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Strategic Choices - SWOT
"Competitive advantage" is approached with the seriousness of a science involving carefully chosen strategies for cost advantage and/or differentiation advantage. Achieving one or both of those advantages through the use of one or more of four strategic business methods ideally gives a company a significant competitive edge over its competitors. The Coca-Cola Company apparently uses three of these strategies to achieve a premiere position in the global beverage industry.
Strengths -- Social Factors
Coca-Cola can use the social factor of health consciousness to become the low cost producer of bottled water and vitamin water, targeting Coca-Cola's broad, worldwide market and gain the lion's share of the market with its exemplary distribution system
Coca-Cola can use the social factor of health consciousness to produce and deliver bottled water and vitamin water that is superior to other competitor's bottled water and vitamin water.
Coca-Cola can use the social factor of health consciousness to target the limited market of vitamin water.
Coca-Cola can use the social factor of health consciousness to develop unique types of vitamin water, beating competitors in fashioning and positioning itself in the market.
Weaknesses -- Supplier Power
Coca-Cola can (and does) have long-term contracts with suppliers of low cost, high-fructose corn syrup, allowing Coca-Cola to produce Coca-Cola inexpensively while forcing competitors to pay more for a far more limited supply of corn syrup.
Coca-Cola has, in some respects, cornered the market on high-fructose corn syrup, has financial resources that can manipulate the supplier market, and has at least developed the illusion that it Coca-Cola's "benefits" of taste and brand exceed the taste and brand of Pepsi and other competitors.
Coca-Cola has certainly targeted and dominated a limited number of suppliers, which allows it to dominate the limited market of customers.
Coca-Cola has beaten competitors to long-term contracts with suppliers of low cost, high-fructose corn syrup, beaten suppliers to the advantage of setting supply prices, and reducing the power of suppliers to affect Coca-Cola's production of cola.
Opportunities -- Economic Factors
External economic factor of the worldwide economic downturn can actually be used by Coca-Cola, which has extensive financial resources. Competitors with lower financial resources can be forced to compete with Coca-Cola's expanded production, marketing and distribution.
Coca-Cola can exploit the global economic downturn's effects on competitors while maintaining its own quality and continue to deliver the taste and brand benefits superior to the benefits of competitors
Coca-Cola has created a number of subdivisions which target and adjust to limited markets and economic factors in approximately 200 countries.
Coca-Cola has beaten the competition to global domination, operating in over 200 countries, expanding and adjusting its production and distribution according to economic factors in many markets and countries.
Threats -- Threat of Substitutes
The Coca-Cola brand is so unique that it can sell at even industry average and outsell the competition. In addition, due to its extensive financial resources, It can sell below industry average and force substitutes out of business by undercutting their prices.
Coca-Cola's brand is so unique and enduring that it has a sustained image of delivering a cola, for example, that has benefits exceeding the benefits of competing colas.
By concentrating on limited markets with specifically created subdivisions, Coca-Cola dominates limited markets and has created the illusion that there is no substitute.
Coca-Cola has beaten potential substitutes "to the punch" by establishing itself as an irreplaceable "statesman" among brands and beverage companies.
3. How Coca-Cola Achieves Sustained Competitive Advantage through Strategic Choices
While assembling this chart with The Coca-Cola Company in mind, some categorized explanations were struggles while others flowed easily because they apparently mirror the Company's strategy. It appears that Coca-Cola uses strategic choices of "low cost," "differentiation" and "preemption" to achieve its sustained competitive advantage. "Low Cost" strategy is used by Coca-Cola due to several factors, beginning with its extensive financial resources. As of December 31, 2010, Coca Cola's financial resources include: cash and cash equivalents of $8,379,000,000; short-term investments of $2,820,000,000; net receivables of $4,430,000,000; inventory of $2,650,000,000; long-term investments of $7,585,000,000 and other current assets of $3,162,000,000 (Yahoo! - ABC News Network, 2012). Whether employing the "positional advantages" view or the "resource-based" view (QuickMBA.com, 2007), these resources give Coca-Cola a significant competitive advantage over its competitors through a "low cost" strategic decision that undercuts competitors and monopolizes supplies. Coca-Cola has the extensive financial resources to cut prices and deliver the same or better product to the public at a lower cost than that offered by Its competitors. In this manner, Coca-Cola can offer superior value to Its customers. Though Coca-Cola has historically publicly taken the position of "statesman" (Porter, Competitive advantage: Creating and sustaining superior performance, 1985, p. 218), it has also negotiated long-term contracts with suppliers of such products as low-cost, high-fructose corn syrup, which has given Coca-Cola continuing access to less expensive ingredients while forcing the competition to pay higher costs for scarcer supplies of this product (Porter, Competitive advantage: Creating and sustaining superior performance, 1985, p. 493).
Coca-Cola has also used the strategic choice of "Differentiation," if only in unique, sustained brand image. As mentioned above, Coca-Cola has historically publicly taken the position of "statesman" among beverage competitors (Porter, Competitive advantage: Creating and sustaining superior performance, 1985, p. 218). In addition, though its product may taste only as good as or worse than competitors' products and though its product may be detrimental to health due to high sugar content, the Company has established the perception that Coca-Cola is the premiere cola and the Company a premiere marketing model (Zurn, 2012).
Finally, the Company has used a "Preemptive" strategy by beating the competition to supply acquisition by creating long-term contracts with suppliers of low-cost, high-glucose syrup, aggressively establishing a dominant presence in 200+ countries worldwide and offering approximately 3500 products in those markets (Coca Cola Company, 2012).
4. How Strategic Choices Align with Coca-Cola's Strengths, Weaknesses, Opportunities and Threats
In a prior module, Coca-Cola's SWOT analysis was charted as follows:
Sustained Global Presence
Decline in net tangible assets
Considerable Financial Resources
Poor performance in North America
Extensive Human Resources
Poor nutritional value of many products
Unique Global Brand
Limited to beverages
Extensive marketing system
Reliance on numerous distributors
Uniquely successful distribution system
Human resources challenges from global diversity
Worldwide proprietary rights
Customer services challenges from global market
Bottled Water market
Regulations in 200+ countries
Expansion into foods
Pepsi already diversified into foods
Expansion into healthful beverages
Prices of raw materials
Customer services challenges from global market
Marketing challenges to multi-cultural consumers
Coca-Cola's Low-Cost, Differentiation and Preemptive strategies capitalize on its strengths by using the Company's: Sustained Global Presence, Taste/Secret Formula, Considerable Financial Resources, Extensive Human Resources, Unique Global Brand, Extensive marketing system, Uniquely successful distribution system, and Worldwide proprietary rights to dominate the world market and create an abiding competitive advantage. Those same strategies minimize the Company's weaknesses of: Negative publicity, Decline in net tangible assets, Poor performance in North America, Poor nutritional value of many products, Limitation to beverages, Reliance on numerous distributors, Human resources challenges from global diversity, and Customer services challenges from global market. The Company's Low Cost, Differentiation and Preemptive strategies could also be used to take advantage of the opportunities of: Bottled Water market, Acquisitions, Expansion into foods, and Expansion into healthful beverages. Finally, those three strategies are also used to reduce the threats of: Fierce Competition, Regulations in 200+ countries, Pepsi's diversification into foods, Prices of raw materials, Customer services challenges from global market and Marketing challenges to multi-cultural consumers.
5. How Different Strategies Prescribe Different Firm Actions to Address the Same External and Internal Contingencies
The four strategies of Low Cost, Differentiation, Focus and Preemption provide alternate approaches for obtaining and sustaining a competitive advantage.…[continue]
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