External and Internal Environment of Coca-Cola
Coca-Cola has successfully developed into one of the legendary companies whose drinks trigger associations connected with holidays in many people. High-quality drinks and unique marketing campaigns became the main peculiarities of the company. The meticulous design of every process which helped Coca-Cola to obtain leading positions regardless of the severe competition also contributed to its development. From the point of managerial wisdom, it is essential to consider Coca-Cola’s environment and performance, the main forces of competition, threats and opportunities, strengths and weaknesses, the company’s core competency, the set of resources, capabilities, and the complexity of the value chain.
The Influence of the General Environment on Coca-Cola
In terms of the company’s performance, the macro environment involves political, economic, social, technological, and legal factors. In addition, Coca-Cola understands the impact of such factors as environmental forces, demographics, and corporate social responsibility. As for the microenvironment, it presents the factors influencing every process of the company: customers, suppliers, competition, and market tendencies.
Customers represent the main influence on the company’s transformation and its optimization in terms of the competition. Coca-Cola proved that it has an outstanding sense of changeable customer’s needs and requirements, which helps to accommodate to the demands of consumers. For example, the company follows the consumer’s demands that define the market structure. In this way, the company works on the optimization of the marketing strategy and product lines. Coca-Cola monitors customer’s activities basing upon various events, holidays, and market trends.
Competition is another factor of the external environment, which pushes the company to the limit of its capabilities. The beverage industry is full of corporations willing to increase their share by presenting unique ideas and fresh marketing campaigns. Coca-Cola feels much tension from the competitors’ side and thus has to accommodate to the conditions created by other companies. It is the main source of motivation that helps Coca-Cola to grow and develop.
The Analysis of the Forces of Competition
Two Most Significant Forces
The five forces model presented such valuable factors as the threat of new entrants, the impact of substitute products, the bargaining power of suppliers and customers, and competition. Nevertheless, it is worth considering the most significant influence of substitute products and competition on Coca-Cola’s performance.
The threat of substitute products has a major impact on every process of the company, which leads to the continuous transformation of the manufacturing processes and marketing campaigns. As a result, Coca-Cola has to revise its product lines regularly in order to hold the same share of customers and work on its expansion. One of the typical examples of the problem is that the customers continue to argue whether there is a difference between Pepsi and Coca-Cola drink. To handle this issue, the company found a sensible solution that refers to the monitoring of product quality, switching costs, and regulation of the flexibility of product prices. Owing to these activities, customers tend to stay loyal to the brand due to the opportunities offered by the company, namely low prices, unique design, and bright advertisements.
Another influence which Coca-Cola has to address is competition. It is one of the major factors, which shape the company’s strategic planning. Pepsi is the main competitor of Coca-Cola who aims to increase the market share by presenting similar products. However, Coca-Cola does everything possible to attract attention of the new customers and generate loyalty among them with the help of new marketing strategies supporting the company’s image and brand (Brownsell, 2011). For example, the company attained a significant share of revenue by placing vending machines that sell drinks with printed names on the cans. It became a new breakthrough for Coca-Cola in retention of the customers.
First, Coca-Cola should optimize its approach to reduce the negative impact of substitute products. For example, the company has already created low-calorie and fat-free versions of a Coca-Cola drink, which attracted customers who care about their health. The same approach can be helpful in creating non-carbonated beverages. Regardless of the fact that carbonated drinks represent the core of the company’s brand, it will be surprising for customers to try the same drinks with more vitamins and flavors.
Second, the company should address the problem of severe competition from the new perspective. The marketing strategy should become a platform for further improvement of the company’s market position. As long as the company has already become one of the main supporters of sport events, it may also try to support cartoons and movies (Brownsell, 2011). For example, special editions of cans and bottles can attract customers’ attention and encourage purchasing more drinks to collect magnets or other souvenirs related to the cartoon or movie characters. In this way, Coca-Cola will be capable of keeping its brand and image fresh.
External Threats and Opportunities
Coca-Cola’s positioning in the market leads to the establishment of two primary threats, which may be harmful in terms of the competition. One of the threatening factors is using water as the main component of the company’s products. Today, it does not represent any threat to the environment. However, environmental agencies may start acting fiercely if the company’s overconsumption of water becomes too dangerous.
