Business

4.0 Five Forces Analysis
Today, soft drink industry is a very competitive industry to be in. Porter's five
forces model shows us that there is already a strong barrier to entry established
by the traditional concentrate producers such as Coca-Cola, suppliers' bargaining
power is strong, buyers' power is weak, substitutes for beverage products are easy
to produce, and the intensity of rivalry is strong since the industry is already
facing a slow growth and high industry concentration.

4.1 Suppliers' Bargaining Power
Suppliers' bargaining power in this beverage industry is strong. For example, the
soft drink ingredient producer - NutraSweet who specializes in producing
concentrate sweeteners. Since there is a rising concern in health and safety
issues in the soft drink drinking within the consumer market, the healthier
sweetener, aspartame, that NutraSweet markets allowed it to have a high impact and
input on costs of each bottler's product costs. Since NutraSweet was the only
marketer that marketed the standard aspartame the costs of using NutraSweet's
aspartame is relatively high compare to other substitutes such as sugar.

4.2 Buyers' Bargaining Power
The Buyers of the software drink industry are the concentrate bottlers. Bottlers
of the soft drink industry have a low bargaining power since they form the largest
base (the greatest number) of all the elements of Porter's five forces. Most of
the bottlers are Coca-Cola owned before 1980, and almost all of them are under
some sort of contractual agreement stating that bottlers must accommodate the
programs set up by the concentrate producers' for the products that they have
franchised. High fees are required of the bottlers are such as high start-up
costs ranging from $100,000 to several million dollars, paying for two-third of
promotional costs, while costs were typically split fifty/fifty for doing consumer
promotion and trade. It is also hard for bottlers to identify their own brand
identity since their products are made of concentrates and the names that they use
are the names of the concentrate manufacturer – Coca-Cola, hence discouraging
their own product differentiation.

4.3 Rivalry Among Competing Sellers
There is a strong barrier setup by the traditional concentrate producers. For new
rivalry to enter into the market is extremely difficult since the two soft drink
giants such as Coca-Cola and Pepsi-Cola have already created a soft drink
tradition and branding. Also since the soft drink giants have already created
their bottler network and also owned majority of them, it is even harder for new
entrants to be gain an absolute cost and competitive advantage. Governmental
policies also create obstacles to the new entrants in the cola industry since the
word "Coke" is strictly mean Coca-cola.

Current rivalry within the soft drink industry is mainly evolved around the two
giants who are Coca-Cola and PepsiCo. The two giants owned most of the spacing
for the vending machines, developed most the flavors for the popular products
within the market, and occupied most of the soft drink market shares within the
industry. They are able to utilize and plane well ahead of other smaller
companies within the industry. Other smaller firms are mainly there for
competition between the two firms. One example would be PepsiCo's purchase of
Seven-Up's to expand its product line. Once Coca-Cola is aware of PepsiCo's
expansion, readily they are also willing to purchase Dr Pepper. However since the
buyout of Seven-Up's domestic operations was blocked by the Federal Trade, Coca-
Cola also dropped its pursuit on Dr Pepper. In the current soft drink industry,
there is a constant battle between Coca-Cola and PepsiCo.

4.4 Substitute Products
Threats of substitutes are high since soft drink industry is a highly unstable
industry. Switching costs for the consumers are extremely low since the pricingdiversified product range with greater youth appeal. Coca-Cola is also planning to launch a new chocolate drink named "Choglit" in the young age market.
Scope for fast, worldwide development Although Coke is the core product, the company has been able to produce a diverse range of multipurpose drinks appealing to a variety of consumer groups. While the mature Coke market has become a difficult field in which to obtain convincing results, Coca-Cola has taken its focus ways from its biggest earner for a while, developing new drinks for all markets. With the current trend in new age beverage looks likely to continue growing, the company is establishing a sound platform for the next few years.

Effective strides in new markets
A move into nutraceuticals has also helped boost Coca-Cola's consumer appeal.
Various new Dasani drinks include multi-vitamins and vitamin C with zinc for
immunity, while the Powerade brand is being heavily marketed to 17-24 year-old
consumers with active lifestyles. New packaging and advertising campaigns
featuring top athletes performing daring feats have renewed brand awareness.
Coca-Cola is in a strong position to cash in on the growing demand for health
products.

