Business-Level and Corporate-Level Strategies for Coca-Cola Company
Business-Level and Corporate-Level Strategies for the Coca-Cola Company
Introduction
The Coca-Cola Company deals with beverage products and has more than 500 brands in over 200 countries. Even though the company's primary line of business is in sparkling beverages, the company has diversified in the recent past to produce still drinks such as water, juices, teas, coffees and energy drinks. Coca-Cola is known for its four non-alcoholic sparkling beverage brands, which are Coca-Cola, Diet Coke, Sprite, and Fanta. The company was founded in the U.S. in 1886 and has since grown to be the largest beverage company in the world. The Coca-Cola Company’s shares are listed on the New York Stock Exchange. The primary competitor for the company in the U.S. and majority of the other countries where it has operations is PepsiCo, Inc. (The Coca-Cola Company, 2016). In this task, Coca-Cola’s business-level and corporate level strategies will be analyzed and then compared with those of PepsiCo to determine which of the two is more likely to succeed in the long-term than the other.
Business-Level Strategies
The Coca-Cola Company employs three types of business-level strategies both in the U.S. and internationally: differentiation, low-cost leadership, and focus strategies. Differentiation strategies involve creating a unique perception of own brands from those of competitors. The company has succeeded in portraying its brands as superior to those of its competitors through various promotion strategies. The beverage industry is highly competitive with various substitutes, and it is very easy for any company to lose customers to the competition. In response to this challenge, Coca-Cola has been able to implement differentiation strategies to present its brands as better in quality and taste than those of its competitors. The strategy has ensured that the company maintains its leadership in beverage industry (The Coca-Cola Company, 2016). Differentiation strategies are not only used in branding but also in other areas such as marketing activities, labeling, bottle designs and business models.
The other business strategy used by Coca-Cola is low-cost leadership where the company focuses on delivering high quality and affordable products. Coca-Cola’s products cost as low as half a dollar and this makes them affordable by even by consumers of low-income class. One way of ensuring that the company can deliver its products to the market at low cost is to control operational and marketing spending. The company’s management does appreciate that it cannot compete without minimizing its cost of operations. Additionally, the company has a culture of using technologies which enhance its internal efficiency, and this has helped it to produce its products at very low costs (The Coca-Cola Company, 2016). The low-cost leadership strategy is the reason behind the company’s success in many developing countries where its competitors failed in the 1980s because they could not be able to control their costs.
Focus strategies involves clear definitions of specific lines of products, and the Coca-Cola Company has been using this strategy for a long time. It uses this strategy to attract consumers in its target market through low-cost and efficient manufacturing processes. For example, the company’s top brands are made and promoted through a focused low-cost strategy. The focus strategy ensures that the company designs its product according to the tastes and preferences of the target market (The Coca-Cola Company, 2016). For example, Coca-Cola brand is sold in all the countries where the company has operations, but the taste, flavor, ingredients vary slightly to ensure that they correspond to the needs and expectations of consumers in those particular markets. Out of the three business-level strategies discussed above, I think that differentiation strategy is the most important for the success of the company in the long-term. Additionally, I do believe that the decision to pursue this strategy was well conceived taking into account the high level of similarities between its products and those of its primary competitor, PepsiCo. The ability to differentiate itself from its rivals has helped it create a perception of top quality in the minds of consumers. Many consumers associate the company’s brands with great taste and value proposition. Furthermore, the company’s decision to introduce new lines of beverages from time to time ensures that it stays ahead of its competitors and meets the changing needs of consumers.
The growth and expansion of the Coca-Cola Company from a small company in Delaware to the largest beverage company in the world could not be achieved if the company’s founders and subsequent leaders did not develop and implement corporate-level strategies. The company’s corporate-level strategies include expansion, stability and disposal strategies. The expansion strategy has been the driving force for the company’s growth across the world with six operating segments in six regions. The strategy has seen the company start operations in 206 countries in the last 130 years. The expansion does not only focus on increasing its geographical reach but also the number of brands under its name.
The company started with a single brand, but today it has over 500 brands in all the markets it sells its products. The company collaborates with distributors and independent manufacturers to ensure that its expansion strategy does not affect its goals for achieving a high level of internal efficiency. Furthermore, the expansion strategy has enabled the company to diversify into other lines of beverages in addition to its traditional sparkling beverage brands (The Coca-Cola Company, 2016). For example, the Coca-Cola Company now produces mineral water, tea, coffee and fruit juice which were not part of its original lines of products. Nonetheless, the diversification has enabled the company to grow its brand portfolio and stay ahead of its rivals.
