Analysis and Strategy of the Coca-Cola Company
Group 3
Rodolfo Castillo
James Congleton
Ryan Nusbaum
James Puruit
February 20, 2013
Group 3 Paper
The Coca-Cola Company is known for their brand and the excellence they have achieved
to become the leader in the beverage industry. To understand how they have achieved their
superiority, one must understand their history and how they compare to other beverage
companies.
History
John Pemberton who created what is now the Coke-Cola brand. It all begun in 1886 in
Atlanta, Georgia when he created a concoction of colored liquid and carbonated water which was
created at Jacob’s Pharmacy. The drink was well received by samplers so then he sold it to the
regular customers at the pharmacy for 5 cents a glass. In Coca-Cola’s first year of existence they
only sold 9 glasses of coke daily. Frank Robinson, Pemberton’s bookkeeper, was the one to
come up with the name Coca-Cola and wrote it out in his distinct handwriting which is still
written to this day. After Pemberton’s death the business was bought by Asa Candler for $2,300.
He was the first president in Coca-Cola’s history. In 1893, Coca-Cola began to heavily promote
their product. Candler began to distribute coupons for complimentary tastes of the new drink to
consumers and also distributed clocks, urns, and calendars bearing the Coca-Cola brand to many
pharmacists. Customers began to recognize the brand more and more as time passed. Coca-Cola
began to bottle their product in 1894 thanks to Joseph Biedenharn. This became a famous
phenomenon at the time because Coca-Cola was now portable to people.
In the 1920’s the Woodruff dynasty began at the Coca-Cola Company. Ernest Woodruff
bought the company from Asa Chandler in 1919 who would present the Coca-Cola beverage to
the world. Ernest Woodruff appointed his son, Robert Woodruff, president of the company years
later. He introduced the brand overseas for the first time at the Amsterdam Olympics in 1928.
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This experienced showed that customers worldwide had a variety of taste preferences. Coca-Cola
decided to broaden their scope with new flavors such as: Fanta, Sprite, TAB and Fresca. The
Coca-Cola Company also acquired The Minute Maid Company, which added a new line juices to
the company.
Roberto Goizueta, a Cuban immigrant, became the CEO of the Coca-Cola Company in
1981. He implemented a new strategy once he got there called “intelligent risk taking”, which is
taking risks in a smart and efficient way. As CEO he accomplish in turning the company’s
bottling operations into a public company, Coca-Cola Enterprises Inc. Goizueta also introduced
the first extension of the Coke trademark; Diet Coke ®. The next two years the drink had jumped
up as the top low-calorie drink in the world. Goizueta most notable achievement was the change
in taste for Coca-Cola. Taste tests proved that people loved the new Coke but everyone had an
intense attachment to the original flavor. To this day, Coca-Cola is now enjoyed in more than
200 countries around the world and is written in over 80 languages. (Coca-Cola Incorporated,
2013)
Industry Analysis
Using Porter’s five forces model, a complete analysis of Coca-colas competitors can be
made. Porter’s 5 forces must be applied to the beverage industry to see the results. In order to
analyze this more, we need to split it up into two groups, the forces related to the competition
and the forces related to the supply chain’s bargaining power. Remember that the industry that
the Coca-Cola Company competes in is the beverage industry. Listed below is a complete
analysis of each industry force for the Coca-Cola Company.
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The threat of substitute products to the Coca-Cola Company is high pressure. In a
blind taste test, Coca-Cola could not be differentiated between Pepsi cola, RC cola or Vess Cola.
(Breneiser, 2011) This poses a threat because some customers would not be able to tell the
difference once they drink another company’s product. Since there are many soda products in the
market there are many other alternatives the customer can buy.
The threat of new entrants or potential competitors to the Coca-Cola Company is
median pressure. The entry barriers for entering the soft drink industry are relatively low.
Customers are not bound to any switching cost and the capital required is relatively low. It is
easy for a company with a cost strategy to enter because they will offer a lower price than Coke
products. An example of new entries could be a store brand soft drink brand. Even though a
company can enter the industry, Coca-Cola will still own a large amount in the market share due
to their loyal customer base.
The rivalry among existing firms to the Coca-Cola Company is high pressure. CocaCola’s main competitor, Pepsi Co., has wide variety of beverage products which try to induce the
attention of customers. They try to attract customers to by sponsoring festivals and sporting
events. When it comes to marketing, Coca-Cola tends to advertise a more classical approach
while Pepsi tried to attract younger generation. Coca-Cola does not want to give up their status
as the possessor of the U.S. market share and will compete to their fullest potential.
The bargaining power of buyers to the Coca-Cola Company is low pressure. The
individual buyer has no pressure on the Coca-Cola Company because of their relative size. When
it comes to the power individual retailers have, they will be able to negotiate a deal with Coca-
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Cola due to their size but do not have absolute power because of their brand loyalty to Coca-Cola
customers have.
The bargaining power of suppliers to the Coca-Cola Company is low pressure. To
analyze the bargaining power of suppliers one must see ingredients needed to create Coca-Cola
such as carbonated water, phosphoric acid, sweetener, and caffeine. The suppliers for these
ingredients are not concentrated so they can always be replaced. There are plenty of substitutes
available if needed. If a supplier would want to leave the Coca-Cola Company that would be a
foolish decision considering the size the company holds. (Valuation Academy, 2013)
Competitive Strategy
Coca-Cola can be addressed as a company with an industry wide-differentiation strategy.
Coca-Cola offers a variety of drinks across the beverage industry. Not only does it offer soft
drinks but it also sells toward the sports drink industry, energy drink industry and water industry.
Coca-Cola has worked toward this strategy by being consistent in its taste and giving their
customers what they want.
The Coca-Cola Company’s biggest competition in the beverage market is Pepsi Co. Both
companies put out a variety of similar products and sell their products at nearly the same price.
At this moment, more people prefer Coca-Cola over Pepsi. This is why they are considered the
better brand across the beverage industry. Research has shown that when people are put in a
blind taste test that they could not actually decide which was Pepsi or Coke. But when given the
drinks with the labels on them most people chose Coke (Breneiser, 2011). This is because Coke
has implemented a great differentiation strategy through which it is perceived as a superior
quality product. The way the company brands their image with promotions and packaging of the
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liquid into the classic “Coke Bottle," are also ways of differentiation (Coca-Cola Incorporated,
2013). Given that Coca-Cola is one of the most established brands around the world they don't
really have a need to worry if their product is slightly more expensive in order to gain an
advantage. You can generally find a Coca-Cola product in some of the most remote places of the
world. This brand recognition makes it extremely difficult for competitors because they aren't as
well known and people are hesitant to switch from their norms.
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Works Cited
Breneiser, Jennifer E., and Sarah N. Allen. "Taste Preference for Brand Name versus Store
Brand Sodas." North American Journal of Psychology 1 June 2011: n. pag. Print.
Coca-Cola Incorporated. "Coca-Cola History: Coca-Cola Heritage Timeline." Coca-Cola
History: Coca-Cola Heritage Timeline. Coca-Cola Incorporated, 2006. Web. 19 Feb.
2013.
Valuation Academy. "Porter™s Five Forces In Action: Sample Analysis of Coca-Cola."
Valuation Academy RSS. Valuation Academy, 2013. Web. 20 Feb. 2013.
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