If Coca-Cola can stick to and cement in their core success factors, even in a
turbulent and dynamic marketplace it can also become the leaders of soft drink in
worldwide market. Successful companies have to keep succeeding, keep challenging
themselves to do better to increase their lead.

5.0 Generic Business Strategy
In order to gain competitive edge in the consumer market, other than responding
quickly to the external forces and its internal environment, Coca-cola also looks
into its position within the industry. The following figure shows the generic
competitive strategies pursued by Coca-Cola.

Coca-Cola is seen to have employed these two competitive strategies: Focused Low
Cost and Broad Differentiation. The company has chosen to serve the consumer drink market and achieved cost savings by means of:
i) Achieving economies of scale in the mass production of all Coca-Cola
products lowers its unit cost.
ii) Long learning, knowledge and experience in production and process, as the
company existed more than a century.
iii) Efficiency and effectiveness in manufacturing and distribution network.
iv) Sharing of research and development, advertising and promotions cost among
the brands carried by Coca-Cola has enabled to achieve economies of scope.

Coca-Cola uses Broad Differentiation strategy on the basis of:
i) Offering of wide range of its drink products – around 230 brands are
currently being offered in the global market.
ii) High brand image and recognition have resulted in superior product
perception among consumers.
iii) Packaging and bottling – The use of contoured shape bottle and the slim
curly font have made Coca-Cola an easily recognized symbol.

5.1 Comparison of Coca-Cola's Generic Business Strategy with Its Rivals
There are numerous competitors, from both carbonated and non-carbonated drinks,
competing with Coca-Cola. Among them, the key rival that competes head-to-head
with Coca-Cola is PepsiCo. Since 1997, PepsiCo adopts the focus strategy which
concentrates its resources in consumer packaged goods and beverage industries
(PepsiCo's Focus Strategy). However, Broad Differentiation strategy is not
adopted by PepsiCo, as compared to the wide ranges of brands carried by Coca-Cola.

5.2 Appropriateness of the Coca-Cola's Generic Business Strategy
Coca-Cola's pursuance of focused low cost strategy is set out to become the
lowest-cost provider of its products in order to compete fiercely in both the
beverage industry in general and carbonated drink market in particular. Coca-
Cola's main focus is its beverage industry where its brand image and quality is
widely acceptable, and it emphasizes on cost-reduction, rather than pricereduction.
Being a low cost provider makes Coca-Cola a strong contender in the soft drink
industry. It also survived a few price wars with its main rival – PepsiCo. Low
cost leadership not only increases Coca-Cola's global market share, it also erects
a strong barrier for the potential new entrants to enter into the industry. Coca-
Cola also faces a few disadvantages in its pursuance of low cost leadership.
Heavy investments have to be made on assets to capitalize on low cost production.
The fact changing of technological advancements and consumer tastes will soon
erode the low cost benefits enjoyed by Coca-Cola.

Coca-Cola employs broad differentiation strategy for the products that it offers
in line with the high proliferation and fast changing of consumer taste, product
preference and emergence of different life-styles. It emphases on creating value
through uniqueness. Coca-Cola pursues a broad differentiation strategy to capture
multiple markets within the drink industry. Consequently, the differentiated
products should be designed so that they have wide appeal to many different market
segments. As a result, Coca-Cola enjoys the advantages of being able to charge a
premium price on its core product – Coke. Strong brand loyalty has been achieved
among the drink consumers, which acts as an entry barrier to potential new
entrants. The main drawbacks of broad differentiation are such that the product
attributes and taste are easily imitated by the rivals. Consumer fast changing
product preference is hard for Coca-Cola to keep pace with.

5.3 Recommendation of Coca-Cola's Future Generic Business Strategy
As Coca-Cola is entering into different market segments of drinks and snacks, it
is recommended that the company to pursue an overall low cost strategy in the
broad markets that it serves. With this strategy, Coca-Cola will be able to
compete with the major rivals by offering its products at competitively low
prices, or match the rivals' price yet earn a higher profit margin.

