Coca-cola industrial analysis

Coca-cola industrial analysis

Introduction

Coca Cola Company is the world’s leading manufacturer, retailers and marketers of non-alcoholic beverages. Coca-cola was founded on 8th May 1886 in Georgia, USA. Its headquarters based in Atlanta, Georgia USA. Coca-cola customers are spread almost all over the world; therefore, the company is regarded as a global brand. The company offers more than 500 brands with the most valuable beverage brand being, Ayataka green tea, Fanta, Dasani waters, Del Valle and nectars, Georgia coffee, Ades soy-based beverage, smart waters, sprite, Vitamin water, Powerade sports drinks, Simply Juices, minute maid juices, innocent Smoothless and juices , coconut waters and many other brands. Coca-cola website they have stated that they are continually improving the drinks, that is trying to reduce the sugary drinks to producing new innovative drinks to the market. The company, together with the bottling partners, has employed more than 700000 employees, who are based on the local communities. Due to the constant industrial changes, it is significantly vital to carry out an industrial analysis focusing the industry dynamics, recent developments, completion and demand-supply scenarios.

Demand-supply scenarios

The price of a commodity is determined by the relationship between the demand and supply of a company. The quantity of a commodity demanded is determined by various factors such as the preferences, pricing and seasonal effects. The quantity of a commodity supplied depends on factors such as cost of substitute product, cost of productions, cost of labour and other factors of production. In economics, demand and supply is the most fundamental concept and serves as the backbone of an industry. The relationship between demand and supply is determined on how resources are allocated in the industry. The demand for goods needs to balance with the supply of the product, Moon 2018. It is essential as the company can set the price and allocate the necessary inputs.

Demand

When all things are held constant, increase in the price of a commodity decreases the quantity of a commodity demanded and the vice versa. The reason behind the situation is because of the availability of cheaper substitutes; hence, customers switch to substitute and the purchasing power of customers determined by the amount of income the consumers are earning.

Factors affecting demand

Price of relative goods: in the soft drink industry, coca-cola has substitute companies which are Pepsi Miranda and Gorment and others. If coca-cola increases the price of their drinks, while the other companies’ prices remain, the customer shifts to consume the products of the companies, and hence the demand for their products fall.

Taste and preferences: if the coca-cola customers are not able to quench the customers shift to the substitute product. The loyal customers stick to coca-cola drinks despite the prices if they fulfil their desires if not so, the cheaper substitute drinks are be preferred and therefore reducing the demand of coca-cola.

Government policies: if the government were to set the standard of drink and coca-cola company were to fail to meet the standard. The consumers, who are law-abiding citizens, is not consumed the coca-cola drinks and hence the demand for coca-cola decrease, this once happened in Belgium when consumers had noticed an odour from the canned drinks and the ministry of healthy banned the soft drinks. The company acted fast and remedied the situation until the ban lifted. However, they have to aggressively do a marketing campaign to regain the customer’s trust and their market share.

Season: this is as an essential aspect that affects the demand for soft drinks. During the festive season, the demand for soft drinks is usually high.

Supply

It is the amount of a product in a given market, offered at a specific price in a given time. The law of supply states, if all other things held constant if the price of commodity increases, the supply of the commodity increase since the suppliers are willing to supply more for profits. The law is so because of factors such as cost of production and high prices increase the profits.

Factors affecting supply

Many consumers: if coca-cola consumers are many, the company supply’s more of their product to cater to their vast number of customers.

Price: in the short run if the price of coca-cola increased, the producers be willing to supply more to make profits. But in the long run, it is risky because the customers shift for substitute commodities.

Price of inputs: if the inputs necessary for production are available at a lower price, the coca-cola company supply more of the product at the same price.

Technology: due to technological changes, the coca-cola can reduce the cost of production, and therefore they can produce more and sell at the same price.

Competitive scenario

In an innovative world, every business has to face competition for it to thrive and improve quality. Although there are many beverage manufacturer’s, coca-cola continues to be the world market leader, with a market share of about 49% followed by Pepsi at 20% and other manufacturers at 31%. Coca-cola and Pepsi use different marketing strategies. Coca-cola focuses on reaching all customers by providing it to the whole world, while Pepsi focuses on covering a particular group of consumer and earning maximum profit from it.

