Business Level Strategy

Which business level strategy does Coca-Cola use?

    Coca-Cola uses the differentiation strategy to make themselves unique and separated from other companies. By using the differentiation strategy, Coke creates a product and service that is unique and valued. They also have non-price attributes that customers will pay a premium for. 
   Coke differentiates themselves by using unique marketing and advertising campaigns to entice their customers to stay loyal to their brand by continuing to purchase coca-cola products versus one of the many competitors. They also have different bottle shapes. Research has been conducted that shows people feel better about themselves and skinnier if the bottle is shaped like a curvy, but slim body shape. Another great differentiation strategy Coke has done, is the above Coca-Cola Freestyle machine. This machine allows customers to mix and match their classic Coca-Cola beverages with many different flavors.
   Coke will need to continue to work hard at using the differentiation strategy to keep themselves separated from its competitors. To do this, Coca-Cola will need to keep introducing new beverages that will maintain customers' brand loyalty. Another way to differentiate themselves would be to use alcohol drinking culture to their advantage. For example, many drinks are ordered as a "rum and Coke", "Captain and Coke" or "whiskey and Coke". Coca-Cola could collaborate with Captain Morgan or a whiskey company and sell attached 3 ounce bottles of liquor with a Coke bottle. Finally, Coca-Cola has a great tasting drink that people have loved for decades and will continue to purchase their product if Coca-Cola works hard to maintain their great Coke taste and innovative ways to present it to their customers.

Intellectual Capital

Intellectual Capital

What intellectual capital does Coca-Cola have as a part of their competitive advantage?

Intellectual capital is the difference between a firm's market value and book value. This is a measure of the value of Coca-Cola's intangible assets. Intellectual capital is broken down into human capital and social capital. Human capital is the "individual capabilities, knowledge, skills, and experience of the company's employees and managers". Human capital is key to a company like Coca-Cola because the knowledge of the Coke recipe and the personnel that have been operating this major corporation efficiently for years are invaluable. Muhtar Kent, Coca-Cola's Chief Executive Officer and Chairman of the Board, is very valuable to the company because he has been working his way up through the company since 1978. He has an extensive knowledge of operations leadership and marketing skills that have guided him to be the leader of number 59 on the 2012 Fortune 500 list. Social capital is "the network of relationships that individuals have throughout the organization". The long-term, polished relationships formed in the Coca-Cola administration has allowed the value of Coke's social capital to rise. The relationship Coca-Cola has with its suppliers, customers and partners is also very strong because Coke has been around since 1888. According to Interbrand, Coca-Cola is the most valuable brand name in the world valued at $77.8 billion dollars. The original Coke beverage is just sugar and water costing nickels. Once the brand name Coca-Cola is printed on the drink, it can be charged for dollars. The Coca-Cola Corporation also sells 3,500 other beverages worldwide.

Internal Environment

Coca-Cola's Internal Environment

Coke's Value Chain- What does Coke do that adds value to the Coca-Cola Company

Primary Activities: 

The inbound logistics aspect of Coca-Cola is very strong as they have over 300 distribution or bottling centers across the globe serving to over 200 countries. Having many distribution facilities will minimize shipping time to decrease shipping costs and therefore increase revenue. 

A lot of research is put into the design and layout of the warehouse and other bottling centers. Since having intelligently laid out these warehouses, Coca-Cola has increased efficiency. Not only having inbound warehouses being effectively designed, Coca-Cola incorporates this layout technology in their outbound factories to increase their overall workflow design. 

Coca-Cola is one of the most recognizable brands in the world and continues to market their product extremely well. Coke's trademark value is estimated at a whopping $25 billion. The brand basically sells itself, but Coke is not just sitting back and being lazy. The Coca-Cola company actively researches the needs of its customer segments and targets to provide drinks and snacks that people will want. As a luxury product, Coke understands that luxury items are the first things to go when times get tough. For this reason they provide excellent service to their suppliers and customers. Without excellent service, a beverage company will fall by the wayside as there are many other products out there to substitute any type of drink.

