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Coca-Cola Business Strategy

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Coca-Cola Business Strategy

Coca-Cola, as the market leader in the soft drink industry, has a wide portfolio and operates in global markets. As a household name, its active corporate and marketing activities are worth studying. Let's have a look at Coca-Cola's international corporate strategy and marketing activities including its branding and pricing strategies.

Coca-Cola Company case study

The first Coca-Cola was sold in 1886 at a pharmacy in Atlanta, but now globalisation and diversification of the product range have changed its original brand image significantly.

Globalisation is one of the most distinctive features of Coca-Cola. The products are not just produced and bottled in its home town in the U.S., but in other countries as well.

Besides, as mentioned above, Coca-Cola uses a standardised brand image around the world.

Coca-Cola is one of the biggest global soft drink companies. It has a wide portfolio with brands in multiple soft drink categories including carbonated drinks, energy drinks, juices, and coffee. Its overall portfolio is diversified and more importantly, there are some products that are sold as region-specific, making up part of their strategy.

A corporate strategy is a medium-to-long-term plan for a business to reach its corporate objectives. It includes the activities that should be carried out, the time in which the tasks should be done, and the person who is responsible for the tasks to achieve corporate objectives.

Merging with or acquiring competitors, re-branding, or expanding the market from domestic to international are all examples of corporate strategies.

Functional strategy of the Coca-Cola Company

Functional strategies are specific goals set out for different divisions of an organisation to reach its functional objectives.

The divisions usually include Marketing, Finance, Operations, and Human Resources. However, for multinational conglomerates like Coca-Cola, there could be more specific teams under each division. For instance, the operations division may include the IT department, Logistics, and Customer Service.

In terms of operational strategy, bottling partnerships have helped Coca-Cola seize growth opportunities via vertical acquisitions. Global partnerships help Coca-Cola with cost control by reducing transportation costs and reaching economies of scale. This is an example of a functional objective for the operations division.

Coca-Cola marketing strategy

Effective and active marketing activities around the world are strong contributors to Coca-Cola’s revenue and market shares. Market and human insights are used heavily as indicators in Coca-Cola’s marketing activities. This means that Coca-Cola can target specific consumer segments well by understanding their profiles, including age, gender, and lifestyles. Hence, instead of individual products, brands under the conglomerate can be wrapped within different brand images to match their target demographics.

Sprite is a brand under The Coca-Cola Company marketed as a brand for younger generations, specifically Gen Z, as their focus is on promoting the ideas of current affairs, pop culture, and some popular consumer lifestyles such as the wider use of all things digital.

Many multinational conglomerates, such as Pepsi Co, choose to localise their brand images and adapt to the local markets, which result in different brand images around the world. Coca-Cola chooses to use a universal or standardised image around the world regardless of the location they operate in.

Coca-Cola Business Strategy Coca-Cola advertisement StudySmarterCoca-Cola advertisement, pixabay.com

The advantage of this lack of segmentation strategy is consistency. Consistency in the brand image could bring travellers a sense of belonging, which trigger the consumers’ impulse to purchase the same product in other geographical locations.

The disadvantage of this strategy is related to reputation. A bad reputation would leave an impact regardless of the location. The same brand image might not suit different cultures.

Some brand images may be universally accepted or create a common effect. For example, Coca-Cola uses family gatherings and festive celebrations for its marketing in different markets. This works because most cultures share the same feelings of happiness for gatherings.

From the perspective of the marketing mix, Coca-Cola diversifies its portfolio to target many niche needs such as Coke Zero, Diet Coke, Coca Cola Life, Glaceau Vitaminwater, and Glaceau Smartwater.

For place, it distributes globally, while region-specific products are also developed to target local consumers. In addition, its distribution channel and strategy of utilising bottling partnerships have enabled it to distribute products efficiently. The most prominent point in regard to place is ease of access. Products of Coca-Cola can be found in convenient shops, supermarkets, vending machines, restaurants and bars.

In terms of promotion, Coca-Cola invests a considerable amount of money in advertisements. It uses a mix of digital and physical channels including TV commercials, sports sponsorships, social media advertisements, and a series of ongoing campaigns.

For its pricing strategy, it offers competitive prices to prevent consumers from switching to other brands, as there are plenty of alternatives, such as Pepsi, available in the market. Besides, psychology pricing is one common pricing tactic it uses. It also tends to use discounts on bulk purchases to stimulate sales.

Coca-Cola expansion strategy

Although Coca-Cola is operating in most parts of the world, it has different market shares and products depending on the market. Coca-Cola has a high dependency on its bottling partners around the world. Hence, first of all, to expand, it has to improve its logistics and bottling systems.

Secondly, it is planning to reach a balanced combination of global, regional and local brands so its consumer base can grow gradually and sustainably. Also, it has a rather diversified portfolio and is planning to make use of the wide range of products to acquire customers with different interests. This means that Coca-Cola will not only continue its focus on soft carbonated drinks but will also put more effort into products such as nutritional drinks and coffee.

Thirdly, by joining social networks and participating in popular culture-related activities such as using TikTok and making YouTube videos for its promotion, it connects effectively with consumers, shortens the distance between the brand and consumers and benefits from the knowledge of the latest consumer trends.

