Coca Cola Company Research PDF

Preview

Summary

The Coca Cola company is a beverage company whose main objective is to refresh the whole world through the providing refreshing beverages to consumers, and make a difference to the world. The company’s products comprise of a portfolio of brands that includes several categories of drinks. Soft drink ...

Description

Running Head: Research on Coca Cola Company

Research on the Coca Cola Company

Student Name: Institution Name: Course Title: Instructor: Date of Submission:

1

Research on Coca Cola Company

2

Description of the Firm The Coca Cola company is a beverage company whose main objective is to refresh the whole world through the providing refreshing beverages to consumers, and make a difference to the world. The company’s products comprise of a portfolio of brands that includes several categories of drinks. Soft drink brands are Coca-Cola, Fanta, Stoney, Sprite, among other sparkling drinks. Dasani, vitamin water, Smart Water, Costa, Topo Chico, Gold Peak, Powerade, among others, comprise Coca Cola’s hydration, coffee, tea and sports brands. The other category of products Coca Cola Company produces is the nutrition, dairy, juice and plant-based brands of beverages are Del Valle, Ades, Simply, Fair life, Innocent and Minute Maid. According to Cutelo (2018), Coca Cola company boasts of owning or licensing 500 brands that it sells across over 200 countries across the globe. The company has been over the years, working on transforming its portfolio of products to impact the lives of consumers positively. The company is always working on bringing on better, new and more desirable products to the market, and has also been working on reducing the sugar contents in its products to avoid negative health implications on the consumers of its drinks. Due to a change in preference to more healthier and natural products by the world’s population, Coca Cola has experienced a decline in annual sales over the past two decades. According to Cutelo (2018), the consumption of Coca Cola products declined by 12% over the past one decade, as at 2018. The company recorded U.S. $ 37.266 billion net operating income in 2019, and U.S. $ 33.01 billion in 2020 (Coca Cola Company, n.d). The significant decline could be attributed to the negative implications of the COVID 19 pandemic across the world. The company controls about 37 percent of the world’s carbonated soft drinks’ market (Conway,

Research on Coca Cola Company

3

2021), with the closest competitor in the industry being PepsiCo. It is the largest company in the world’s beverage industry. The Coca Cola company operates in an oligopolistic market, that comprises of Coca Cola and PepsiCo. Other firms operating in the soft drinks industry have little or no influence in the market. Coca Cola and PepsiCo. Are the two firms controlling the market, and have the choice to alter their prices either individually or through collusions. The marketing actions of the two firms are mutually interdependent, thus the two operate in an oligopolistic market, which involves a few firms in control of the market that make it difficult for new entrants. In the soft drinks market, the greatest competitor to Coca Cola is PepsiCo. PepsiCo has become more efficient in customers’ perspective, given its focus on the health perspective of its products (Stofova & Kopcakova, 2020). However, Coca Cola still maintains a significant share of the soft drink market across the world, and has been working towards ensuring positive impacts on the health of the consumers of its products. The Firm’s operations and Competitors Coca Cola company is an international firm, with its products offered across more than 200 countries. The operations of the company are stretched across all the continents, with thousands of distributors and bottlers in the regions. In the U.S., Coca Cola company’s products are sold across all the states, and the company controls over 50 percent of the United States’ soft drinks’ market. Its major rival is PepsiCo, and the rivalry is not only based in the U.S., but is extended to international levels. Local-based beverages companies in different regions and countries also offer some competition to Coca Cola, though their individual influences are not significant in the world market.

Research on Coca Cola Company

4

Economic Concepts Coca cola company uses a number economic concepts and strategies to create competitive advantage over its key competitor, Pepsi. One of the most effective economic strategy used by Coca Cola is product differentiation. The company brands each of its products differently. For instance, Powerade has a different brand to that of Fanta. Moreover, the company brands its products differently to those of Pepsi, and packages different quantities of the products. This enables the consumers to acquire the products at the desired quantities. Coca Cola also ensures that despite the similar composition of coca cola and PepsiCo products, its drinks have a unique taste. This helps in maintaining high levels of customer loyalty. Through product differentiation, Coca Cola is able to see off competition from local beverage companies internationally. In most of the countries within which Coca Cola owns a significant market share, there exists local beverage companies that compete within national or regional boundaries. The uniqueness of Coca Cola’s products is vital in maintaining and extending its market share, both locally and internationally. Another economic strategy used by Coca Cola company to create competitive advantage is cost leadership. The company charges lower price for similar quality and quantity of products to those of competitors. The strategy is useful in building customer loyalty and attracting new customers. The company achieves profitability with reduced prices by perfecting its production methods and efficient utilization of resources. For some products such as the Dasani water, Coca Cola ensures high quality of the product to justify the higher price. It is important to note that under cost leadership strategy, similar actions should not be taken across the international market. Pricing decisions should be made regionally, depending on the prevailing market conditions, for effective applicability of the strategy. This is because in different regions or

