Coca Colas Business Level and Corporate Level Strategies - Essay Example

Coca-Cola’s Business-Level and Corporate-Level Strategies Coca-Cola’s Business-Level and Corporate-Level Strategies The Coca-Cola Company has experienced great success in its operations over the years. The company was established in 1986 and has its headquarters in Atlanta, Georgia. The company operates in the beverage industry with over five hundred non-alcoholic brands manufactured and marketed under its name. Despite concentrating on the manufacturing and marketing of sparkling beverages, Coca-Cola also has a stake in the still beverages market. Coca-Cola operates in over 200 countries across the globe (The Coca-Cola Company Website). Nevertheless, nonalcoholic beverage industry is overly competitive, and Coca-Cola has taken the lead over the years in manufacturing and producing in this industry. The company’s success cannot be attributed to serendipity; rather, the effectiveness of the management of Coca-Cola has facilitated the eloquent positioning in regards to competition. In essence, the management of the company has put in place strategies, both in the corporate-level and in the business-level, in order to ensure that the company is flourishing. The separation of these two critical levels of strategies is salient to the long-term performance and organization. The objective of business-level strategy is to create a value that appeals to the customer without compromising the cost-efficiency of the producing the value. In other words, business-level strategy focuses on how the company will satisfy the needs of the target customers in the existing market through meeting their needs accordingly and thus being competitively advantaged. On the other hand, corporate-level strategy focuses on the strategy of the organization in it’s entirely. Whereas the business-level strategy focuses on a single business unit, the corporate-level strategy focuses on the entire portfolio of the organization’s business. Corporate-level strategy involves deciding the products and markets that the company will venture into (Carroll and Buchholtz, 2014). In this discussion, the business-level and corporate-level strategies employed by Coca-Cola Company will be addressed, as well as the how these strategies differ from the principal Competition, PepsiCo, and in different market situations. In the business-level, Coca-Cola has complied with Michael Porter’s three generic strategies of attaining competitive advantage. On the first note, Coca-Cola employs a differentiation strategy in its bid to separate and make itself unique from other companies in the market. It is evident in the unique design used in the packaging bottles. In fact, the shape of the bottle has a positive psychological impact on the consumption of the company’s beverages. Research shows that people feel skinnier and better when the shape of the bottle is curvy and yet slim (Jansson-Boyd, 2010). By so doing, the products of the company are consumed to a higher extent as compared to the competitors. Coca-Cola also differentiates its products by providing the beverage consumers with a wide range of brands and flavors to choose. For instance, the company produces and markets the leading nonalcoholic sparkling beverage brands in the world: Coke, Diet-Coke, Sprite and Fanta. This strategy ensures that the company reaches as many prospective customers as possible. Besides, the customers’ preferences and tastes are regarded in that the company goes an extra mile of offering different flavors for their brands, such as the Black Currant for the Fanta brand. For those customers who are health conscious, Coca-Cola bears their concerns in mind by offering them Diet Coke (The Coca-Cola Company Website). In essence, the company commands a greater market share for its products as compared to is competitors through differentiating its products by offering different brands and flavors. In addition, the differentiation strategy of Coca-Cola is apparent in its marketing techniques. Unlike its competitors, the company sponsors a myriad of events in its attempt to give back to society, something that has a positive impact on the attitude of people towards the products of the company (The Coca-Cola Company, 2014). What is more is that Coca-Cola presents its advertising campaigns in a unique manner, and this boosts the customers’ loyalty to the brands of the company instead of those of the competitors. It is through these powerful advertising techniques that the company attains a high brand recognition and positive image. Also, the products of the company are perceived to be quality and superior in relation to those of other companies in the market (Vrontis and Sharp 2003). On the second note, Coca-Cola’s business-level strategies encompass the cost leadership strategy. Cost leadership means that the company can explore all the possible