0.63

2007

28 858

18452

7253

5982

1.37

0.69

2008

31945

29575

8440

5808

1.54

0.85

2009

30991

19908

8232

6823

1.68

0.83

2010

35118

22429

8445

11807

1.77

0.78

Rothacher (2004, p. 25) argues that Coca-Cola Company has substantially invested in various cost reduction dynamics to survive this hard economic times. Some of them include production of high quality products at a reduced cost, thus increasing sales turnovers in some important markets.

The suppliers are partners of the firm that supply the systems with materials that include the ingredients, packaging, services, goods, and machineries. All of authorized and direct suppliers require complying with respected laws and regulations that include child labor and forced labor prohibition, freedom of association, and collective bargaining power. The customers of Coca-Cola Company include large international chains of retailers and restaurants (Murden 2010, p. 78).

As indicated above, Coca-Cola Company is one of the most successful companies in the 21st century. The success of the firm in the domestic and international markets can be attributed to high quality customer service as well as production of quality products at reduced prices. For instance, during this hard economic time, the company has been able to produce quality products like Fanta and Sprite at a reduced cost across the globe. One of the weaknesses of Coca-Cola Company is the general failure to invest in organic beverages which are becoming more popular in some markets, namely, North America and Latin America. Consequently, Coca-Cola Company has lost a substantial number of customers in some of these areas, thus experiencing reduced profitability levels in those regions (Ghemawat 2007, p. 67).

From the above information, it is clear that Coca-Cola Company is one of the most successful firms in the 21st century. This is due to the various critical success factors which have been adopted over the last ten years. For instance, the firm has come-up with the vision of 2020 when it hopes to double its sales revenues in most major markets like the Asia, Latin America, and other areas. Through the VRIN Analysis, it is evident that Coca-Cola will continue to be competitive in both the short and long run if the adopted policies generate positive effects.

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