Porter’s five forces

The model was developed by Michael porters in 1979 to access the competitiveness and attractiveness of the company in an industry. The forces are present, and they have a significant impact on the company’s performance. According to Dobbs (2014), the forces identify the business weaknesses and strength, and hence the power it has to solve their threats. Using the model, Coca Cola Company analyzed in the following way:

The threat of new entrants

Profitable businesses always attract new entrants into the industry (Dobbs, 2014). Although coca-cola has been the leading beverage manufacturer, it still has to be on watch of new entrants, who may snatch a particular market share they currently hold in the industry. To survive the threat of new entrants, coca-cola has innovatively provided different flavours to cover a specific group of people that is, for example, Fanta for the children and ladies, the sprite for men they have of late produced drinks for those who do not prefer the sugary drinks. Hence they have placed themselves on the top-notch in the whole world. If the company has to enter the market, it has to spend a fortune to build a name like coca-cola has, fight for spaces in the supermarkets and mini markets and get good licensing deals.

Threat of substitutes

A substitute is a product that enters in the same market to serve the same customer taste. In the past, Starbucks had shaken the coca-cola company for introducing a drink for people who love coffee; coca-cola company counter-attacked that by introducing Keurig in partnership with Green Mountain Coffee Roasters. A consumer to has the choice of freshly made beverages rather than bottled coca-cola drinks, posing a threat to coca-cola. Consumers too are turning to be health-conscious, with coca-cola drinks been sugary; they face the threat of consumers substituting for a different drink.

Bargaining power of a customer

The bargaining power of customers describes the customers’ pressure that forces a firm to change the pricing of a commodity. In the industry of bottled beverages, buyers have good bargaining power, and this has Coca Cola Company directly. The company sells its products through distribution companies, hence they have to keen on the prices they are selling to the distributors. If they sell their products to the distributors at relatively low prices, the distributors can then sell to the end-user at a lower price.

Bargaining power of suppliers

The bargaining power of suppliers described as the raw materials, services, labour, and all components that a firm requires to manufacture a product. As big as the company is, it has no control over the cost of the ingredients it uses during manufacture. To control the bargaining power of the suppliers, the coca-cola company contracts its suppliers, especially the sugar suppliers.

Competitive rivalry

Competitive rivalry described as the competitiveness in the industry. Since the 19th century, coca-cola has competed with Pepsi. Their products have similar tastes and ingredients, for example, their marquee products. The company can face the competition since it has loyal consumers who never shift to substitutes, they also have different beverage brands such as minute maid, Dasani, Powerade, vitamin water and gold peak tea which when people are off soft drinks, they have drinks for the consumers. Other competitors are Dr Pepper Snapple Group who has beverages such as Nehi, Hire’s Root Beer, Orangina and RC Cola.

Recent developments

Coca-cola as they continue to review their 133 years of success, they base their success on the history of investing and the sustainability of their hometown, Atlanta and the territories they sell their products. In 2018 as they were doing their reviews, they decided to continue transforming their products to deliver a robust, balanced and geographically revenue growth and value-added share. The highlighted the following:

Innovations

Production of coca-cola plus coffee which was available in the whole market and a Diet coke which was to be sold in North America and it included new packaging, flavour and new marketing strategies for a new market.

They also launched 600 new products, among them 250 were of no or low sugar, 400 were teas, juices, waters, and non-sparkling beverages.

Strategic investments

They have recently partnered with BODYARMOR, which is a sports hydration brand; it is one of the fastest-growing trademarks in the U.s.

They have also strengthened and expanded their portfolio through mergers and acquisitions, which includes Costa limited, which was closing in early 2019 and now they have a global coffee platform.

They also have used their strength of the distribution system to launch products like Smart water, Ades and fuse tea at a faster speed. They expanded 165 products to new markets in 2018.

Leadership

They have recently made new leadership appointments, with Brian Smith as the chief operating officer, chief financial officer to be John Murphy and new business unit presidents.

A new Global Ventures Group to led by Jennifer Mann was created to connect and scale new acquisitions, new brands and investments.

Conclusion

Coca-cola is a strong brand in the global market; they have used the strength of a brand name to get deals, merging and acquisition of new investments. Coca-cola has continuously improved and transformed their portfolios the recently been the non-sugar drinks for the health-conscious consumers. They have a strong management team that is quick to come up with products and fill up the market gap that may exist. Their marketing strategies that are advertising is on top of other brands has ensured that it reaches every corner of the world. They have been on the verge of quenching customers with a variety of all drinks they are providing, which covers each customer, that is they have drinks that cover the preferences and tastes of individual customers. To diversify their brands, they should think of now investing in alcoholic drinks, so that they can fulfil the desires of alcohol customers. To reduce the environmental impacts, they need to campaign for recycling and reuse of their bottles.

Deal, J., 2018. Brand Communication in a Large Consumer Goods Company: A Case of The Coca-Cola Company

. E. Dobbs, M., 2014. Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), pp.32-45.

Moon, M.A., 2018. Demand and supply integration: The key to world-class demand forecasting. Walter de Gruyter GmbH & Co KG.