Managerial Economics Business Strategy
Firms history
Coca-Cola Company is US based soft drink company which is headquartered in Atlanta Georgia. The company mainly deals with production of carbonated soft drinks which are sold in restaurants, stores and in the small enterprises in US and in the foreign countries. Coca-Cola Company was established in 1886 in Atlanta during when its products were sold as patent medicine. John Pemberton, the pioneer of the Company promoted his products by claiming that the soft drinks would cure wide range of diseases including impotence and headache. In order to increases the consumption of the soft drinks Pemberton initiated the first advertisement strategy in May 29, 1886.The advert appeared in the Atlanta journal, which was the major source of information during that time (Mireles, 2007).
Overall size and concentration ratio of Coca Cola in the Soft drink industry
The beverage industry has for along time attracted large number of firms. One of the major reason as to why companies have entered the industry is in order to compete with Coca Cola Company which has dominated the market for a long period of time. With the large number of products which the company has introduced in the market, it has effectively counteracted its competitors who have not been able to diversify their product line. Coca Cola Company market segment covers more than 200 countries in the world. With more that 100,000 employees and revenue generation of more than 50 billion US dollars per annum, the company has widened its market base to cover regions which competitors have failed to dominate. Due to the high demand of its products in US, the company has increased its concentration in the US market. In turn the company has been able to increase its annual sales and profits. The company annual profit is approximately 5,808 billion US dollars.
Revenue generation
Coca Cola Company marketing strategies have positively affected its profitability. Due to the intensive advertisement and promotion, the number of consumers of the company products has continued to increase. As a result, the company has continued to enjoy increasing revenue and huge market segment. With more than 52 billion beverages products which are consumed daily by the consumers, Coca Cola soft drinks account for more than 1.7 billion. In turn the high annual revenue of the company which currently stands at 31,944 million US dollars has made it possible for the company to execute its operations as well as undertake more research and development strategies. It is good to note that based on the 2007 Annual Report, the company registered 37 sales in US, 20 in the rest of the world while sales in Brazil, China and Japan stood at 43 (Simon, 2009).
Production technology
One of the techniques which Coca Cola Company has adopted in order to dominate the market is the high production technology which the competitors are not able to duplicate. In the same way the company has adopted modern technology which has made it possible to diversify its product line. Some of the new brands which the company has introduced in the market include Coca-Cola Vanilla, Coca-Cola Cherry and Coca Cola Zero. In its production facilities the company utilizes caffeine, Phosphoric acid, sucrose and carbonated water. It is imperative to note that the company utilizes franchising model in its production and distribution of its products. This implies that the company produces concentrated syrup which is then sold to various bottlers in different parts of the world. The distributors prepare the final soft drink by mixing the syrup with clean water. In order to safeguard the exact formula applied in the production of Coca Cola products, Sun Trust Bank acts as the custodian of the original copy of the formula on behalf of the company. In this way, it has been very difficult for the competitors to come up with products which are exact like those of Coca Cola Company both in terms of quality and color.
Product lines
Coca Cola Corporation top management team has for a long period of time realized the importance of products diversification. Having in the soft drink industry for more than 100 years, the company has more than 400 brands of soft drinks. Some of the major products includes Cherry Coke which was introduced in 1985,Diet Coke with lemon to improve its quality, Coke with lime, Coca-Cola zero, Coca Cola blak,Diet Coke plus, Vanilla Coke and Diet Coke with citrus zest. With this wide product diversification, it very clear as to why the company enjoy a competitive advantage over its competitors.
It is also vital to note that due to the high number of company products it has made it possible for the company to continue with its operations. This is based on the fact that a loss by one type of a product is counteracted by profits made by another type of brand. This means that the aspect of Coca Cola as a going concern is highly valued by the entire management team.
Market share
As mentioned earlier Coca Cola Company market segment covers global market. It is due to the company strong advertising strategies which has made it possible for the large number of consumers to emulate strong loyalty towards the company products. In the same way, the company has been able to put off its major competitors in the soft drink industry(Pfeffer and Salancik, 2008).Some of the notable competitors are Kola Real in South America, Corsisa in French and Inca Cola, one of the major soft drink in Peru. However, due to the effectiveness of the marketing and promotional strategies adopted by the company marketing department the company has continued to dominate a large market segment which has resulted to an increased level of profitability for the company.
Management style
The company top level management team is based in US. The team is under the effective leadership of Muhtar Kent who is the also the CEO of the company. In order to effectively manage high number of other affiliated branches in different parts of the world, qualified managers are responsible to oversee their operations. The management style adopted by the company puts into consideration the need to perform company duties as a team and the desire to enhance performance. It is based on this fact that Robert Goizuetta, former CEO changed the management structure after the company recorded a decrease in the revenue. In addition, Robert streamlined the recruitment process of managers and senior company personnel and as a result a great level of performance was realized by the company.