cost advantage sources and subsequently uses them to produce and market its products at a low cost. Coca-Cola achieves cost leadership through the economies of scale. The company’s products are highly standardized, despite covering a large market niche. As a result, the company produces its products at a relatively low cost and markets across the world (Vrontis and Sharp 2003). Given this, the company saves on cost of excessive differentiation, which has the eventual effect of reducing the price that the customers have to pay for the beverages. Additionally, the unmatched distribution system of Coca-Cola constitutes its cost leadership strategy. The distribution system is considered to be the greatest in the world. The company first manufactures concentrates, syrups and beverage syrups before selling them to the bottling partners, which are either owned or controlled by the company, after which the raw materials undergo manufacturing, branding, packaging, merchandising and distribution to the vendors and customers. The effectiveness of this distribution system translates into 1.9 billion beverages of Coca-Cola being sold each day (The Coca-Cola Company, 2014). It is imperative that the knowledge and experience acquired under this distribution system will continue to add to the success that Coca-Cola is currently enjoying. On the third note, the focus strategy is one of the business-level strategies that Coca-Cola has employed in its operations. In this respect, the company has narrowed down its scope of competition into the beverage industry and specifically to the nonalcoholic beverages. This strategy has allowed Coca-Cola to better meet the needs of its target market by emphasizing more on effectiveness than efficiency in regards to the gaining of competitive advantage (Tanwar, 2013). Apparently, this strategy has helped Coca-Cola outperform its competitors. The saliency of these three business-level strategies, the differentiation strategy emerges as a key strategy for the long term success of Coca-Cola. It is because through differentiating the company’s products, in relation to those of the other firms in the industry, Coca-Cola will expand its market share and enhance the loyalty of its current customers. To boot, differentiation ensures that the disparity in tastes and preferences in various regions in which Coca-Cola operates are taken into consideration. In fact, by standardizing the production of the beverages, the company will be assuming that tastes and preferences are homogeneous across the world, something that is misleading and very detrimental to the growth and progress of any given company. The value added by the corporate-level strategies of Coca-Cola cannot be underestimated. Firstly, the company employees the international expansion strategy in its operations as it is evident from its global presence. As mentioned early, the company operates in more than 200 countries through the world. According to 2013 annual report of the company, out of the 28.2 billion units sold by the company, only 19 percent of the sales were made in the U.S. (The Coca-Cola Company, 2014). This implies that over 80 percent of the company’s revenue is derived from the international platform. In fact, if it were not for this strategy, Coca-Cola would not be hailed as its success as it does currently. The company’s significant competitors do not match the degree of international presence that Coca-Cola has a further reason for the company take the lead in the industry. Secondly, the level of diversification in the product markets that Coca-Cola involves in makes up part of the corporate-level strategies of the company. Diversification involves the involvement in another product line, either similar or dissimilar to the primary product of the company. Coca-Cola’s primarily produces and markets sparkling beverages under different brand names, such as Coca-Cola, Fanta, and Sprite. However, the company also engages in the manufacturing and marketing of still beverages, such as juice drinks, enhanced water, sports and energy drinks, and ready-to-drink coffees and teas (The Coca-Cola Company, 2014). The company trivializes the risk of being hindered from progressing if the current market of sparkling beverages fails to provide opportunities for further growth by implementing this strategy. Additionally, the company can expand its customer base by venturing into a different but related product lines. Ostensibly, the two corporate-level strategies are very significant to the operations of the company, but the international expansion strategy comes forth as more important for the long-term success of Coca-Cola. It is because the acceptance the company’s products across the world suggest that the emerging markets will also embrace the beverages. It seems like the Coca-Cola is not operating to its potential by not having presence in each and every country