Coca Cola Company - Source of Sustainable Competitive Advantage and Business Level Strategies - Case Study Example

Analysis of Coca Cola Company Name Institution Course Date Introduction Today’s firms have to manage and operate under dynamic and complex business environment (King and Zeitham, 2001). A complex business environment is very hard to predict due to many uncertainties. For organisations to succeed in such an environment, firms must think strategically. This involves understanding of the changing competitive environment, exploiting opportunities and seeks improvement in every sector of business (Barney, 2001). Organisations must respond very quickly to opportunities and threats. In order to succeed and improve performance, firms must compete in a way that they outperform their competitors in the business environment. In order to be more competitive, organisations should endeavour to satisfy their customers more appropriately and proficient compared to their competitors (Barney, 2001). Generally, an organisation must strive to add value in order to succeed. Adding value leads to competitive advantage. Coca-Cola Company has come up with strategies to boost its competitive advantage in order to survive in the business world that is rattled with intense competition. Therefore, this report will highlight the corporate identification, research as well as corporate revenue centres of Coca-Cola. Furthermore, it will assess the external environment of the company and its source of sustainable competitive advantage. Finally, it will highlight the business level strategies for the company. Corporate Identification A corporation is a company that meets assured legal requirements to be identified as having a legal presence, as a unit separate and distinct from its owners (Barney, 2001). Coca-Cola is a good example of corporation that span over multiple business units and a proper product and service portfolio. Coca-Cola’s product portfolio offers a vast range of quality, refreshing beverages with nutritional value and information about their ingredients for their consumers (Coca-Cola Journey, 2014). It focusses on three priorities. First, it aims at providing their consumers with greater options by introducing new products through minimizing of both calories as well as sugars across their ranges of products. In addition, Coca-Cola offers additional information through being open about both their calories and ingredients in their products (Coca-Cola Journey, 2014). Lastly, Coca-Cola Company ensures that their products are sold and marketed responsibly. Additionally, Coca-Cola Company has a Coca-Cola, Fanta and Sprite representing about 29 per cent of their portfolio (Coca Cola, 2013). The company also has a vast range of products such as low-calorie soft drinks such as Diet Coke and Coca-Cola Light which are alternatives for the larger group of flavoured drinks. Also within their product portfolio, they have waters, sports drinks, energy drinks as well as functional waters. According to Wenger (2000), product portfolio is the assemblage of every product or even services provided by a corporation. Corporate Research Mathews (2003) describes the business unit as a functional unit of a business that creates its self-strategic vision and direction. The Coca-Cola Company has two operating units: Coca-Cola Refreshments and Coca-Cola North America. These business units are franchise models which gets into product generation as oppose to only owning bottles. Corporate Revenue Centres Revenue is the sum of funds that a corporation usually gets during a specific period which are inclusive of discount, deductions for reimbursed merchandise (Bowman and Collier, 2006). Coca-Cola’s revenue centres includes the bottling partners, restaurants and convenience stores, retailers, wholesalers and distributors and also other nonalcoholic beverage brands (Coca-Cola Journey, 2014). Coca-Cola generates revenue through selling of concentrates and syrups to bottling partners. Furthermore, in the finished products. Coca-Cola generates its income through selling a wide range of products such as sparkling beverages, still beverages, energy and sports drinks and juices and juice drinks to retailers or to wholesalers and distributors (Coca Cola, 2013). In addition, Coca-Cola manufacture fountain syrups for restaurants as well as convenience stores, who utilize them to develop beverage for immediate consumption. External Environment Analysis The environment of Coca-Cola Company can be analysed in terms Political, Economic, Socio-cultural, Technological, Environmental and Legal factors. Acquaah (2003) describes the operating environment as the outside influences that affect the functionality of a business. It is also referred to as the external environment. Therefore, the external environment of Coca-Cola involves: Political Factors Coca-Cola being the world’s dominating soft drink producer and seller, they ought to abide by the rules and regulations set by the country within which they operate. For instance, in Canada, there are standards on the amount of caffeine tolerable in a soft drink (Coca-Cola Journey, 2014). Economic Factors Between the year 2006 and 2012, inflation rates in the United States imposed on food and beverage was very high (Coca-Cola Journey, 2014). This directly affected the disposable income the consumers used on such commodities. This problem combined with the increased cost of transportation globally caused by inflation in oil prices affected the transportation of their products. The increased in costs in the industry has caused a decrease in the disposable