Coca Cola Company RD (Research Development) strategies
Research and development (RD) is an aspect that every organization which is focused towards maximizing its profits and the overall shareholders returns cannot overlook. Coca Cola has put in place proper avenues through which it has initiated strong innovation strategies. Under the leadership of Danny Strickland, the technology and innovation personnel, the company has ensured that its quality products meet the needs of its consumers. One of the important RD strategies which the company has put in place is a RD center established in Turkey. This has positively the operations of the Company in Turkey and the neighboring countries. Coca Cola Company commitment to RD tactics is geared towards providing valuable products to the consumers. In order to achieve this, the company has established four more areas of technology in addition to its core business of producing soft drinks. These areas include Vending equipment, Water treatment systems, Fountain equipments and modern packaging system (Zyman, 1999)
Marketing strategies adopted by Coke the major product of Coca Cola Company.
This part of the paper will analyze the marketing strategies adopted by Coca Cola Company in marketing Coke, the companys main product. Coke was established in 1944 by a Griggs Candler, a famous businessman. In the 20th Century the marketing tactics applied by the Griggs made it possible for this brand to dominate the soft drink industry.
Coke pricing strategies
In order to penetrate the market effectively the prices of the Coke was initially very low. For instance, a single glass of Coke was sold for five cents. This was a proper strategy to put off the high number of competitors who were entering the market with an intention to compete with Coke. Depending with the costs of production and the transportation costs 1 litre of the Coke soft drink is priced between 1.5 to 2.0 US dollars. With these flexible and low prices it has been possible for many consumers to comfortably acquire the beverage. Likewise, the pricing strategies have created a positive customer company relationship thus increasing the sales level for the company (Murden, 2005).
Coke Competitive strategies
Distribution strategies
Coke is distributed by the members of channel who have been licensed by the company. In the same way, the distributors are responsible for diluting the concentrated syrup which is obtained from the companys production department. This gives coke a competitive advantage over its competitors in that customers are able to get their favorite beverage on time. Secondly, through the assistance of the distributors in preparing the final product the costs of production is distributed among the producers and distributors.
Advertising strategies
Since its introduction in the market, Coke has been effectively identified by most of the consumers due to the intensive advertising campaign it has initiated. In order to make the product acquire more awareness in the minds of the consumers, the company has used celebrities to advertise Coke. One of the celebrities used by this brand in its marketing strategies is Selena. Through the television commercials in the US she strongly influenced the advertising strategies for Coke. In addition, Coke used slogan which were very different from those of the competitors but which were and highly recognizable. Such slogans include Id like to buy the world a coke, Coke the drink that pauses and the other side of Coke. Based on such an intensive advertisement, the company has been able to effectively put at bay its main competitors such as Big Cola in Mexico, Breizh Cola and Corsica Cola in the French market.
Recommendations
With the increasing competition in the soft drink industry, it imperative for Coca Cola Company to invest in improving the existing products. Since most of the competitors have now taken more strategies to go global and to utilize e-marketing, it is vital for the company to improve on the quality of the existing products.
As mentioned in the production technology section, Coca Cola Company utilizes sucrose and HCFS (High-fructose corn syrup) in the production of its products. However, it is important to note that even though the two ingredients are important in the production of Coke their adverse effect is a great concern to the consumers in US and in other countries. The first major effect is that their consumption results to an increased chance of Obesity to the consumers. Secondly, excess in take of sucrose leads to increased level of insulin which results to gout. Likewise, HCFS has also been a major cause of increased body sugar level. However, HCFS has less negative effects as compared to the sucrose. In this regard, it is imperative for Coca Cola Company to consider a change in its composition of the Coke ingredients. One technique which the company can adopt is use of real sugar in its production of Coke. As a result, the company will reduce the expenses incurred in the carbonization and affination processes involved in the refining of the sugar. This will also lead to increased profitability and reduced health expenses for the consumers of Coke brand.
Another advantage of using real sugar in place of sucrose is that it avoids use of harmful chemicals such as phosphorus and calcium carbonates which are harmful to the consumers. In turn, this will positively enhance more purchases and loyalty a fact which will lead to more consumption. To avoid the high costs of importing real sugar, Coca Cola Company should come up with a program which will enable it acquire land where it can grow its own sugarcanes. Alternatively the company should encourage farmers to adopt sugarcane as an agricultural activity. This will increase the sugarcane production reduce cost of raw material and increase profits for the company. Since the company utilizes locally produced and imported HCFS, replacement of sucrose with real sugar will reduce the cost of importing the HCFS.In this way, the company will provide an avenue through which more revenues will generated by Coke brand. More sales for Coke will act as a source of income for the company to support other Coca Cola brands which are currently in the market or which are going to be introduced in future.
The company should also increase its CSR (Corporate Social Responsibilities) programs. This can be undertaken by use of tree planting exercises and digging of boreholes in dry areas especially in African and Middle East countries. In this way, it will not only improve its relationship with the customers, but it will also create a positive image of the public as well as the government. Based on the above analysis and recommendations competitors in the soft drink industry will not be able to outdo Coca Cola Company in the soft drink industry. The prices mechanisms and the continued marketing strategies including brand diversification by the company will pray a vital role in ensuring that potential competitors are kept at bay.