Research on Coca Cola Company

5

countries, the beverage market conditions are different. Thus, similar pricing strategies cannot be adopted across all operational regions. Besides cost leadership and product differentiation, Coca cola invests a lot of resources in advertisement and product marketing. According to Monem and Nagy (2021), Coca Cola has spent an average of 4 billion U.S. dollars in advertisement over the past six years. This amount is relatively higher than what PepsiCo spends annually on advertisement. Coca Cola adverts are done through almost all the media, but the audio-visual medium is mostly used. The company customizes its adverts to suit the target audience within the different regions it operates. It also channels more resources in advertising in regions it faces stiff competition, either from its largest rival PepsiCo, or from local beverage companies. Recent Events Over the past few decades, there has been quite a significant number of events and changes within both the internal and external environments of Coca Cola company. The last two decades have witnessed several acquisitions than the preceding decades. During that period, the Coca Cola company acquired Costa Coffee, Kombucha Mojo, Tropico Fruit drink, Bodyarmor, Smoothie, and Made Group. The company’s CEO insisted that the increased rate of acquisitions is not an exception, but rather a company’s norm. Through increasing the number of acquisitions, Coca Cola company aims at propelling disciplined growth, according to a statement by the company’s CEO James Quincy. Coca Cola’s increased acquisitions have had several effects and significances on the company. One of the significances of the acquisitions is that they have helped in expanding the company’s brand portfolio. For instance, the acquisition of Costa Coffee, which is a leading coffee brand in the world. This has significantly impacted Coca Cola’s growing coffee category,

Research on Coca Cola Company

6

as Costa Coffee has been experiencing a 6 % annual growth. Thus, the acquisition is expected to help Coca Cola change the direction of its annual growth percentage, which has been on the decline in the last few years. Moreover, the acquisitions of Coca Cola in the hot beverages and sports categories have strengthened, and still strengthening the respective categories. Therefore, Coca Cola is becoming an all-rounded beverage firm, not only leading in one sub-industry but leading in all sub-industries of the beverage industry. The growth of the Coca Cola company has been greatly impacted by the decline in the demand for sugar-flavored drinks. The demand has been on the decline due to the increased concern on the impact of sugar on the health of consumers. Customers have been shifting from sugar-flavored drinks to more natural and healthier options. Thus, the market demand for soft drinks has been on the decline. This has had a negative impact on the growth of Coca Cola company, which has prompted the company to adopt reducing the amount of sugar in its drinks or producing new non-sugary products. Coca Cola company has acquired several firms in attempts to diversify their range of products, and also develop new products to meet the changing market demand. The overall demand for Cola’s products was also affected by the outbreak of the COVID 19 pandemic in the year 2020. This resulted to a decline in the company’s operating income from USD 37.266 in 2019 to USD 33.01 in 2020. The legal directives laid down in attempts to control the spread of the disease in various countries affected the overall demand for the company’s products negatively. Such directives include lockdowns, travel restrictions, closure of non-essential service and product sell operations, among other measures. These directives influence the company’s operations in various geographical jurisdictions.

Research on Coca Cola Company

7

Recommendations Coca cola company should continue pursuing its efforts in broadening its brand portfolio, to successfully counter the challenge of the change in customer preference to more natural and healthier options. A broad portfolio of brands will be achieved through the development of new non-sugar and healthier products, reducing the amounts of sugar in the current portfolio of brands, acquiring more beverage companies or creating categories for non-sugar and sugarflavored drinks. The company should ensure well-strategized and planned product promotion procedures to ensure that people perceive the new drinks and brands it develops as healthy, and with additional nutrition. All these recommendations will help the company regain its growth rate, which has been on the decline. In addition, Coca Cola should consider lowering its product prices for regions hardly hit by the COVID 19 pandemic. This will encourage their consumers to purchase Cola products despite the hard economic times being experienced due to the Pandemic’s implications. Regarding the implications of the directives laid for the control of the COVID 19 pandemic and which alter the operations of Coca Cola, especially distribution and selling of the products, the company should devise online platforms for customers to make their orders. In addition, home delivery services, where possible, should also be provided especially in regions where there are home-lockdowns. These will ensure that the company regains and surpasses its sales levels before the pandemic.

Research on Coca Cola Company

8

References Cutelo, L. (2018). The Coca Cola Company-Non-alcoholic beverages (Doctoral dissertation). Conway, J. (2021). The Coca Cola Company-Statistics and facts. Retrieved From https://www.statista.com/topics/1392/coca-cola-company/ Monem, A., & Nagy, H. (2021). The effectiveness of Advertising Personalization. Journal of Design Sciences and Applied Arts, 2(1), 335-344. Štofová, L., & Kopčáková, J. (2020). The Competition Strategy between Coca-Cola vs. Pepsi Company. Calitatea, 21(179), 40-46. The Coca Cola Company (n.d). The Coca Cola Company. Financial information (Income Statement).

Retrieved

From:

information/income-statement

https://investors.coca-colacompany.com/financial-...