This paper is about Coca – Cola Company and its strategy. The idea was to look at a specific strategic initiative from the past year or so and how the company defined that strategy, and how the company was able to implement that strategy. There is both description and analysis in the paper.
¶ … Coca-Cola. According to the company's 2012-Year in Review, one of the objectives that the company had coming into 2013 was to improve the strength of its product portfolio. The company wanted to find products where there was untapped potential, and take steps to exploit that potential and improve the overall portfolio strength. To that end, Coca-Cola was able to take an ownership stake in Core Power, which makes protein drinks in the United States, and entered into a partnership with Aujan, which is a maker of juice, sparkling beverage and malt beverages in the Middle East. The company also continued to enjoy strong growth from some of its targeted brands, notably I LOHAS and Ayataka, both of which reached the billion-dollar mark in sales in the past year (Coca Cola, 2012).
As a result of these efforts, the company was able to enjoy broad-based success. Volume was up 4%, and the company achieved record highs in operating revenue and operating income in 2012 as well (Coca-Cola, 2012). The targeted investments that Coca-Cola made contributed to this success. In terms of diversification, the company has a stock market beta of 0.49, which indicates that its business is very stable, more than that of the broad market (MSN Moneycentral, 2014). This speaks to Coca-Cola's global diversification, contrasted against the volatility of the U.S. stock markets. A company with strong global diversification should have lower volatility than the U.S. markets overall, as those are more strongly tied to the U.S. economy. So on that basis, the increased diversification efforts that are part of Coca-Cola's long-term strategy appear to have been successful.
It is also possible to examine how the company has earned its success with some of its growth brands. With Core Power, Coca-Cola's investment has allowed the brand to leverage Coca-Cola's marketing muscle and distribution system. There is better in-store placement, a dramatic increase in the number of retailers, better customer management systems and more strategic support, all of which translate to higher sales for the product after Coca-Cola acquired it, something that has been mutually beneficial for both companies.
Green tea is a product that has been highly successful in Japan in packaged format, and that has driven the growth of Ayataka, one of Coca-Cola's new billion-dollar brands. The company performed a comprehensive environmental scan and realized that green tea demand overall was being driven by demographic shifts. While people of working age in Japan have been more oriented towards increased coffee consumption, the supposed health benefits of green tea have made it a favored product of Japan's rapidly-growing elderly population. Ayataka is differentiated by being nigori, meaning cloudy, in contrast to the clear beverages of the competitors. This appearance connotes greater healthfulness. Coca-Cola recognized that its product was going to have increased appeal as Japan's retirement-age population grows, and made significant investments in the design of the packaging and new promotional strategy to increase exposure to this #3-ranked green tea. The product giveaways worked, and Ayataka has seen an significant increase in sales since the promotion (Metcalfe, 2013).
Strategy requires that the organization takes the time to understand its external environment, and identify opportunities where they exist. For Coca-Cola, this means gathering information about its individual businesses. The two brands discussed above are different in that one was already owned by Coca-Cola, while the other received investment from the company. Both investments were made in response to a market opportunity. Yet, to be successful, a company needs to make good, strategic investments that have a long-run payoff. This is important for Coca-Cola. For example, it made an investment in Ayataka even though the brand was already growing. But it saw that it had a product that was distinctive from the competition, and could probably capture greater market share for the long run if it was able to succeed in the short-run. It took a short-run investment to gain tens of thousands of new consumers, but those consumers will be loyal to the brand for a further 10-20 years or more. Additionally, the better-established the brand is, the more people when they begin to consume more green tea will choose that brand.
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