Business

3.1.3 Technological Factor
The advancements of technology in the fields of soft drink raw material,
production, information and communication technology (ICT) and logistics have
great positive impacts on the operation of Coca-Cola. The availability of new
soft drink ingredients enables Coca-Cola to introduce new variants of its products
to its existing consumers, not forgetting to attract the new consumer groups. The
use of the latest information technology has made the company "colonized" the new
generation of soft drink consumers with the latest features of song downloading.
The presence of company website enables the world to "keep in touch" with the
latest developments of Coca-Cola. The Digital Sotrytelling Theater, located in
Las Vegas tells stories of Coca-Cola through the use of short video vignettes
developed by multimedia technology.

3.1.4 Social / Cultural Factor
In recent years, there have been voices of anti-Coca-Cola being aroused in the
world marketplace. The most recent case is the call for Coca-Cola to stop its
sponsorship of Live 8 in India. Such negative sentiment is due to severe water
shortages and underground water pollution caused by Coca-Cola production
activities, and distribution of its toxic waste to local farmers as fertilizer.
Top level management shall review their sponsorship policy and business ethics in
foreign countries (Indymedia UK).

The worldwide environmental protectionism has called for the company to the use of
environmental-friendly and recyclable products in Coca-Cola production, bottling
and packaging. Recyclable olyethylene terephthalate (PET) bottles have been used
for its drinks, and Coca-Cola spent over $2 billion in the U.S. and over $5
billion worldwide on recycled content material and supplies (The Coca-Cola
Company).

3.1.5 Demographic Factor
The increasing health consciousness and emphasis of healthy lifestyle not only in
developed nations, but also in developing nations, have slowed down the sales of
Coca-Cola's carbonated soft drinks. In response to this health consciousness
issue, the company introduced Diet Coke in 1982. Such change of consumer life
style had also led to the introduction of its bottled purified water – Dasani in
1999.

3.2 Presence of Opportunities & Threats
This section deals with the opportunities and threats faced by Coca-Cola, and its
responses towards them in comparison of the actions taken by its rivals. A
summary of the opportunities and threats Coca-Cola faces are as below. Each of
the elements is dealt with in greater details.
Opportunities Threats

• New products introduction
• Brand is attractive to global partners
• Focus upon core products
• Strength to boost acquired brand and major products link-ups
• Competition
• Health issues
• Free trade
• Risk of cannibalizing sales
• Varying growth in non-core categories
• Major rivals also investing in non-carbonated drinks

3.2.1 Elements of Opportunities
The Coca-Cola is a leader in beverage industry and it's a symbol of America.
Brand recognition is the significant factor affecting Coke competitive position.
Coca-Cola manufactures, distributes and markets nonalcoholic beverage concentrates
and syrups, in markets across the world. Coca cola also manufactures and
distributes juice drinks and water products like Dasani. Finished beverage
products bearing its trademark are sold in more than 200 countries world wide.
New products introduction The company introduced a variety of new brands and products in 2003 and 2004.

Among numerous examples are Vanilla coke, Diet Vanilla Coke in more than 50
countries and Sprite Remix and Brag's Floatz in selected US markets.
Brand is attractive to global partners With its strong portfolio, customer base and powerful marketing strategies, Coca-Cola has been able to attract other globally renowned companies to use its products. For instance, it currently provides Burger King and McDonald with soft drinks. This has provided Coca-Cola with a strong opportunity to boost consumer awareness and the circulation of its products internationally.

To team up with new partner in promoting Coca-Cola brand is definitely a plus. In
2003, Powerade has launched new flavor and promoted with Matrix Reloaded themed
packaging and advertising campaign in order to enhanced company profile among
younger group. With Coca-Cola already established as a leading brand in the
drinks industry, it will always be able to use other industry to market its own
products.

Focus upon core products Whilst the company has had significant success in extending its offering into new markets, there still remain markets in which such a strategy is fraught with risk. The Latin American market is an example of this, but this market also demonstrates that the company's core products can still be effective if pushed. Besides, total volume declined in Brazil however the Coca cola classic increases by 3%. This represents that Coke has potential in other such markets if the company deemphasizes unprofitable or low- profit volume and seeks to extract value on the core trademarks.

