Coca-Cola Competitive Strategy: SWOT and Porter's Analysis

Executive Summary

This paper analyzes the Coca-Cola Company, the largest beverage company in the world, through a comprehensive strategic analysis designed to ascertain its competitive advantage. Two analytical tools are employed: SWOT analysis and Porter's generic strategies. Of the four generic strategies, the analysis reveals that Coca-Cola Company follows the differentiation strategy.

By integrating the differentiation strategy with the strengths, weaknesses, opportunities, and threats of the organization, several key insights emerge. The strengths identified in the SWOT analysis include the company's distribution system, its valuation, and its brand equity. Coca-Cola's distribution system is unique and difficult for competitors to imitate. Its high market value facilitates the sustaining of differentiation, while brand equity helps ensure that its various products are purchased across the world. The three weaknesses selected from the SWOT analysis are intense market rivalry with Pepsi, a lack of healthy beverage offerings, and low product diversification. It is imperative for Coca-Cola Company to diversify its product range and introduce a line of healthy products.

Coca-Cola Company should not alter its vision or mission. This strategic analysis has reconfirmed both. The organization is deliberate in what it undertakes, which is evident even in its marketing. The company's marketing campaigns primarily inspire happiness, with the product playing a secondary role. Furthermore, Coca-Cola emphasizes relationships rather than solely generating revenue, and its advertising focuses on spreading happiness and endorsing kindness.

Porter's Generic Strategies and Coca-Cola's Differentiation Approach

According to Porter's Generic Strategies model, there are four basic strategies that firms can use to gain a competitive advantage over market rivals: cost leadership, differentiation, cost focus, and differentiation focus (Porter, 1985). With respect to cost leadership, an organization endeavors to establish itself as the low-cost producer in its industry. If a firm can attain and sustain overall cost leadership, its market performance will be above average, provided it can command prices at or near the industry average (Porter, 1985). In a differentiation strategy, an organization strives to achieve uniqueness and distinctiveness within its industry, which typically commands a premium price. The third and fourth strategies are cost focus and differentiation focus. With cost focus, a firm seeks a cost advantage within its target market segment; with differentiation focus, it seeks differentiation within that specific segment (Porter, 1985).

Of the four generic strategies, Coca-Cola Company follows the differentiation strategy. Since its founding in 1886, Coca-Cola has become a reputable and globally recognized trademark. The organization has successfully differentiated itself by becoming renowned as the largest producer, distributor, and marketer of non-alcoholic beverages in the world. Today, Coca-Cola sells more than 3,000 products bearing its famous trademark in over 200 countries. Despite strong competition from Pepsi, the company has maintained significant success and market dominance.

The organization pursues differentiation by spending substantial sums on marketing and advertising campaigns to create a distinctive image for its various products. According to Bailey (2014), advertising and marketing campaigns have substantially strengthened the organization's brand supremacy over the years. For instance, in the 2013 fiscal year, Coca-Cola spent nearly $4 billion — equivalent to 7 percent of its 2013 revenues — on advertisements. The recipe for manufacturing Coca-Cola has been kept secret, allowing the company to advertise that its drink is inimitable and cannot be copied by competitors. To this day, the precise formula remains unknown to the public, which ensures the product continues to be perceived as unique compared to other beverages such as energy drinks and juices. Coca-Cola also features an iconic red label with white calligraphy that is recognizable anywhere in the world. The company further demonstrates its differentiation strategy by positioning its brand across a wide range of merchandise — from vehicles to clothing — and through sponsorships of major events such as the Olympics and the FIFA World Cup. These sponsoring activities have helped the company remain distinctive and keep consumers aware of the brand.

Coca-Cola's Strategic Choices: SWOT Integration

The SWOT analysis of Coca-Cola Company identifies the following factors (Bhasin, 2018):

Strengths: Brand Equity; Company Valuation; Extensive International Presence; Greatest Market Share; Brilliant Marketing Plans; Customer Loyalty; Distribution System.

Weaknesses: Competition with Pepsi; Low Product Diversification; Lack of a Healthy Beverage Offering; Water Management.

Opportunities: Diversification; Focusing on Developing Countries; Packaged Drinking Water; Supply Chain Management; Marketing Lesser-Selling Offerings.

Threats: Sourcing of Raw Materials; Indirect Competition.

Three points from each of the four areas of the SWOT analysis are integrated with the differentiation strategy below. The strengths selected are the distribution system, company valuation, and brand equity — all three of which support the company's generic strategy. Coca-Cola's distribution system is distinctive and extremely difficult for rivals to replicate. In fact, it is unmatched in scale. The closest competitor is Pepsi, which still falls significantly short in international distribution. Company valuation also supports differentiation: according to Statista (2015), Coca-Cola's valuation nearly doubled over the past decade, from $40 billion in 2006 to $84 billion in 2015. Finally, the company's brand equity is exceptionally high — the brand is recognized worldwide and loved by consumers everywhere.

The three weaknesses selected are intense market rivalry with Pepsi, a lack of healthy beverage offerings, and low product diversification. It is important to note that Coca-Cola has not yet achieved perfect alignment between its SWOT factors and the differentiation strategy. One specific area of disconnect is its vulnerability in the market. While differentiation implies that Pepsi's products are merely similar rather than identical to Coca-Cola's, research has shown that a majority of consumers cannot distinguish between the two products by taste alone. Low product diversification is similarly misaligned with the differentiation strategy. The company should diversify its product range in order to strengthen its competitive advantage through truly inimitable offerings. The same applies to the absence of healthy beverages: Coca-Cola should develop a range of healthy products, as more consumers are increasingly gravitating toward healthy lifestyles and preferring non-carbonated beverages (Stewart, 2014).

References

Bailey, S. (2014). Advertising is a key strategy for Coca-Cola's growth. Market Realist. Retrieved from: https://marketrealist.com/2014/12/advertising-key-strategy-coca-colas-growth

Bhasin, H. (2018). SWOT of Coca Cola. https://www.marketing91.com/swot-coca-cola/

Coca-Cola Company. (2017). Mission, Vision, & Values. Retrieved from:

Mullane, J. (2002). The mission statement is an important strategic tool: When used properly. Management Decision, 40(5), 448–455.

Porter, M. E. (1985). Competitive Advantage. New York: The Free Press.

Stewart, J. B. (2014). For Coke, challenge is staying relevant. The New York Times. Retrieved from: https://www.nytimes.com/2014/03/01/business/challenges-for-coke-to-stay-on-top.html

Svendsen, S. E. (2013). Refresh. Create. Inspire: A rhetorical analysis of the mission, vision and values behind The Coca-Cola Company and the digital marketing strategies of the "Open Happiness" campaign (Doctoral dissertation, Liberty University).