Indirect competitors represent another threat, which means that healthier drink options may become more appealing to the customers. For example, Coca-Cola offers carbonated drinks full of sugar, while Starbucks offers its visitors to taste coffee, tea, and juice. The contemporary customers’ desire to make healthier food and drinks choices may result in a significant decrease of revenue. Similar industries and companies should become another focus of the corporation’s strategy aimed to increase its competitive advantages. Coca-Cola should work on providing more useful drink options in order to protect its brand and image from threats coming from indirect competition.
In terms of opportunities, the company should also focus on the healthy trend shared among the customers. Healthy food and drink options will be surprising for the customers, which will help to attract attention globally. In addition, it will show the company’s desire to guard the customers’ health condition. Coca-Cola may also try to expand its performance in the developing countries including India, which shows outstanding preference for carbonated drinks.
Coca-Cola’s Strengths and Weaknesses
One of the main advantages of the company is its global presence, which helps to adhere to cultural preferences and needs of the customers. Behavioral peculiarities define customer’s needs and requirements, which Coca-Cola knows how to address. In addition, the company’s marketing campaigns find support among well-known celebrities and legendary sports figures that make the company outstanding among its competitors. All these factors contribute to the strong customers’ loyalty, which guarantees a significant share of the company’s revenue.
The main weakness of Coca-Cola lies in its inability to address the competition with Pepsi, which continues to threaten its leading positions. The problem of the company consists in a challenging navigation through the market full of competitors willing to win their market share. Along with the problem of poor diversification of the products, Coca-Cola’s strategic plan requires various improvements in order to strengthen the marketing position.
To enhance strengths and reduce weaknesses, the company needs a single strategy. For example, the company may use celebrities and sports legends to advertise new healthy products. It will ensure the effectiveness of the marketing campaign used to promote new products in the global arena. The strategy should also be supported by resource management and re-engineering initiatives, which will increase Coca-Cola sales and will address the problems of poor diversification and severe competition.
Resources, Capabilities, and Core Competencies
Tangible, intangible, and human resources are the main types of resources. In 2014, the company managed to generate gross profit equal to $28.78 billion and reach the point of the market value equal to $83.84 billion (Wang, 2015). In this way, Coca-Cola has an appropriate level of financial sustainability in order to guarantee its productivity and reinvestment strategies.
The corporation also has stability in the management of intangible resources that include the company’s reputation and technological support. Due to the timely investment in the refreshment of technological equipment and support of the performance according to the company’s reputation, it is possible to maintain leading positions and ensure further growth.
As for the human resources, the company has approximately 100 000 employees who willingly contribute to the implementation of the strategic plan (Gardner et al., 2011). Employees’ engagement and empowerment help Coca-Cola to remain competitive on the market. As a result, motivation and job satisfaction take a primary position in the company’s organizational culture.
The beneficial aspect of the company’s capabilities is that it managed to invest in training and development of employees, which helps to support the growth of the company owing to the professionalism of employees. Investment in marketing strategies is also favorable to the support of the company’s reputation, brand, and image. Moreover, the global presence of Coca-Cola has a positive influence on its market penetration. Coca-Cola proved to be a valuable brand, which, however, works on the protection of its image and reputation.
The Core Competency
Coca-Cola’s core competency lies in its ability to build a respectable brand, which is the source of its growth. The best example of the company’s brand-building effectiveness is the company’s long history that includes various challenging aspects on the way to success. In terms of a changeable market environment, the company’s core competency is effective and important enough to promote Coca-Cola’s development.
The company’s value chain includes upstream processes, logistics, and downstream processes. Upstream processes include agriculture along with other processes aimed to source the required set of resources. Non-toxic packaging initiatives and water stewardship occur in the upstream processes as well. The stage of logistics continues the upstream processes including water stewardship on the territory of the factories. The downstream processes aim to deliver products and sell them according to the standards of quality supported by the company. The stage finishes with recycling operations.
Coca-Cola performs in an environment full of competitors that are willing to increase the market share at the expense of the company’s customers. There are many threats and opportunities faced by the company, which have a significant influence on strategic planning. The evaluation of the company’s strengths and weaknesses identified the most appropriate ways to address competition and the threat of substitute products. In general, the company’s brand-building competency should be effective in the revision of strategy along with reinvestment related to the diversification of the product lines.