Business-Level and Corporate-Level Strategies: The Coca-Cola Company

Business level and corporate level strategies

This paper analyzes the business-level and corporate-level strategies of the Coca-Cola Company in order to identify the most important strategies which have contributed to its success in the past and can help it in competing effectively in the long run. An analysis of its competitive environment has also been done in a view to assess and compare the strategies which other industry rivals are using to compete in the slow and fast cycle environments.

The Coca-Cola Company

The Coca-Cola Company is the world’s largest manufacturer and distributor of beverage products. It is an American multinational corporation engaged in the manufacturing, promotion, and distribution of a wide range of beverages; including soft drinks, fruit juices and sodas, sparkling energy and sports drinks, mineral water, soy-based beverages, coffees, yogurt drinks, and tea. The Coca-Cola Company has more than 3,500 products under 500 different brand names. Its top brands include Coca-Cola, Sprite, Fanta, Fresca, Minute Maid, Dasani, Mello Yello, Power Ade, etc. The company has spread its business network in more than 200 countries around the world which is supported by its 146,200 business partners and associates. The company claims to be serving 1.8 billion consumers every day. It owns four out of the five top seller beverage brands (The Coca-Cola Company, 2013).

Business-Level Strategies of the Coca-Cola Company

The Coca-Cola Company uses the following business-level strategies for its local and international operations:

i. Differentiation Strategies:

Differentiation strategy is used by a firm to operate in its industry in a unique and competitive way (Hitt, Ireland, & Hoskisson, 2013). Since its inception in 1886, the Coca-Cola Company has always focused on differentiating its products from those of its competitors in order to establish a unique position in the Global beverages industry. Its top most brands like Coca Cola, Sprite, and Fanta are manufactured under strict quality standards and by using unique formulations. With the help of its differentiation strategy, the Coca-Cola Company is able to maintain the top market leadership position. Differentiation is found in each and every aspect of its business operations. For example, it uses unique marketing campaigns, labeling, bottle shapes, and advanced plant and machineries to manufacture the top quality beverage products. It also keeps on introducing different flavor variations in its existing products so that consumers can taste and enjoy a wide range of beverages from their favorite brand (The Coca-Cola Company, 2013).

ii. Low Cost Leadership:

In addition to delivering the top quality products, the company also keeps an eye on its increasing operational and marketing expenditures. It recognizes the importance of cost control for gaining competitive advantage in the industry and operating in a more profitable way. Therefore, the low cost leadership is one of the major business level strategies the Coca-Cola Company has been pursuing since its incorporation. It strongly emphasizes on internal efficiency so that its products can be manufactured at the minimum possible cost (Hitt, Ireland, & Hoskisson, 2013). Although the Coca-Cola Company has a wide array of products, there is high level of standardization in their manufacturing processes, packaging, and marketing. It has maintained a tight control over its manufacturing, overhead, marketing, and R&D costs (The Coca-Cola Company, 2013).

iii. Focus Strategy:

The company uses focus strategy in both low cost and differentiation dimensions. For its focused low-cost strategy, it has defined a specific line of beverage products through which it can target a specific market and achieve low cost by manufacturing these products under highly efficient manufacturing processes. For example, its top most favorite brand, Coca Cola is manufactured and promoted under focused low cost strategy. Coca-Cola is sold in more than 200 countries of the world, but has slight variations in its taste, flavor, and ingredients. The company produces its Coke for every target market at a large scale in order to achieve low cost leadership in that market. It keeps that target market under complete focus while designing its marketing campaigns and selecting distribution networks so that it can serve the potential consumers from that market in the most effective and efficient way (The Coca-Cola Company, 2013).

The Most Important Business-Level Strategy for the Coca-Cola Company:

After analyzing all these business level strategies of the Coca-Cola Company, it can be said that the most important strategy which has largely contributed towards its success in the past and will continue to deliver a competitive edge in the future is its differentiation strategy (Hitt, Ireland, & Hoskisson, 2013). The Coca-Cola Company’s products are recognized for their unique taste and value proposition. If the company keeps on bringing innovation its products according to the changing consumer needs, it will be able to differentiate itself from its competitors in the long run. The Coca-Cola Company has adopted a differentiation strategy because it can give strategic benefits if its products succeed in developing their strong brand image in the consumers’ mind. It will help them in making these consumers brand loyal which is vital to transform their buying decision in favor of Coca-Cola products (Thompson & Martin, 2010).

Corporate-Level Strategies of the Coca-Cola Company

This section describes the major corporate-level strategies used by the Coca-Cola Company:

i. Growth Strategies:

The Coca-Cola Company invests a huge amount on its business expansion projects in all the six operating regions of the world. It is currently present in more than 200 countries which is a big depiction of its focus on growth strategies. Being a large scale corporation, the Coca-Cola Company has to use different types of growth strategies in different situations and for varying needs of its business operations. For example, whenever it aims to target new consumers, introduce new products, or enter new geographical locations, it pursues a horizontal growth strategy. On the other hand, if it invests in its own supply chain as a part of cost-leadership strategy, it is basically focusing on vertical growth. The Coca-Cola Company has developed its own supply and distribution system in various potential markets of the world which largely helps it in controlling the heavy manufacturing and distribution costs.