6.0 Global & Internet Strategy

6.1 Coca-Cola's Globalization Trends

Globalization is a key factor in gaining market share. Coca-Cola recognized the
need to go global very early on in its existence. This has played a significant
role in Coca-Cola's strength today and for the future. Coca-Cola became globally
successful only after fourteen years of its existence in 1900, by distributing to
England, Cuba and Puerto Rico. From that point on, it continued to expand
globally at a rapid pace. Today, Coca-cola is distributed everywhere around the
globe. The company is divided into six operating units which include: the Greater
Europe Group, the Middle East and Far East Group, the Latin America Group, the
Africa Group, the North America Group and the Minute Maid Group.

Coca-Cola's products are known worldwide. It is a drink that spans all ages,
colors, races, and countries. More than 70 percent of the revenue comes from
outside the U.S., but the real reason they are a truly global company is that the
products meet the varied taste and preferences of consumers all over the world.
The company has become more efficient in how the drinks are bottled, it is able to
use recycled materials, and help conserve natural resources. In addition,
according to Bettman, et. al, (1998) Coca-Cola's bottling system is one of its
greatest strengths. It allows the company to conduct businesses on a global scale
while at the same time maintain a local approach.

Besides, the product's image is laden with sentimentality, and this is an image
many people have taken deeply to heart. The Coca-Cola image is displayed on Tshirts,
hats, and collectible memorabilia. This extremely recognizable branding
is one of Coca-Cola's greatest strengths. "Enjoyed more than 685 million times a
day around the world Coca-Cola stands as a simple, yet powerful symbol of quality
and enjoyment" (Allen, 1995).

6.2 Advantages and disadvantages of Coca-Cola's Globalization Trends
The advantages of coca cola in adopting globalization trends are first of all with
the economic scale that is bigger (talking about the whole entire world instead of
one country, as mass marketing) it help coca cola to actually reduce the cost of
producing (adjusting to the country where the product is manufactured and price
(cutting the cost of transportation, export and import cost as well as tax). It
also helps coca cola to gain competitive advantages of a high quality product. The
localize system or management help the company to expand the local network with
the value creation functions and also established in low cost markets, instead of
the country of origins. They also can have a tight bound of long term contract
with the low cost supplier in each country.

In the other hand disadvantages of globalization trends is that there will be
increase in the bureaucratic costs due to centralization. Some of the resources of
ingredient still transferred by the head quarter which means that supplies chain
or supply control from the head quarter must be very strong. Some other problem
that will occur is that local branch will have lack of responsive or creativity or
learning to develop different product from the same trademark, due to highly
depend to head quarter or copy or have to follow the head quarter instructions.
Also, sometimes due to lack of creativity of product development or advertisement
will lead to decreasing in product demand and local company hard to create
differentiation in the products or expanding.

6.3 Coca-Cola's Internet Strategy
As Group Director of Coca-Cola, Carol Kruse plays a significant role in the
company's online presence. Kruse develops and executes these internet strategies
and plans. At present, Coca-Cola is using the Internet to extend its promotions.
One of the most recent promotions Coca-Cola did was around NASCAR and the Coca-
Cola Racing Family. On the other hand, The Coke Music Website, which is ever
growing, really shows that Coca-Cola can build a compelling online community even
on a branded website. As consumers spend more and more time online, therefore taking some time away from traditional media, it's an important way to reach
folks. And in a very interactive way, versus passively viewing a television
commercial, consumers can interact with the brand online. The majority of Coca-
Cola brands are using the Internet as part of their marketing mix, and they're
doing it with interactive branded sites, not just putting brochure or product
information on the site but creating an entreating and interactive site. It's an
area that Coca-Cola is continuously testing and analyzing, and it has some pretty
strong results. This is a learning process for the company.

6.4 Recommendation of Coca-Cola's Internet Strategy
Coca-cola can adopt e-commerce for its website, allowing purchases to be done via
its website. For feasibility purpose, this feature should be applicable to its
whole-sellers only. By linking the order to its production (automation), it would
enhance the efficiency of the supply chain management.

Coca Cola's Internet strategy has many other options other than e-commerce methods
such as e-mail or Internet Telephony or even using video blogging such as
Microsoft's Channel 9 video blog to reach out to its all important business
partners, customers and vendors.