income of the potential customers. This therefore translates into lower revenues for Coca-Cola Company. Socio-cultural Factors Over the past decade, there has been an increased awareness regarding human health. This awareness has pushed the social movement towards a lifestyle that embraces healthy living all over the world. Soft drinks have been considered to be the cause of type-two diabetes. This has significantly pushed the society into looking for healthier alternatives (Coca-Cola Journey, 2014). This concern may affect Coca-Cola since its consumers may shift to healthier drinks therefore; the company is continually developing products that meet their customer’s needs. Technological Factors In order to boost brand awareness, many companies results to social media tools. This has been due to their high traffic of users. Therefore, Coca-Cola uses these sites such as Facebook in order to expose their brand to a larger market (Coca-Cola Journey, 2014). Environmental Factors The company is bound by powerful regulatory scrutiny from Environmental Protection Agencies concerning the conduct of its service. Green issues have also affected Coca-Cola as the nature of its products has been considered unfriendly on the basis of its bottling and packaging (Coca-Cola Journey, 2014). Legal Factors There are countries where Coca-Cola doesn’t sell its products. For instance, Cuba and North Korea had earlier trade embargos. This is because of the policies that are in existence in those countries (Coca-Cola Journey, 2014). Source of Sustainable Competitive Advantage Coca-Cola Company owns an uncontended distribution network all over the world which distances over 200 nations (Coca Cola, 2013). This kind of infrastructure is hard for other entrants to acquire. This comes as a competitive advantage since it is not only costly, but also has a base for an economy of scale (Oliver, 2000). Furthermore, their brand is well known all over the world which gives them an added advantage. Also, Coca-Cola has a 2020 vision which focuses on processing the lowest cost logistics and manufacturing business while at the same time maintaining their principles. The four major for sustainable competitive advantage include valuable, rare, costly to imitate and non-substitutable (Christos, 2009). It is essential to emphasize that if a firm need to create sustainable competitive advantage it should possess the capabilities that can add value to the customers. Also, it is important for a corporations to consider the rarity of strategic capabilities. Competitive advantage can be achieved if a company’s processes has a unique or rare capability. It can acquire the form of a unique resource or rare competencies. Another factor is inimitability. In order to attain competitive advantage, the resources and competences must be hard for competitors to imitate (Christos, 2009). Corporations can also decide the potential of its capabilities by measuring the non-substitutability of strategic capabilities. Normally, substitution may take different forms such as the product or service substitution and competence substitution. In order to gain competitive advantage, managers need to take into consideration how and to what degree it possess capabilities that are rare, valuable to buyers, inimitable as well as non-substitutable (Christos, 2009). Business Level Strategies Coca-Cola Company utilizes a differentiation level of strategy to mark themselves exclusive through the creation of products and services that are of values and unique (Zollo and Winter, 2002). Furthermore, they have a non-price, quality which consumers pay premium for. In addition, the company distinguishes themselves in the way they market and advertise their products. This entices their consumers maintaining their brand recognition over their competitors. It is recommended that Coca-Cola should continually strive to use differentiation strategy to keep themselves separated from their competitors (Wang and Ahmed, 2007). For example, they should use alcohol drinking culture to their leverage by attaching a bottle of Coca-Cola on a whiskey bottle as a complementary drink. This will attract more consumers to purchase their products as a mixer (Wang and Ahmed, 2007). Conclusion To sum up, today’s firms have to manage and operate under dynamic and complex business environment. In order to be more competitive, organisations should endeavor to satisfy their customers more appropriately and proficient compared to their competitors. Coca-cola has a wide portfolio with products such as Fanta and Sprite which represents about 29 per cent of their portfolio. Furthermore, the various revenue centres of Coca-Cola include: bottling partners, restaurants and convenience stores, retailers, wholesalers and distributors and also other nonalcoholic beverage brands. Additionally, Coca-Cola is affected by various external environments such as Political, Economic, Socio-cultural, Technological, Environmental and Legal factors. Furthermore, Coca-Cola has a sustainable competitive advantage since they have a vast distribution network which makes it difficult for entrants to acquire. Generally, the four major for sustainable competitive advantage include valuable, rare, costly to imitate and non-substitutable. Coca-Cola Company utilizes differentiation level of strategy to mark themselves exclusive through creation of products and services that are of values and unique. It is recommended that Coca-Cola should continually strive using a differentiation strategy to keep themselves separated from their competitors. 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