Strategic goals of the Coca-Cola Company

Corporate objective

Marketing objective

Financial objective (long-term)

Operational objective

HR objective

  • Gain more consumers
  • Gain market share, especially in hot drinks
  • Strengthen stakeholder impact
  • Equip the organisation to win
  • Effective campaigns
  • One global digital media infrastructure
  • Ensuring strong return on marketing spend
  • Universal brand image
  • Revenue growth 4-6%
  • Increase operating income 6-8%
  • Increase earnings per share 7-9%
  • Free cash flow 90-95%
  • Networked organisation
  • Improved revenue growth management
  • Higher employee engagement

Table. 1 Objectives of Coca-Cola (source: Coca-Cola investor overview presentation, 2021)

In order to achieve the long-term corporate objectives, businesses tend to set up some short-term strategic goals to make sure they are on track. In this case, Coca-Cola tends to develop goals for different functional areas depending on its long-term objectives.

Moreover, its overall main objective is claimed to be growing the company, the industry, and crafting brands and drinks that people love. In 2021, Coca-Cola set up a pipeline to assess its level of innovation. The goals of the pipeline included gaining new drinkers. This number was assessed weekly, significantly increasing frequent users from its existing customer base and increasing the value of each transaction significantly.

In general, the corporate goals of Coca-Cola can be summed up as gaining new customers, gaining market share, improving stakeholder impact, and ensuring the ability of the organisation to remain a market leader. Coca-Cola achieves this by pursuing a wide range of global strategies.

Coca-Cola Business Strategy - Key takeaways

  • Coca-Cola is a market leader in the carbonated soft drink industry worldwide
  • The strategy of franchising to its global bottling partners has enabled it to grow quickly.
  • By partnering with local small bottlers in under-developed markets, it is able to strategically merge or acquire these small local businesses to expand the local markets.
  • The marketing activities and strategy of using a standardised brand image around the world are contributing to its stable status as a household name worldwide as well.
  • Marketing mix of Coca-Cola: Product: a wide portfolio including classic Coke, Zero, Fanta and so on; Place: operates in global market, can be found in shops, restaurants and vending machines; Promotion: across different media and communication channels, using a series of campaigns; Price: competitive pricing at the market level.

Sources:

Investors Coca-Cola, https://investors.coca-colacompany.com/about/presentations

Marketing91, https://www.marketing91.com/marketing-strategy-of-coca-cola/

Investopedia, https://www.investopedia.com/articles/markets/112515/how-does-cocacola-actually-make-money.asp

Frequently Asked Questions about Coca-Cola Business Strategy

The market coverage strategy employed by coca-cola is as follows:

  • The strategy of franchising to its global bottling partners has enabled it to grow quickly. 
  • By partnering with local small bottlers in under-developed markets, it is able to strategically merge or acquire these small local businesses to expand the local markets. 

Cocacola uses a functional strategy to run its business. 

Functional strategies are specific goals set out for different divisions of an organisation to reach its functional objectives. The divisions usually include Marketing, Finance, Operations, and Human Resources.

 Coca-Cola can target specific consumer segments well by understanding their profiles, including age, gender, and lifestyles. Hence, instead of individual products, brands under the conglomerate can be wrapped within different brand images to match their target demographics.  For example, Sprite is a brand under The Coca-Cola Company marketed as a brand for younger generations, specifically Gen Z.

Coca-Cola implements two growth strategies. 

1. Bottling partnerships have helped Coca-Cola seize growth opportunities via vertical acquisitions. 

2. Global partnerships help Coca-Cola with cost control by reducing transportation costs and reaching economies of scale. 

For its pricing strategy, it offers competitive prices to prevent consumers from switching to other brands available in the market. Besides, psychology pricing is one common pricing tactic it uses. It also tends to use discounts on bulk purchases to stimulate sales.   

Final Coca-Cola Business Strategy Quiz

Question

What is the market coverage strategy of Coca Cola ?

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Answer

Undifferentiated mass marketing. 

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Question

What business strategy does Coca-Cola use?

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Answer

Outsourcing bottling partners

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Question

Does Coca Cola offer products targeting niche markets?

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Answer

Yes

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Question

What kind of needs are the niche products based on?

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Answer

Dietary needs. 

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Question

Which segmentation strategy does Coca-Cola use?


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Answer

Coca Cola does not segment the market by demographic features but it tends to create product to meet niche demands.

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Question

What is Coca-Cola's growth strategy?

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Answer

Franchising trademark and syrup to tis global bottling partnership for expanding under-developed markets.

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Question

What is Coca-Cola price strategy?

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Answer

Competitive pricing, with a combination of psychological pricing when on promotion.

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Question

Instead of segmenting demographic groups for product marketing, what does Coca-Cola do?

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Answer

Marketing brands under the company in different images to match the taste of its target segments.

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Question

What does Coca-Cola do for its products in the market mix?

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Answer

Creating products for niche dietary needs. Product examples including Coke Zero, and Glaceau Vitamin Water Zero

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Question

What does Coca-Cola do for the factor of place in its marketing mix?

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Answer

It operates worldwide, and provides easy access to customers as conveniently as to be found in any supermarkets, restaurants, or even vending machines. 

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Question

What does Coca-Cola do for the factor of promotion in its marketing mix?

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Answer

Mainly based on above-the-line marketing for mass marketing purpose, but it also uses a mixture of media including both online and offline advertising. 

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Question

What does Coca-Cola do for the factor of price in its marketing mix?

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Answer

It adopts competitive pricing strategy and psychology pricing. 

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Question

What are some of the goals of Coca-Cola?

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Answer

Gaining new customers

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Question

What is a corporate strategy?

Show answer

Answer

A corporate strategy is a medium-to-long-term plan for a business to reach its corporate objectives. It includes the activities that should be carried out, the time in which the tasks should be done and the person who is responsible for the tasks to achieve corporate objectives.

Show question

Question

What is a functional strategy?

Show answer

Answer

Functional strategies are specific goals set out for different divisions of an organisation to reach its functional objectives.

Show question

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