7.0 Corporate Strategy & Strategy Implementation

7.1.1 Shaping the Work Environment and Corporate Culture
Coca-Cola Company believes that it is important to give something back to the
communities in which it does business. This philosophy grounded in the Company's
value system and become the key part of the corporate culture. Coca-Cola has s
strong commitment to the wider community through every aspect of the way the
company operates. For instance, the way in which Coca-Cola sponsors sporting
activities or its commitment to recycling and minimum use of scarce resources.
Philanthropy is a central part of the Coca-Cola culture and contributes to one of
the company's strongest assets - public goodwill. Its goal is to give something
back to the communities in which the company operates by supporting the education
and community development activities.

Coca-Cola aims to help the environment by "Always trying to give back more than we
take". Coca-Cola is well known for its high-profile sponsorship programs,
covering major events such as the Olympic Games, football's World Cup.

7.1.2 Building a Capable Organization & Marshaling Resources
Coca-Cola's marketing strategy has become a reality, the product most
representative of this process is Coke. Robert Woodruff, former chairman of the
Coca-Cola Company stated in 1923 that Coca-Cola should always be "within and arm's
reach of desire".

The Coca-Cola has always been able to create the most appropriate marketing mix.
Coca-Cola has built its business using a universal strategy based on three major
principles - acceptability, affordability, and availability. This is to ensure
Coca-Cola brands are an integral part of consumer's daily lives, widely available
and products that are value for money.
Coca-Cola can use these few areas to improve their strategy execution and build a
more capable organization.

Branding
Coca-Cola posses a number of instantly recognizable brands which go beyond the
familiar taste of its product when compare with other products. Coca-Cola
benefits from its registered trade mark and its characteristic classic shapes of
bottles. Also the highly familiar red and white Coca-Cola can. Coca-Cola also
produces others popular flavored soft drink, like Sprite, Fanta, Diet Coke, and Cherry Coke. These products can be mass marketed across the globe using standard
advertising and promotions.

Advertising
Advertising is the most effective way in gaining social acceptance for Coca-Cola's
products. The Coca-Cola Company created advertising slogans which are very
memorable until today, like 1886-Delicious and refreshing; 1993-Always Coca-Cola.
Coca-Cola's powerful brand personality can become a vehicle for promotion in its
own right.

Global and local sponsorship of sport
The relationship which Coca-Cola has with sport seeks to advance the development
of sport overall and to help make sporting competitions possible by supporting.
Since 1928, the Coca-Cola Company's active sponsorship of the Olympic ideal has
continually grown in depth. Until today Coca-Cola has a long history of sports
sponsorship including the Olympic Games, football, tennis and special Olympic.
This reflects the way that the company operates and helps Coca-Cola become the
world's most popular soft drinks.

Worldwide leadership
Coca-Cola needs to continually build on its brand image through successful
advertising, promotion and provision of value-for-money products. The company
requires consistent expansion and development in its distribution systems. Coca-
Cola is enabling to do this effectively due to its strategy of growth which has
enabled the company to develop international market leadership.

7.1.3 Internal Leadership
E. Neville Isdell leads the Coca-Cola Company into the new century with a firm
commitment to the values and spirit of the word's greatest brand. He was named the
chairman and chief executive officer in June 2004. Isdell has been described as
charismatic by many people with whom he has worked.
"We have very strong values. I also believe that providing clear direction and
clear accountability… allows us to do those millions of things that we need to do
very well every day in a cohesive matter."

Coca-Cola can use six styles of leadership to improve their management
• Coercive- demands instant compliance
• Authoritative- motivates people toward a set path
• Affiliative- creates harmonious relationships
• Pacesetting- strives to improve efficiency
• Coaching- helps people develop themselves
• Democratic- gains commitment through participation

7.2 Coca-Cola's Approach to Diversification
Coke is pursuing related diversification. Coke operates multiple business globally
which are linked by common distribution systems and brand name. Coke has
diversified through horizontal integration (proliferation of products and markets)
and vertical integration (manufacturers, distributes and retails beverages).
To portray corporate growth strategies, Coke adopted Ansoff's matrix that focus on
the firm's present and potential products and markets.

