Coco cola Company: Why is the Product Sale High and Global? (Essay Sample)

Coca cola – Why is the Product Sale High and Global?
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Coca-Cola – Why is the Product Sale High and Global?
Introduction
The Coca-Cola Company is the world’s largest and leading producer of soft drink concentrates and syrups in addition to the biggest fruit juice and variant juice products producer in the world (Kwon, 2008). The company operates in more than 200 countries worldwide and with over 500 brands and more than 3300 non-alcoholic beverages. John Pemberton first produced the famous Coca-Cola Classic, a sweet-smelling caramel-colored liquid, mixed with carbonated water, in 1886. Through peace and wartimes, and periods of economic boom and recession, the Coca-Cola Company has survived, rising to one of the world’s most respected companies in the late 1990s because of its powerful global brand and its successful management team (Bodden, 2009). Currently, following the long history of the company, the Coca-Cola Company is involved in the production of bottled water, carbonates, fruit and vegetable juice, concentrates, ready to drink (RTD) coffee and tea, sports and energy drinks, and Asian specialty drinks. The beverage market offers quite a mix of players and other forces. The sheer size of the Coca-Cola Company makes it a global phenomenon. This paper therefore seeks to investigate the performance of this company through research and analysis of its marketplace and a speculation of its potential growth and profitability.
Market Analysis
Oligopoly, the market to which the Coca-Cola Company exists, is described as a market with only few firms (Cuellar-Healey & Gomez, 2013). Companies in this type of market sell products or services that are or are not completely standardized, but similar enough to breed competition. One characteristic feature of an oligopoly is that actions of rivals with regard to competitors largely determine the success of firms within the market. Unlike monopolies and perfectly competitive markets, firms in an oligopoly market have to monitor the actions of other firms since the market can be affected largely by particular competitive actions. In providing a perspective for this point, let us consider the case of the Coca-Cola Company and PepsiCo. These two companies are the major players in the beverage industry; with Coke commanding about 80% of the market share while Pepsi holding on to approximately 20%. The two companies exist in an oligopoly since they dominate the beverage market, thus it would be difficult for new entrants to break it into the global market, mostly because the major players in the company are well-built brands that enjoy customer loyalty (Haig, 2005). Though oligopoly is the most prominent market structure in the case of the Coca-Cola Company and PepsiCo, there are elements of monopolistic competition since each company tries to gain advantage over the other through emphasis on product differentiation.
Market Type: A Case Study
In advertising, the Coca-Cola Company has thrived in its "secret formula”, which gives it a competitive edge over its competitors since carbonates produced by the company are unique. It is evident that in an oligopoly, though firms are in competitions, to some extent, they protect the market through means that may seem to be protective of competitors. Let us consider a case in 2007, when two Coke Company employees offered to sell the "secret formula" to PepsiCo. The competitor refused to purchase the secret recipe and matter-of-factly assisted in the arrest of the would-be informants by the FBI (nytimes, 2007). Huge consensus would have rather PepsiCo take the formula and expose it to the world to gain market advantage over Coca-Cola. It was however tactical and evident of an oligopolistic market that PepsiCo refused to acquire the secret recipe. The chance of PepsiCo exposing this secret would be perilous to the beverage market in the event that new companies would enter the market with this recipe to produce products similar to Coke. New firms entering the market would therefore bring about a perfect competition model to the beverage market, under which PepsiCo would lose customers and profits. It was also not a guarantee that having dealt a blow to Coke, PepsiCo would gain the market share of its competitor because Coke itself is an already established brand.