Moreover, the company has used diversification strategy various times in its history. It was founded as a soft drink manufacturer; but with the passage of time, it entered into various related industries like mineral water, soda, tea, coffee, fruit juices, etc. (The Coca-Cola Company, 2013). These diversification strategies have increased its business portfolio and enabled it to compete with the top brand in all these industries.

ii. Stability Strategies:

Sometimes, the Coca-Cola Company has to suspend its growth strategy and take a stand on its current market position. The company uses this strategy when it feels that growth strategies are not a feasible choice in the presence of unfavorable economic circumstances or some internal issues. Therefore, it either proceeds with an extra care or completely stops at the current position and focuses on its quality control, marketing efforts, supply chain, and R&D (Thompson & Martin, 2010).

iii. Retrenchment Strategies:

The Coca-Cola Company uses retrenchment strategy for those business units where it observes no or little growth during a definite period of time. It retrenches these business units in a number of ways; including budget-cut for production, marketing, or R&D in that area, complete shutdown of operations, or selling out the whole unit to private investors.

The Most Important Corporate-Level Strategy for the Coca-Cola Company:

Among all these corporate level strategies, the growth strategies are giving the biggest competitive edge to the Coca-Cola Company. By pursuing continuous growth in its operations, business network, and product lines, the company is able to compete with the top industry rivals in the most competitive and profitable way. Growth strategies not only strengthen its market position in the Global industry, but also help it in achieving its strategic objectives through business level strategies, like cost leadership, differentiation, etc. For example, the vertical growth strategies make its supply chain and distribution network more efficient and in larger control of its own Management (Sharp, Bergh, & Li, 2013). Similarly, diversification strategies enable it to manufacture the products which complement the sales of its leading brands. Growth strategies are a good choice if the Coca-Cola Company has to maintain its leadership and market share in the Global market (Hill & Jones, 2010).

Analysis of the Competitive Environment for the Coca-Cola Company

The beverage industry is highly concentrated with a large number of small and large scale manufacturers — The Coca-Cola Company, PepsiCo International, Dr. Pepper Snapple Group, Inc., Nestle Waters, Red Bull GmbH, Starbucks, Anheuser-Busch, Suntory International, etc. are the market leaders with high market share and strong customer base. The biggest all-time industry rival of the Coca-Cola Company is PepsiCo International. Pepsi owns the second most favorite brand in the world, Pepsi Cola which is a direct competitor to Coca-Cola (Coke). PepsiCo International also emphasizes on maintaining market share through expanding business networks and extending product lines. As a result, it is present also present in all those geographical markets where the Coca-Cola operates. PepsiCo also has a strong supply chain and distribution network in the local and international markets which gives it cost-leadership advantage. PepsiCo is currently the top market leader in cost control and enjoys higher profit margins than the Coca-Cola Company.

As far as corporate-level strategies are concerned, PepsiCo International also gives major focus on different types of growth strategies; like horizontal and vertical growth, related and unrelated diversification, etc. It has a more diverse business portfolio than the Coca-Cola Company; however, operates with limited level of productivity in new product lines. Keeping in view the economic conditions and internal operational issues, PepsiCo also uses stability and retrenchment strategies in order to avoid heavy financial losses or other uncertainties.

After analyzing the competitive environment for the Coca-Cola Company and its rivalry with the next-market leader, it can be said that both these companies have a huge potential to grow in the market due to their brand appreciation and extensive business network. The consumers love these brands due to their unique taste and quality and prefer over all other brands. However, Coca-Cola is ahead of PepsiCo in its sales of all product lines whereas PepsiCo has a competitive advantage of distribution efficiency. PepsiCo can ensure a sustainable future in its industry if it improves its sales performance while the Coca-Cola Company can succeed in the long run by continuously targeting new markets and focusing on all types of growth strategies.

Performance in the Slow-Cycle and Fast Cycle Markets

The Coca-Cola Company and PepsiCo International have resources, core competencies, and competitive advantages that enable them to compete in any type of market conditions. When the economies are moving with a slow pace, these companies survive by adopting stability and retrenchment strategies while keeping their promotional campaigns, Research and Development efforts, and quality control constant. The Coca-Cola Company has a competitive advantage of extensive product range — all these products can collectively give good sales performance even in a slow-cycle market (The Coca-Cola Company, 2013). On the other hand, PepsiCo International can survive in the slow environment by cost control and more efficient distribution system (Hill & Jones, 2010).

In a fast paced environment, both these companies have to face a number of challenges that can impact their operations in many different ways. For example, the barriers to entry for new competitors are low while suppliers have weak bargaining power. Therefore, the Coca-Cola Company and PepsiCo International can move forward more competitively and aggressively. They can invest heavily on marketing campaigns in order to boost up their sales. In high demand periods, they offer price-cuts and different types of discounts to attract consumers to consumer greater amount of their products. In this way, they are able to throw the new competitors out of the market (Sharp, Bergh, & Li, 2013).

References

Hill, C.W., & Jones, G.R. (2010). Strategic Management Theory: An Integrated Approach, 9th Edition. Boston, MA: Houghton Mifflin

Hitt, M.A., Ireland, R.D., & Hoskisson, R.E. (2013). Strategic Management: Competitiveness & Globalization – Concepts, 10th Edition. Mason, OH: South-Western Cengage Learning

Sharp, B.M., Bergh, D.D., & Li, M. (2013). “Measuring and Testing Industry Effects in Strategic Management Research: An Update, Assessment, and Demonstration,” Organizational Research Methods January, 16 (1): 43-66.

The Coca-Cola Company, (2013). Our Company. Retrieved on May 8th, 2013, from

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