There are total four different growth strategies:
1. Market penetration: A firm seeks to achieve growth with existing products in
their current market segment, aiming to increase its market share.
2. Product development: The firm develops new products targeted to its existing
market segment.
3. Market development: A firm seeks growth by targeting its existing products
to new market segment.
4. Diversification: firm grows by developing new products for new markets.

Existing product New product
Existing Market Market penetration:
• Diet Coke Product development
• Coca-Cola Vanilla
• Fanta Icy Lemon

New Market Market development:
• Coca-Cola Share Size
1.25 liter Bottle Diversification
• Winnie the Pooh Roo Juice
• Powerade

Coke has identified Winnie the Pooh Roo Juice is an opportunity to offer mothers a
new product that suitable for children aged 2-5 years. The product and its
packaging appeal both to mothers and children, offering diluted pure juice with no
added sugar, colorings or preservatives combined with well-loved characters. In
addition, Coke created new brand within the sports drink segment called Powerade.
Coke was growing through market penetration (selling more Coke in US and Japan)
and now diversifying into new markets (China, India, Russia, Eastern Europe). With
the new mantra of at Coke is "think locally and act locally", Coke adopted
decentralizing management. The company will become more responsive to regional
needs rather than wait orders from headquarters in Atlanta. Coke's local managers
will have more freedom in setting price, tailor advertising campaigns to local
cultures, and introduce new brand. In China, new product such as Nestea Ice Rush
and Orange Pulp by Minute Maid launches and drove noncarbonated beverage unit case
volume growth of 51 percent. In addition, unit case volume increased 10 percent on
top of 22 percent growth in 2003, despite pricing increases in India. In Russia,
Coke's core brands helped drive double-digit unit case volume growth, including 19
percent for Trademark Coca-Cola.

7.3 Evaluation of Coca-Cola's Current Strategy & Recommendation
Coca cola's management structure is divided into five geographic groups plus the
Minute Maid group. The diversity of the management structure allows each group to
tightly control all of the functional areas. The weakness is, we would rather
manage a business in nearly 200 countries than to build a business in nearly 200
countries.

In recent years, due to the changing global economies, Coke has taken a less
aggressive stand in market place. Coca-cola should always remain dedicated to
build a better business. This is the promise that a company makes to its
stockholders everyday.

Although Coca cola decentralized its management structure can be a strength and
weakness at the same time. The company currently has not set common corporate
goals. Instead, each regional management sets their own goals. In more developed
countries the system will works very well. Conversely, in economically challenged
regions where Coke is not established as a daily attach, Coca cola need to change
its internal management structure in order to deal with this problem. Perhaps, a
wide common goal of supporting the regions where this problem exists with more
resources from the other regions and from corporate headquarter.

Coke has begun to realize that they are capable in expanding into other market
besides soft drinks. Minute Maid Group will focus on worldwide juice beverage.
This is a very good opportunity for Coke to move into the next level where
consumers today are becoming more health conscious. China is definitely a very
large potential for growth since it has the largest population in the world and by
default, the largest consumer for foods and beverage. In 2004, China achieved the
highest growth rate in Asia with 22% in terms of Unit Case Volume.

8.0 Conclusion
The results of analysis of Coca-Cola's vision, mission, environmental scanning of
the drink industry in which it operates, the intensity of each of the Porter's
Five Forces faced by the company, the generic business strategies, global and
internet strategies it adopts, the corporate strategy and the implementation give
us a full overview of Coca-Cola's operation and positioning in the drink industry.
The ever-changing external environment and the challenges posed by the
opportunities and threats in its immediate industry command a significant
attention and resources from top management. With the current successful generic
business strategy, Coca-Cola should not be complacent. On the contrary, it has to
keep an eye on its rivals' actions and changes in external environment variables,
then shift the current generic business strategy to a more appropriate one. The
company needs to juggle its corporate strategy and the internal corporate culture
in order to achieve a sound strategy execution and implementation.

One Of References
Coca-Cola, Wikipedia, www.en.wikipedia.org/wiki/Coca-Cola (June 29, 2005)