The Coca Cola SWOT Analysis
The Coca Cola SWOT Analysis
The Coca Cola Company
Operating in the highly competitive beverage industry, The Coca Cola Company is one of the leading players in the industry with over 100 years of industry experience, and 140,000 employees worldwide. The company is an international corporation that deals with the manufacture, retail and marketing of its products and services throughout the world. Working under the umbrella of Coca-Cola, one of the world’s most priceless business brands, the Coca Cola Company’s portfolio entails billion dollar brands comprising Coca-Cola, Diet Coke, Coca-Cola Zero, Sprite, Fanta, Sprite, Powerade, and Minute Maid among other reputable brands. Their mission, which they have and will continue to accomplish, is to refresh the world and inspire moments of optimism and happiness, create value, and make a difference.
Industry
As previously mentioned, The Coca Cola Company operates in the cutthroat beverage industry that has seen the collapse of many companies that have tried doing business in it. Because the beverage industry is complex and multifaceted, The Coca Cola Company has managed to develop unique products and services for the sustenance of competitive advantage. Internationally, the company is the No. 1 manufacturer and distributer of sparkling beverages, juices, and ready-to-drink coffees and teas.
Customers
The Coca Cola Company serves over 50 billion customers worldwide. The company has outlets in over 200 countries and for that reason, it is estimated that the company serves a remarkable number of 1.6 billion beverage drinks every day. The market niche for The Coca Cola Company is approximated to be 40% in the USA, 38% in Asia, and 23% in the rest of the world. Notably the target customers for the coca cola brand include anyone who is old enough and capable of purchasing one of its branded beverages. The customers of The Coca Cola Company are varied and are inclusive of customers with various health problems, who the company has taken an initiative of producing beverages suitable to this group.
Operational Activities
Apart from the daily business operational activities including manufacturing, production, sales, and marketing, The Coca Cola Company engages in various sustainability activities, which have been linked with the company’s success. The Coca Cola Company has long been committed to the building and development of sustainable communities and it engages in a number of projects in relation to this. Not only is the company focused on environmental initiatives, it also supports healthy living, safe work environments and the enhancement of economic development for the communities in the regions that the company operates. The company’s Operational activities have assisted the company in setting itself aside from its competitors in the beverage industry.
Recent Events
Being the end of the year, the most recent event of The Coca Cola Company involves the 2011 Christmas campaign. This campaign will include a performance of the “Shake It Up Christmas” by the well famed musician, Natasha Bedingfield. The Christmas campaign is one the of the company’s marketing and public relations events that the company engages in each year. In addition to this, The Coca Cola Company has also been engaged in cash donations, as well as, relief involvement in the rehabilitation of those affected by Thailand floods. Conclusively, the company has also recently invested in India’s long-term sustainable growth by providing cash donations which have gone into the development of India as a state.
SWOT Analysis
Strengths:
The Coca-Cola Company enjoys significant ownership of the soft drink market with a 43% market share. Pepsi is the only significant competition in the industry and its stock has dropped 10% in the past 6 months, giving Coca-Cola even more distinction in the market. While North American sales hit lows, the company enjoyed enormous growth internationally, specifically Asia and South America. In order to remain profitable, Coca-Cola will have to see sustained growth outside the region where its trademark enjoyed its original success. Since Pepsi has invested most of its resources in domestic markets, the battle between the two beverage giants may be decided by the battle between the dollar and international currency.
By diversifying their product line, Coca-Cola has positioned itself competitively in the transforming beverage market by investing in organic and dairy drinks as carbonated beverages are losing favor. Coke’s Minute Maid and coffee and tea lines will have to remain strong, as juice alternatives are receiving strong attention from beverage competition and the Pepsi-Starbucks partnership seeks international expansion.
Another strong attribute of Coca-Cola is that it is well known. According to Rayner (2003), no other company has so many impressions than Coca-Cola in the world today. Their brand can be seen in cafes, concession booths and hot dogs stand. The brand also lights up Times Square and Piccadilly square. Coca-Cola brands everything it can lay its hand on, from t-shirts to umbrellas and on ball caps. The company has branded refrigerators and coolers, key chains and just about anything that can be branded (Rayner, 2003). It is estimated that the Coca-Cola Company in the US alone spends about a million dollars every day on advertising (Lynch, 2006). This has given it an edge over its competitor because the brand is very prominent and consumers can associate with the products and familiarize themselves with it, as well on a daily basis.