across the world. The diversification strategy, on the other hand, will expose Coca-Cola to new competitors, and in this way, shift its focus from the primary sparkling beverages. The result of this possibility is that the loyal customer base Coca-Cola claims will leave, and the company will fail execrably. The competitive nature of the nonalcoholic beverage sector is unmistakable. There are many companies that pose stiff competition to Coca-Cola, including PepsiCo, Nest’le, The Unilever Group, DPSG and Groupe Danone, among others. Even so, the primary competitor of Coca-Cola is PepsiCo (The Coca-Cola Company, 2014). The two companies have formulated various strategies to counter the competitive efforts of the other. For instance, on the corporate-level, PepsiCo employees the acquisition strategy for acquiring already established companies, such as SBBC and Quaker Oats, as well as the international expansion strategy and diversification in its operations. On the other hand, Coca-Cola uses the international and diversification strategies to gain market power against PepsiCo. Even though Coca-Cola has relished success over the years, in the long-term, it appears that PepsiCo will outperform Coca-Cola. It is because Coca-Cola operates in the beverage industry only while PepsiCo engages in the production of beverages and snacks. In essence, the snacks segment is an added advantage to PepsiCo in terms of future cash performance (Tanwar, 2013). Moreover, if the PepsiCo upholds its strategy of acquisition in the future, it can still outdo Coca-Cola in what it does best because it will pool the market share of all the other competitors in the nonalcoholic beverage sector. On the hand, the business-level strategies of PepsiCo and Coca-Cola somewhat differ. Rather than merely focusing their operations on the beverage industry like Coca-Cola, PepsiCo has ventured into the snack sector. Besides, the company’s cost leadership is fairly good since its products are primarily standardized but does not correspond to that of Coca-Cola. Unlike Coca-Cola, the PepsiCo’s products are barely differentiated to meet the varying tastes and preferences of its target market (Tanwar, 2013). Given this, PepsiCo will forever remain under Coca-Cola even in the future. As a matter of fact, the increase in net sales experienced by PepsiCo is attributed to the acquisitions and not an improvement in its products and services. Clearly, the prosperity of Coca-Cola in the nonalcoholic beverage sector is unbeatable. However, the situation would be different if the beverage market would be considered fast-cycle such that PepsiCo would easily imitate the competitive advantage of Coca-Cola. Currently, Coca-Cola possesses a secret formula for the production of its primary beverage brands. As such, it has patent rights over the formula, and this makes it difficult for PepsiCo to copy the competitive advantage that Coca-Cola revels. Nonetheless, if the nonalcoholic beverage market were fast-cycle in nature, then PepsiCo would outdo Coca-Cola in the business-level strategies because the prevailing setback is that the competitive advantage of Coca-Cola is proprietary and sustainable. On the contrary, the situation would have been similar if the market under consideration were slow cycle in nature. In slow-cycle markets, it is overly difficult for a rival company to imitate the competitive advantage of another company. In the context of Coca-Cola and PepsiCo, Coca-Cola would remain in the lead even in the long term in respect to the business-level strategies of differentiation, cost leadership and differentiation because PepsiCo would find it difficult to imitate these strategies. On the corporate-level, PepsiCo would lead, in the long run, not because it would successfully imitate the competitive advantage of Coca-Cola, but the companies distinct competencies of acquisition and unrelated diversification will not be copied by Coca-Cola. Without doubt, the type of market demonstrated in a given sector or industry has a great impact on the success and failure of the participants. References Carroll, A. & Buchholtz, A. (2014). Business and Society: Ethics, Sustainability, and Stakeholder Management. Stamford, CT: Cengage Learning. Jansson-Boyd, C. V. (2010). Consumer psychology. Maidenhead: Open University Press. Tanwar, R. (2013, December). Porter’s Generic Competitive Strategies. Journal of Business Management, Vol. 15 (1). pp. 11-17. The Coca-Cola Company. (2014, February 27). Annual Report Pursuant To Section 13 of 15(D) of the Securities Exchange Act Of 1934: For the fiscal year ended December 31, 2013. Retrieved from The Coca-Cola Company Reports database. The Coca-Cola Company Website. Accessed 6 February 2015 on Vrontis, D. & Sharp, I. (2003). The Strategic Positioning of Coca-Cola in their Global Marketing Operations. The Marketing Review, Vol. 3(1), pp. 289-309. Read More