Market Analysis: Emerging Markets
The markets of Asia Pacific, Africa, and the Middle East are emerging markets that are expected to outperform the global market for soft drinks in the near future. A divide between the emerging markets and developed markets is evident from the growth of the former and moderate prospects for the latter. Capitalizing on these prospects, the Coca-Cola Company has an existent geographical spread that is important in breaking into the emerging markets. Investments are therefore heavily channeled towards these markets such as China, Brazil, Mexico, and India. The Middle East and Africa are considered long-term. Profitability in the developed markets for soft drinks will therefore remain rather constant; however, market saturation especially in the U.S. has caused analysts to suspect a slight slowdown of growth in the industry. Due to this fact, soft drink leaders – the Coca-Cola Company in particular – are establishing themselves in alternative markets such as the bottled water, snack, confections, and sports drinks in the developed markets. Because of the need to continue to company growth and increase profits, soft drink companies need to diversify their product offerings. The emerging markets provide the right opportunity for these changes in the market.
Market Analysis: Competition
In 2012, the Coca-Cola Company maintained its top spot with no significant changes in the standings of the top 10 global companies in the soft drinks market. The company kept a large gap between itself and PepsiCo, the second largest producer in the global market. At US$8.7 billion in 2012, and with a keen focus on soft drinks, the company is reported to have generated the most retail value growth compared to PepsiCo’s US$3.3 billion in actual terms during that year. In a more recent report in 2014, the company reports itself to feature a portfolio worth $17 billion in brands that include the Diet Coke, Sprite, Fanta, Coca-Cola Zero, PowerAde, Minute Maid Georgia, Del Valle. The case of market dominance was however, different in the domestic beverage market in the US. PepsiCo outperformed the Coca-Cola Company in carbonates by retail value growth because of PepsiCo’s significant marketing budget in the US.
Top 10 Global Companies by percentage Off-Trade RTD Volume Share, 2012
Coca-Cola Co.21.2
Pepsi Inc.9.9
Danone, Groupe4.7
Nestle SA3.7
Mondelez International , Inc.2.0
Ting Hsin International Group1.6
Dr Pepper Snapple Group Inc.1.5
Suntory Holdings Ltd.1.1
Hangzhou Wahaha Group0.9
Acqua Minerale San Benedetto0.6
Source: Bright, Pat. The Coca-Cola Co., SWOT Analysis in Soft Drinks (World), 2013
On a geographic level, the competition between this company and its rivals describes a variety of the economic topographies of the soft drink industry. The beverage industry in the US is largely dominated by three major players; Coca-Cola, which leads the soft drink production and holds a global market share of around 80%, PepsiCo holding about 20%, and Cadbury Schweppes at 7% (Deichert et al., 2006). Apart from these beverage giants of the industry, smaller companies such as the National Beverage Company and Cott Corporation constitute the remaining market share. A portion of the profits of all these five companies is made outside of the US. The US however does not hold the greatest percentage of the global market share when measured with other countries in the world. Companies are therefore forced to make their global presence known in order to be successful in the beverage market. Compared to its competitors, the Coke Company has a greater global presence, which is reflective of its overall position in the global beverage industry. The US market is already saturated thus increasing the global growth of the leaders in the market and increasing their profits. While the simplicity of making an entrance and exit in this market does not cause competitive pressure on the major players of this market. Due to the high capital investment, established brand names, and distribution channels, it would be very difficult for a new company to enter and compete in this industry. In the same sense, leaving the industry is difficult, with the significant financial loss from advertisements used to create strong brand names, fixed costs, binding contracts, and distribution channels. Entry and exit into and from this industry is therefore quite difficult since it is already well established.
SWOT Analysis
The general growth strategy of the company is via both organic growth and through acquisitions. Investments in major emerging markets has increased in the recent years while small-scale acquisitions in developed markets help in enriching the health and wellness portfolio of the company. Refranchising and reorganizing bottling operations have been among the important highlights of the corporate activities in the backdrop of 3% volume growth off-trade RTD in the period of 2011-2012. With the continued growth of the company, reporting strong full-year global shipment volume growth of 4% in 2012 and subsequent years, the company is on a positive trend against the threats and weakness in the soft-drink market.
Strengths
The strengths of the company that help towards achieving the remarkable growth include factors such as the strength in size and financial power. As the world’s largest producer of soft drinks, the Coca-Cola Company enjoys immensurable financial capability and influence...