Coca Cola Sources of Competitive Advantage

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  • Post last modified:March 2, 2019

 

Introduction:

Coca Cola is a leading global beverage company.  Its only main rival is Pepsi. The brand sells its products globally in more than 200 countries.  Its large product range includes sparkling soft drinks; water, enhanced water and sports drinks; juice, dairy and plant-based beverages; tea and coffee; and energy drinks. Coca Cola’s large portfolio of brands includes more than 500 non alcoholic beverage brands. The company owns and markets four of the top five nonalcoholic beverage brands of the world – Coca-Cola, Diet Coke, Fanta and Sprite.  It has divided its business into six major operating segments that are • Europe, Middle East and Africa • Latin America • North America • Asia Pacific • Bottling Investments & Corporate. Coca Cola’s success is based upon several factors that include product quality, pricing, accessibility and marketing. In 2017, the company sold 29.2 Billion unit cases of its products. Coca Cola is a major employer as well and is known for its focus upon human resource management. Competition in the soda industry has grown highly intense and success depends upon having several sources of competitive advantage. This is a discussion of the various sources of Coca Cola’s competitive advantage.

Brand equity:

Brand equity is the most important strength for any large company. Coca Cola is a strong brand because of its strong brand equity. Overtime, the company’s customer base has grown very large globally. Around the world, millions trust the Coca Cola brand. While the company has faced several troubles due to water management and  product quality related issues, still it is loved globally by millions. The popularity of Coca Cola and its brands is very high around the globe and  a main reason behind its high net sales every year. 

Global presence:

Coca Cola sells across more than 200 countries. It is a global brand with a large and global sales and distribution network. Its headquarters are located in Atlanta, Georgia. The brand also has production, distribution and warehousing facilities around the globe. Coca Cola also owns the world’s largest beverage distribution system. Its distribution system includes the company owned or controlled bottling and distribution operations, bottling partners, distributors, wholesalers and retailers. Around 1.9 Billion servings of its beverages are consumed around the world daily.

Pricing strategy:

Coca Cola’s pricing strategy is also a major source of competitive advantage. Despite the high popularity of the brand, it has priced its products competitively. While competition is an important factor behind the pricing strategy along with market dynamics, another important reason is that it has made its products more affordable and accessible. This gives the brand access to a very large customer base throughout the globe. Its products are available in various packages suited to various types of needs from 500ml to large 2 and 2.5 litre family packs. Larger packs mean higher savings. 

Product portfolio:-

Coca Cola has a large product portfolio of which several are billion dollar brands which earn it more than a billion each year. Many of them are market leading brands that enjoy very high level popularity. A larger product portfolio caters to the taste and preferences of various customer segments. Coca Cola’s large product portfolio includes sparkling soft drinks; water, enhanced water and sports drinks; juice, dairy and plant-based beverages; tea and coffee; and energy drinks. It is mainly the modern generation of millennial consumers which is the largest part of Coca Cola’s customer base.  However, Coca Cola has a large number of fans across the other age groups as well.

Marketing :-

Marketing is also a major strength of Coca Cola which has helped the brand earn a competitive advantage by building a strong image. Each year, the brand spends billions on advertising and promotions. This is done in order to churn demand and attract new customers as well as retain existing ones. Growing competition in the Coca Cola industry has also led to higher expenditure on marketing and advertising  to acquire new customers and retain old ones. Apart from attractive packaging and promotion of individual brands, the company also spends a large sum each year on advertising. In 2017, the company spent around 4 Billion dollars on advertising. Its main rival Pepsi also spends a huge sum on advertising each year which is about the same as Coca Cola’s advertising expenditure.

Customer loyalty:

Brand loyalty is also an important advantage for Coca Cola. As a highly popular beverage brand, it enjoys superior customer loyalty. Several of the beverage brands by Coca Cola have acquired market leading positions based on their popularity.  Apart from its pricing strategy, large product range and diverse flavours have helped it acquire a large customer base and retain its popularity. Increased competition and growth of digital technology have led to an intensifying fight for customer acquisition among food and beverage brands. Coca Cola and its rivals are using a mix of techniques including marketing, diverse product range, competitive pricing and attractive packaging as well as technology for customer engagement and to build customer loyalty. Since, it is easy for customers to switch brands in the soda industry, customer loyalty is a major focus for these businesses. Coca Cola has a strong advantage in this area which it is trying to strengthen by investing in marketing, product innovation and corporate social responsibility.

Customer base:

As a leading soda brand, Coca Cola has the largest customer base. A larger customer base means higher sales and revenue. This means better financial performance. Moreover, the soda industry has grown highly competitive and Coca Cola’s main rival Pepsi also spends a large sum each year on marketing as well as research and  innovation to grow its customer base and improve product quality. Both brands are engaged in a tough fight to acquire a higher market share and to grow their customer base. Coca Cola regularly releases attractive advertisements and promotions to engage its customers. It uses several channels including modern and traditional to reach them. A large customer base also signifies higher popularity. 

HR management:-

Human capital is also a source of competitive advantage in the 21st century. Coca Cola has also acquired a competitive advantage by focusing on strategic human resource management. Apart from competitive salaries and non financial incentives, it has also focused on performance management as well as training for staff motivation and career development. Career development is an important focus at Coca Cola and therefore it has implemented several training programs that help it increase its employees’ productivity. Using technology and modern methods of performance management, the company has managed staff performance, training and staff motivation. Attractive packages and an excellent work environment that offers opportunities for a shining career, attracts young aspirants every year in large numbers.

Conclusion:

Coca Cola is a leading brand with several sources of competitive advantage. Its market leading position is owing to its focus on product quality, marketing, research and innovation as well as several more factors. Being a leading  soda brand, its only main rival is Pepsi. However, as the soda industry has grown highly competitive, both brands spend a lot on marketing and customer engagement to retain their market shares. Coca Cola is a great marketer and has been appreciated widely for its great marketing and creative advertising strategy.  The soda brand’s strong position is based upon several sources of competitive advantage. However, a large supply chain and distribution system is also an important strength through which Coca Cola has managed its global presence. Other factors that Coca Cola has managed well include pricing strategy and product packaging.

  • Sources:
  • Coca Cola Annual Report 2017.

Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.