Support Activities:

With over 500 brands owned by the Coca-Cola Company, there are many raw materials that are needed to support these snack and beverage brands. The main ingredient most of Coca-Cola's products is water. Coke understands the difficulties with many countries receiving fresh water and they work hard to deliver to these remote areas. Other than water, nutritive and non-nutritive sweeteners are used in their products. Coke has developed win-win relationships with their suppliers because both parties are in understanding that they will do a lot of business together. Coke does depend on one supplier for different ingredients they use. This could be dangerous for Coke as the supplier may take advantage of this relationship. 

The Coca-Cola Company is massive and has it's own internal administration. These internal divisions include Human Resources, Information Technology, Accounting and others. They also spend millions of dollars a year on research and development of new products. Continually changing and understanding the needs and wants of the world's population will lead to happier customers and increased revenues. 

General Environment

Demographic: Coca-Cola should target nearly all age groups from around five years old, where children can understand messages, to senior citizens who enjoy drinking diet soda or juice/tea. They should target both males and females but focus on males because they typically drink more liquid and drink more unhealthy products like soda. Of course women are still important as they will drink more juice, water or tea. All races and ethnicities should be considered as a possible target market for Coke. They should also focus on all income levels besides the lower-lower class because soda and other drinks are a luxury item and life can be lived without it.

Sociocultural: This aspect of Coke's general environment is very important and threatens the longevity of the brand as their main product, soda pop, is being labeled as extremely unhealthy with all of the high fructose corn syrup. Coke can battle these claims and focus on their healthier beverages or healthier aspects of their soda like no calories or made with natural cane sugar. More women in the workforce is excellent for Coca-Cola because more women are going to need caffeine to stay awake and will look to soda, hopefully, to get their fix. With cultural trends focusing more on fitness, Coke can narrow in their focus on their fruit/sport drinks. While people in general have a greater concern for the environment, Coke can use recycled bottles/materials. They could also make a slender bottle made with less plastic. Depending on individual family formations, if the family have kids, they will not drink as much soda because they do not want to be a bad example for their kids. Instead they will drink more juice and water.

Political: The increase in minimum wage will no doubt add costs as Coke will have to pay workers more for their services. Also with the FDA requiring food label disclaimers, this increases costs and labor for the Coca-Cola Corporation.

Technological: The chemical engineering of drinks could definitely change in the future as new technological processes arise. It is possible to get a younger demographic into Coke products by using online games and shows with new internet technology. Computer aided systems may help ease the logistic side of things for Coca-Cola. With population and global warming on the rise (potentially), there is going to be more people with warmer weather and therefore there will be more people drinking more beverages.
Wireless communications will allow for more feedback and ease the communication between sales associates and Coke's accounts. The growing technology will no doubt push Coke's product and will allow Coke to do greater research regarding materials and allow them to find and produce the best and lowest price point products.

Economic: With interest rates being quite low right now, it would be an excellent time for Coca-Cola to lock in a fixed rate. Unemployment rates are still high an with less people working, there is less money to spend on luxury items like soda. CPI may hurt Coke as inflation could hike the prices of soda/juice. Changes in the stock market like other stocks struggling, will help Coca-Cola as more people will buy their strong stock.

Global: Free trade agreements between countries makes it easier to sell or produce internationally.
With an increase in globalization of business in general, everything is becoming more global and easier to sell/trade.

Porters Five Forces model of industry competition: The five forces of Porters model of industry competition are suppliers, buyers, potential entrants, substitutes and industry competitors. Coke has some bargaining power as they do a lot of business with the supplier of raw goods. The buyers of Coca-Cola's products have a lot of bargaining power because there is a large corporation that sells mostly all of the same products that Coke does, and that company is Pepsi Co. There is minimal potential or threat of new entrants into the beverage industry as Pepsi and Coca-Cola own a lot of the brands out there today. The substitutes force of Porter's model is an aspect that should concern Coca-Cola the most. With people changing their thought on healthy food and drinks, Coke needs to be careful so that other products or services are not produced that outdate or replace one of their existing products. There is a huge industry competitor as previously mentioned, Pepsi Co, who is one of, if not the only true competitor with Coca-Cola.