Strength to boost acquired brand and major products link-ups Purchase of Odwalla has provided the company with new fruit juice brand named Samantha'. Even though fruit juice market in many countries is distinctly slow but it is expected to grow due to health conscious issues. Besides, Coca-Cola has also picked up on the potential expansion in the juice market with Simply Orange Juice Co'. The combination of Coca-Cola's established position in beverage market and consumer thirst for fresh-squeezed juice offers Simply Orange Juice the chance to win market share from epsiCo's Tropicana.

3.2.2 Elements of Threats
Currently, the threat of new viable competitors in the carbonated soft drink
industry is not very substantial. The threat of substitutes, however, is a very
real threat. The soft drink industry is very strong, but consumers are not
necessarily married to it. Possible substitutes that continuously put pressure on
Coke and its competitors include tea, coffee, juices, milk, and hot chocolate.

Competition
The non-alcoholic beverages segment of the commercial beverages industry is highly
competitive. Competitive products include carbonates, packaged water, juices and
nectars, fruit drinks, sports and energy drinks, coffee and tea and other beverages. Non-alcoholic beverages are sold to consumers in both ready-to-drink and not-ready-to-drink-form. Consumer buying power also represents a key threat in the industry. The rivalry between Pepsi and Coke has produced a very slow moving industry in which management must continuously respond to the changing attitudes and demands of their consumers or face losing market share to the competition. Furthermore, consumers can easily switch to other beverages with little cost or consequence.

Health issues
Increasing consumer and regulatory awareness of the health problems arising from
obesity and inactive lifestyles represents a serious risk to the majority of Coca-
Cola products. As health problems continue to grow, industry legislation and
public backlash may both harm the company's performance going forward.
Relatively narrow product range Coca-Cola still has a relatively narrow product range. In contrast, competitor like PepsiCo has a far more diverse portfolio, including a substantial snacks division, putting it in stronger and more flexible position to exploit potential growth in the global foods and drinks market.

Risk of cannibalizing sales
Coca-Cola is relying on brand extensions to boost sales growth in old brands.
While new products such as Vanilla Coke and diet Coke with Lemon may attract some
customers from rival colas, and perhaps even generate more purchases in the
category as a whole, there is a strong risk of cannibalizing existing sales in the
long term.

Varying growth in non-core categories
The popularity of the non-core categories Coca-Cola has invested in vary greatly
by country. The fruit juice market, for example, has a high growth rate in the US
but is fairly stagnant in many other countries. While Coca-Cola may be able to
generate increased interest in the category through a strong marketing push, it is
not going to be easy unless the category is growing already.

Major rivals also investing in non-carbonated drinks
As well as being major rivals in the core cola and other carbonated drinks
categories, other companies such as PepsiCo and Cadbury Schweppes are pursuing
similar strategies in investing in other beverage categories. Cadbury Schweppes,
for example, acquired Orangina-Pampryl for €700 million in late 2001. PepsiCo,
meanwhile, is attempting to gain ground in the sports drinks category by
segmenting the customer base. It plans to target the Hispanic market with a new
Gatorade based drink called Xtremo.

3.2.3 Response to Opportunities & Threat
Coca-Cola was in the middle of the Cola War and the company is in need of more
market share. Hence, opportunity arises with the presence of McDonald's. It was
the window of growth for Coca-Cola as the strategy was to enter into younger
demographic of market and cultivating such branding awareness of Coca-Cola, while
this market is still at its infant stage. Hence, product confidence is built at
the younger age. Not only that, Coca-Cola was also able to provide McDonald's
restaurant with a portfolio of brands inducing redundancy of other colas. Cocacola
strived further entering into the customer branding awareness through
attachments with schools and education institutions, as this was the market
penetration method employed. Naturally, people want to have confidence in their
favorite beverages. Coca-Cola understands that consumers place priority on being
healthy and fit and promotes active living through programs around the world that
support physical activity. In addition, Coca-Cola also works with a wide variety
of organizations to support health, fitness, and good nutrition, for instance,
American Council for fitness and Nutrition (ACFN), Grocery Manufacturers of America (GMA), International Life Sciences Institute (ILSI) and etc.

Next On - Coca-Cola Business Strategy Part 3