The other corporate-level strategy used by Coca-Cola is stability strategy which involves formulating and implementing actions that ensure it maintains its market share. The firm recognizes that markets reach maturity stages at some point where they cannot grow anymore and if nothing is done, they start to shrink. It is at this point that the stability strategy is used to maintain the company’s market position through different marketing activities such as advertising and sales promotion. It would be ineffective to use expansion strategies in a market that has reached the maturity level since there are no new customers that can be attracted to the brand. Coca-Cola is currently using this strategy in most of its markets because they have reached points where they cannot attract a significant number of new customers (The Coca-Cola Company, 2016). Hence, the company focuses on quality control, marketing activities, supply chain management and research and development to retain its current client base.
Disposal strategy involves selling off business units which are not growing and are not contributing to the company’s profitability. Coca-Cola disposes of unprofitable business units through budget cuts, shut down of operations and selling them off to others. For a company like Coca Cola with varying brands, there is a need to identify the line of products that contributes to significant growth of the company in varying aspects such as profitability and brand recognition. However, some lines of products have negative effect on the overall brand or have low levels of profitability yet the company uses significant resources to provide it to the market. As such, the disposal strategy aims at eliminating such lines of products that are more of negative attribute to the company.
The most important corporate-level strategy is stability strategy. I do hold that this is the most crucial strategy for the company’s success in the long-term because it will ensure that it retains its leadership in all the markets it operates. Most of Coca-Cola’s products have reached maturity stage in their life cycle, and it will be tough to expand their market share in the current business environment. Additionally, the Coca-Cola Company is now in almost every country, and its brands are available even in the remotest parts of the world. Hence, the biggest challenge for the company is to maintain its current position in the market, and it is only the stability strategy can help it avoid being replaced by its rivals.
Competitive Environment
As the Coca-Cola Company diversifies into other types of beverages, the level of competition increases as well because it ventures into products being produced by others. However, the primary competitors for the company in the last 120 years have remained to be PepsiCo Inc. PepsiCo was started in 1898, only 12 years after the establishment of the Coca-Cola Company and since then, the two have been fighting for the same consumers (PepsiCo, Inc., 2016). However, they are different in their business-level and corporate-level strategies. When the Coca-Cola Company’s most important business-level strategies are differentiation, low-cost leadership, and focus, PepsiCo pursues product innovation, brand recognition and low price strategies. Even though the ultimate objective of the strategies for both companies is to achieve competitive advantage, each has succeeded in creating unique brands for themselves and attracting different types of customers. Nevertheless, the Coca-Cola’s business-level strategies have helped it to stay ahead of its main competitor for a long time, and the situation is not likely to change taking into account that PepsiCo has tried severally to take the former’s market position but failed.
On the other hand, corporate-level strategies for the Coca-Cola Company includes geographical and product expansion, stability, and disposal while those of PepsiCo are growth via mergers and acquisitions, strategic alliances and focus on emerging markets. I think that PepsiCo’s corporate-level strategies are more likely to be successful in the long-term than the ones implemented at Coca-Cola (PepsiCo, Inc., 2016). The decision to expand through mergers and acquisitions by PepsiCo provides it with an access of competencies and infrastructure which reduce direct costs and overheads associated with organic growth. Furthermore, the company does not only acquire or merge with companies in its traditional line of businesses but also in other types of beverage and food products such as juice, dairy, snacks, and cookies. M&A is the cornerstone of PepsiCo corporate-level strategy and has been the driver behind its 22 popular brands where each of them contributes to over $1 billion in revenue every year.
Another aspect of PepsiCo’s corporate strategy is the formation of strategic alliances in areas where it faces difficulties in employing M&A strategy. Unlike Coca-Cola which wants to control its operations in all the markets entirely, PepsiCo has formed strategic partnerships with other enterprises to claim a share of the beverage markets in emerging countries. The company collaborates with established businesses in those markets which ensure that the corporation benefits from their market shares (Dudovskiy, 2016). My choice of the Coca-Cola Company as the one with the business-level strategies that are more likely to be successful and PepsiCo with the corporate-level strategies which are more apt to be successful in the long-term than those of its competitor would not be different in slow-cycle and fast-cycle markets.
References
Dudovskiy, J., (2016). PepsiCo business strategy and competitive advantage. Retrieved January 26 2017, from http://research-methodology.net/pepsico-analysis-of-corporate-strategy/
PepsiCo, Inc., (2016). 2015 Annual Report on Form 10-K. New York.
The Coca-Cola Company, (2016). Form 10-K: Annual Report Pursuant to Section 13 or 15(D) of the Securities Exchange Act of 1934. Washington, DC.