Weaknesses:
What impedes Coca-Cola more than any external force is self-inflicted damage to their brand image. More than one allegation of forceful union busting and murder related to labor issues has sprung from the company’s Latin American bottling plants. In addition, some plants in lesser developed countries have also been accused of leaving surrounding communities in drought and producing pesticide heavy soft drinks. Some self-inflictions to Coca-Cola’s brand image trace as far as back as World War II, when Coca-Cola began manufacturing Fanta for Germans who became frustrated after Hitler banned Coca-Cola ingredients from entering Germany. Hitler’s reasoning behind this was because Coca-Cola was an American icon which consequently forced Coca-Cola to manufacture something “special” for distribution in Nazi Germany. Many consumers viewed and still view this as a deceptive act on Coca-Cola’s part.
Many of Coca-Cola’s products also pose health risks. The acidity of the drinks has sparked debate over whether the product causes excessive teeth and stomach damage. In addition, in an effort to reduce costs, Coca-Cola led the way in utilizing high fructose corn syrup in the manufacturing of soft drink ingredients, which has become associated with obesity and diabetes. As the modern consumer has become more educated and health conscious, the company has seen stunted growth, especially in the U.S.
In the world market, Coca-Cola is predominantly seen as a United States Corporation. This is despite the fact that it has been operating in so many countries for so long. When local competition arises, they normally portray Coca-Cola as this big corporation that makes profit from the local market and then transfers the money to their headquarters in the States. They bring out the patriotism card in most of their advertising campaign with the main idea being local, implying the competitor, is best (Lynch, 2006). Consequently, Coca-Cola and its subsidiaries should endeavor to promote themselves as local as possible. This can be achieved through the use of contextualized and custom made adverts that suit that particular market as opposed to the idea of having a standard advert for the whole market.
Opportunities:
Coca Cola has always been proud of their environmental and humanitarian initiatives, as these efforts have played a considerable role in shaping the company’s image throughout past decades. A current opportunity that the company is venturing into is a program referred to as the Arctic Home initiative. The Arctic Home initiative is a collaborative effort between Coca Cola and the Wildlife Fun (WWF) that is focused around the goal of “raising awareness and funds to help create a safe haven for polar bears – an Arctic refuge”. In order to raise awareness for their efforts, and hopefully translate awareness into soda sales simultaneously, Coca-Cola is “turning their iconic red cans white for the first time in history”. In addition, Coca-Cola is matching up to $1 million in total donations made for this cause and despite being in the beginning stages, this eco-initiative and WWF partnership is definitely an opportunity for Coca-Cola to not only enhance their brand image but also generate increased sales as well.
Establishing a healthier association with their products is also seen as being a critical opportunity for Coca-Cola. As exemplified by their 2007 purchase of Glaceau, the maker of Vitamin Water, the beverage industry is increasingly beginning to adapt to the market’s newfound health awareness. Rather than viewing the shift away from soft drinks as a threat, CEO Muhtar Kent has seen growth in the sports drink, juice, and water industries as an opportunity that Coca Cola will continue to become heavily invested in. Boasting major brands such as Powerade, Odwalla and Tab, Coca Cola has begun to utilize the opportunities which have presented themselves in industries neighboring the soft drink industry to their advantage. Originating in 1886 as a company that served nine drinks per day through a small Atlanta pharmacy, Coca Cola is now made up of over 500 brands serving nearly 1.7 billion servings per day. Ultimately, the newfound mentality of diversification has proven to be very successful for Coca-Cola and will continue to pose many opportunities for them not only in the short term, but also the long term as well.
Coca-Cola has always been a major sponsor of international sports events like the World Cup which has consequently endeared it to many soccer fans around the globe. With this in mind, Coca-Cola should consider taking a central spot in other international multi sports events like the Olympics. This will attract a diverse fan base to Coca-Cola Company and its products.
Threats:
While direct competition poses a significant threat to most major corporations in the United States, substitutes have proven to be the major area of concern for Coca Cola in recent years. With people constantly trying to change their drinking habits in an effort to become healthier, sales are being driven away from Coca-Cola’s primary product line – soda. While Coca-Cola’s involvement with healthier industries certainly helps lessen the impact that these habits are having on reported earnings, Coca-Cola cannot expect to achieve continuous growth if soda sales are declining. The non-alcoholic beverage market is ever-expanding and Coca Cola has been working diligently and spending a significant amount of money in order to keep up with these changes. Coconut water is an example of a beverage substitute which has seen its industry leader, Vita, grow from 2009 revenues of $20 million to $100 million in just two years. Coca Cola has reacted to this apparent success by becoming a minority stakeholder of coconut water company Zico. Although this is just one example, the ongoing, and rapid expansion of the non-alcoholic beverage industry has clearly proven to be a significant threat to Coca-Cola.
