Coca-Cola's global brand positioning and cultural impact

Coca-Cola Company (KO) is a beverage maker that is seeking to renew growth despite the maturity of its core soda market. The company is seeking to develop new products and markets. In order to achieve this objective, Coke has been forced to make adjustments to its corporate culture in order to spur innovation (Foust, 2006). The company faces tremendous challenges in renewing growth given its internal and external environment.

Porter's Five Forces analysis outlines the favorability of an industry, and can be tailored to the individual players (QuickMBA.com, 2007). The power of buyers is relatively low. Buyer volume is low. The seller has high brand identity, which lends it pricing power. While there are many substitutes available, buyers do not have much pricing power. Suppliers have moderate pricing power. Coke is a very high volume purchaser, so suppliers become dependent on the volume. Most inputs are not differentiated. However, key sweeteners like corn and sugar cane are subject to global commodity price fluctuations, one area where Coca-Cola has less pricing control. There are low barriers to entry and many new products have entered the beverage industry recently and stolen market share from the incumbents. There is a high threat of substitutes for the rather vague benefits that any individual beverage will offer (Fredrix, 2010). For a company like Coke that offers a wide range of beverages, they are covering many of those substitutes in order to retain market share. The degree of rivalry is intense, which impacts pricing, merchandising and increases advertising budgets. Overall, the beverage industry remains favorable. While there are a number of challenges, the high degree of pricing power that beverage companies have allows them to charge sufficiently strong markups to cover the high costs associated with intensive marketing campaigns and hundreds of different products to cover all non-alcoholic beverage categories.

Coca-Cola faces several major threats. The first is substitute products. The company too long ignored the rise of non-carbonated beverages, but consumers took to these alternate beverages because of the different perceived benefits they offered (Foust, 2006). Today, non-soda soft drinks are a growing portion of the market and are hurting profits at the major soda manufacturers (Fredrix, 2010). Another threat is the threat of taxes, such as a sugar tax on soda makers (Ibid). This tax is proposed to help compensate for the impacts that soda-makers have on obesity. Other potential threats include raw materials costs - corn and sugar in particular (2009 Form 10-K), which are partially determined by global commodities markets - and the economy (Fredrix, 2010).

There are also a number of opportunities as well. Coca-Cola has strong distribution capabilities and these can be used to launch new products around the world. The company is active with new product launches, totally hundreds each month or year (Foust, 2006). The company may also be able to improve its global presence. Although recognized around the world, there remain countries where Pepsi has a stronger presence and Coke can continue to build market share in these countries.

Coca-Cola's response to the threats and opportunities it faces has been largely defensive. The company has introduced new products largely in response to categories that have been created by other companies -- moving into coffee drinks in response to Pepsi's deal with Starbucks and introducing Fruitopia and Nordic Mist (Foust, 2006). These moves are reactionary and despite the company working hard at new innovation, it tends to lag other firms in the creation of innovative products. In addition, the company finds itself on the defensive with respect to taxation and other government relations issues. Moreover, Coca-Cola still finds itself subject to prices of raw ingredients, where it could otherwise have implemented backwards integration, long-term hedging or other strategies to mitigate the potential consequences of commodity price fluctuations.

The result is that Coke has been largely unsuccessful. On the Investor Relations section of its website, Coke puts forth some minor initiatives in which it has had some success, but the company remains a follower when it comes to introducing quality new products. In addition, the company remains under pressure for increased taxation and it remains in a situation where its market share is declining in its core products. The company saw revenues decline last year, although profits increased. Profits had declined in 2008 despite a revenue increase (MSN Moneycentral, 2010). Financial improvements at Coke, then, have been incremental. The company remains in search of transformational change.

The company needs to dig deeper to address the threats that it faces. Innovation stems from culture change, and in this area Coca-Cola has moved slowly. Mary Minnick left Coke for political reasons in 2007, highlighting perhaps the reasons why the company has continued to lag in innovation -- the mindset simply does not exist. The company's current innovation pipeline is still attributed to Minnick, which calls into question if it can continue to foster innovation going forward (Rayasam, 2007). The evidence is that it cannot and it is still addressing its threats in a reactionary way, and this is resulted in the same flat performance that the company has endured for many years.