Activity 3 Internal Analysis and Strategy Formulation

Activity 3: Internal Analysis and Strategy Formulation

Student’s Name

Institution’s Name

Date

Part A: Coca-Cola Company Description

Coca-Cola Company is the largest beverage firm in the world, refreshing its customers with over 500 still and sparkling brands. The company together with its bottling partners ranks among the best private companies, with over 700000 systems relations. The history of the company stated in 1886 when Dr. John S. Pemberton, an Atlanta pharmacist, invented a formula that resulted to the creation of a soft drink with unique taste. The Coca-Cola brand and formula were in 1889 bought by Asa Griggs Candler, who in 1892 incorporated the company. The company whose headquarter is located in Atlanta, Georgia, has since managed to produce various concentrate soft drink syrup that it sells to different bottlers in the entire world (Biswas & Sen, 1999). Coca-Cola is the home to about 20 billion dollar brands that comprises of the four top soft drinks that include Sprite, Coca-Cola, Fanta, and Diet. Other main brands include vitaminwater, powerade and minute maid. The company is licensed to market over 500 brands of beverages that include ready-to-drink coffees and teas, sparkling drinks, sport and energy drinks, water and juice drinks. With the globe biggest system of distribution, the company serves thirsty customers in over 200 nations (Saeidinia et al., 2012).

The Coca-Cola’s main competitor is PepsiCo Company. PepsiCo is among the world top beverage and food companies, with more than $63 billion in 2016 net revenue and a world portfolio of beloved and diverse brands. PepsiCo was established in 1965 with the PepsiCo merger with Frito-Lay. The company’s main brands include Aquafina, Pepsi, mug, mountain, propel, mountain dew, propel, sierra mist, naked juice, SoBe, IZZE, and AMP energy among others. The company products are sold in over 200 territories and companies across the globe (Pepsi.com, 2017). Another major Coca-Cola competitor is Dr Pepper which is the distributor and bottler of Snapple drinks and Dr Pepper soda. The company serves the US, Mexoco, and Canada. It provides a huge non-alcoholic beverages portfolio that includes mixers, flavored, juice drinks, carbonate soft drinks, juices, non-carbonated soft drinks, and ready-to-drink non-carbonated tea. Its brands include Snapple and DrPepper, Schweppers, A&W Root Beer, Mott’s and Hawaiian Punch. It is record as the third best company for soft drinks after Pepsico and Coca-Cola in the North America (Hoovers.com, 2016).

Coca-Cola has a good performance track record. However, the company has been experiencing a consistent decline in its total revenue for the last five years. This means that the company has been experiencing a consistent net income for the last four years from 2013. However, it is important to note the company has been making huge profits despite the decline in the net profit. The company’s financial performance has been as shown below (Coca-Colacompany.com, 2017):

Description (In Million Dollars) 2016 2015 2014 2013 2012

Revenue 41863 44294 45998 46854 48017

Gross Profit 25398 26812 28109 28433 28964

Operation expenses 33237 35566 36322 36126 37231

Operation income 8626 8728 9676 10728 10779

Net Income 6527 7351 7098 8584 8513

Market share in US 42.5% 42.3% 42.2% 42%

Based on the above table, it is evident that the company has been experiencing a steady decline in all its financial aspects in the last five years. This has been happening despite an increase in the company’s market share increase in the US. Although the company has all along been making profit, the profit made has been declining all along. This paints a negative image of the company and its general operations. Nevertheless, Coca-Cola Company has still been dominating company in its industry worldwide. Thus, it still stands a chance to improve its situation.

Part B: Coca-Cola Resources, Core Competencies and Distinctive Competencies Contributing to its Success

The company’s main resources include equipment, plant and property found extensively across the globe. It also has a strong financial position, well developed and trained human resources, intellectual property rights which include the trademarks and patents, good will which include brand visibility and loyalty, and technical expertise that enhance innovation through research and development. The main Coca-Cola core competencies include the Coke formula. The original formula bought by the company gave it a great height in the market since the flavor was highly liked by the consumers in the market worldwide (Saeidinia et al., 2012). The coke product still remain among the most preferred and loved product of the company. Its trademark is another resource that gives it high competitive advantage. Coca-Cola is associated with high quality and hence, most consumers prefer its products based on this aspect. Other resources include extensive distribution and bottle centers that enable the company to carry its business worldwide. One of the Coca-Cola core competencies is its brand name, taste and customers loyalty. The coke taste has been exceptional for ages and none of the competitors are anticipated to surpass this. The taste has made most customers to prefer it and hence being loyal to the company. The company has also been very consistency in its quality, which enhances its ability to maintain customers. Coca-Cola specific competencies include the company business model that enhances licensing of specific bottlers in different parts of the world that facilitate the supply of its products in their regions. Administrative competency is another major company’s core competency which enables the company to run the business effectively. Other distinctive competencies include cost control, effective advertisement techniques, equipped distribution and network. Coca-Cola ranks high in all the above competencies compared to its competitors (Coca-Colacompany.com, 2017).

Part C: VRIO Framework

Resource or capabilities Valuable Rare Imitability (cost of imitation) Organization(non-substitutable)

Coke Formula Yes; the formula has made the company popular for many years across the globe Yes, it is only owned by Coca-Cola Yes, the formula has been inimitable since it was created in 1886 Yes, the competitors have tries but the company ability has never been matched

Global distribution network Yes; this network is effectively exploited to enhance global distribution of the company’s products Yes, the company has a unique global system that is unmatched by the competitors Possible, PepsiCo may eventually manage it Yes, it is considerable hard for Pepsi to reach this level

Marketing ability Yes, it has highly managed to structure localized adverts focusing on different locations and demographics Yes Yes, the company keeps on changing its slogans and marketing styles thus, hard to keep up No, the competitor may eventually manage to discover marketing technique to outshine that of Coca-Cola

Business model Yes, has highly contributed to the company’s success Yes, unique in the industry Yes, will be costly to duplicate it Hard, more resources may be required to manage this

Part D: Coke Future Competitive Advantage

The analyzed resources, core competencies and specific competencies of Coca-Cola have the ability to enhance the company’s competitive advantages in the future. The company’s coke formula has never been matched for the last 120 years. This means that the company will continue using and benefiting from it for ages to come. The company distribution network has been of great advantage and will still continue serving the company even in the future. The brand loyalty and position attained will even be of greater advantage to the company in the future. Basically, the company’s resources and capabilities are unmatched and may remain so for a long time period.

References

Biswas, A., & Sen, A. (1999). Coke vs Pepsi local and global strategies. Economic and Political Weekly, 1701-1708.

Coca-Colacompany.com. (2017). Investors: Annual and other reports. Retrieved from < http://www.coca-colacompany.com/investors/annual-other-reports>

Hoovers.com. (2016). Dr Pepper Snapple Group Inc. Retrieved from < http://www.hoovers.com/company-information/cs/company-profile.dr_pepper_snapple_group_inc.178f4f692fb83d23.html>

Pepsi.com. (2017). Retrieved from < http://www.pepsico.com/company>

Saeidinia, M., Salehi, M., Hashemi, S. M., Darabkhani, Y. D., & Ahanijan, B. (2012). Operation strategies for Coca-Cola vs Pepsi companies to attract their customers. Contemporary Marketing Review, 1(11), 1-15.