New health-conscious taxes proposed by several US states have also proven to be a potential threat not only to Coca Cola, but also to their customers as well. As mentioned in a recent GoLocal article, “four states collect a special excise tax on soda” while “fourteen more states, including Rhode Island, proposed new soda taxes”. The purpose of these taxes is to discourage unhealthy diets and offset the economic costs of obesity. While Coca Cola is a company that has a global presence, US sales have dropped within the last ten years and recent steps towards the mass taxation of soda is alarming. In addition, ever since the release of the documentary film Super Size Me, which highlighted the negative effects that fast food could have on one’s life, obesity has become a very influential factor in political decisions. This consequently suggests that government policies will continue to pose major threats to Coca-Cola and many of their soft-drink product lines. Other countries are also beginning to follow in the footsteps of the U.S. in regards to these policies, which only serves as further motivation for Coca-Cola to diversify their portfolio with brands outside of the soft drink industry.
Coca-Cola’s key ingredient is clean water. As global warming, pollution, degradation, and overpopulation take a toll on the water reserve on earth today, the position of Coca-Cola as a leading soft drink producer is threatened. Clean water is expected to become more and more expensive thereby threatening Coca-Cola’s output and profit margin considerably.
Recommendations based on the SWOT
Examining a company’s internal and external environment is essential in the process of strategic planning. The SWOT analysis which includes the analysis of strengths, weaknesses, opportunities and threats investigates internal and external as well as positive and negative factors of a corporation. On the basis of a SWOT analysis, a marketing strategy can be developed using corporate strength while avoiding corporate weaknesses.
Coca-Cola’s position as a leader in the soft drink industry seems strong, and this domination is expected to go on for a long time unless some phenomenon of humongous magnitude plays a role in reversing this (Lyinch, 2006). The fact that Pepsi’s stock has dipped in the last few months goes to prove that Coca-Cola’s position is solidifying. This is because when a business is in trouble, the target market runs to the competitor. This solidifying market position coupled with the company’s widely known brand name act as impetus for its growth.
Coca-Cola spends a lot in advertising and other campaigns that are aimed at improving its image to the public. This implies that it knows how serious image is to consumers, especially in respect to products that are eaten or drunk. Should the public feel that they are offered substandard services or goods, they will boycott not only the said product, but everything else that is connected with the tarnished company (Rayner, 2003). That said, as people are becoming increasingly health conscientious, Coca-Cola realizes that it needs to diversify its product line with alternatives that would not only satisfy consumers, but also make them feel less guilty about harming themselves in the process (Rayner, 2003). They cannot just expect to enter new markets effortlessly though. These types of transitions need to be made very carefully and with great caution. Coca-Cola has been made well aware of this after making the mistake of entering the water beverage market with the offering of Dasani bottled water. Rather than deriving its water from natural springs as they suggested, Coca-Cola had actually been filling its Dasani bottles with purified tap water. Consequently, Coca-Cola not only lost out on the lucrative water market thanks to what happened, but they also lost a sizeable number of clients who felt that all products from Coca-Cola were not safe. This is precisely why Coca-Cola needs to be more careful when venturing into new markets. Product line diversification is potentially the greatest opportunity for the Coca-Cola Company and according to Rayner (2003), the best way for them to test new markets before they venture in is to buy distributing licenses from already established players. This she says would enable the company to have a piece of that market while at the same time insuring itself should anything happen.
Another thing that Coca-Cola should focus on is creating market-based promotions rather than whole-market promotions. If Coca-Cola and its subsidiaries endeavored to promote themselves as local as possible, competing companies would have a much harder time playing the patriotism card on them. This can be achieved through the use of contextualized and custom made adverts that suit a particular market as opposed to the idea of having a standard advert for the whole market in general.
When a company is in a critical market situation, it needs tools to analyze its current situation and find the right strategy for successful development. A SWOT analysis makes this possible, as it forces a company to define where it has come from and also where it is headed. It not only helps a company realize the strengths that have allowed a company to develop successfully, but it also identifies weaknesses that exist and which of them have to be neutralized or converted into strengths. Therefore, Coca-Cola needs to facilitate what has been discussed here in order for it to continue its legacy and maintain its position as the number one soft drink producer in the world.
