Counting Beans

One way Coca-Cola has neutralized the treat of entry into the is to fill almost all entry points, this is particularly evident in the carbonated soft drink market, with Coca-Cola offering every flavor combination imaginable. Coca-Cola also neutralized the threat of rivals with product differentiation, emphasizing their unique taste in their products. This strategy has also neutralized the threat of buyers by making their product unique, in other words, Coca-Cola classic has a unique taste over their competitor Pepsi, therefore by switching brands the customer will have to sacrifice this unique taste.

Coca-Cola is operating in a mature industry especially in the carbonated soft drink market as consumers are often switching to healthier, substitute products. Coca-Cola has shifted its focus to refining its current products. One major way that Coca-Cola has refined its current products it to expand its packaging offerings. Customers who enjoy plastic bottles have various sizes to choose from including two liters, 24-ounce, 16-ounce, and 12-ounce. There are also two sizes of aluminum cans, the classic 12-ounce and a smaller 8.5-ounce size. This is a direct response to consumers who are trying to limit their soda intake. Coca-Cola is continually evaluating the needs of the customer and refining its products in response.

Coca Cola operates in the non-alcoholic beverage industry. This industry is an oligopoly because there are a small number of competing firms and costly entry and exit. Coca Cola, PepsiCo, and Dr. Pepper Snapple Group make up the majority of the market. Both Coca Cola and PepsiCo spend a significant amount of money on advertising cost, making it hard for new brands to break into the market. The non-alcoholic beverage industry uses product differentiation as a barrier to entry. Consumers have strong loyalty to their brand of choice, creating a significant financial investment for a new entrant to attract consumers to their product.

Also, the non-carbonated beverage industry has cost advantages independent of scale as a barrier to entry. Coca Cola and its competitors have proprietary technology surrounding their beverage flavors and syrups. This is patented information that is costly to develop and introduce a competing product. Coca Cola has favorable access to raw materials due to their size in the market, allowing them to negotiate the lowest price possible from their vendors.

The threat of substitutes is significant in the non-alcoholic beverage industry. Carbonated soft drinks sales have declined as consumers look for heathier options. Coca Cola has tried to compete with their 2007 acquisition of Glaceau, which has brands such as Smartwater and Vitamin Water. They have also focused heavily on their water brand Dasani. PepsiCo is launching a new premium water brand called LIFEWTR in this year’s Super Bowl ads. There have also been new market entrants such as companies like Bai, who was recently acquired by Dr. Pepper Snapple Group and KeVita which was purchased by PepsiCo. These healthier options are where growth for the industry is headed.

Coca Cola has maintained a competitive advantage by keeping costs low. Even though their rival Pepsi has higher sales volume, Coca Cola has been more profitable. Coca Cola brings economic value to the customer by bringing a quality product to the consumer at a competitive market price while bringing higher returns to their shareholders. Coca Cola has kept cost low by working with their supply chain to continually negotiate better prices and terms. They have focused on implementing technology into their bottling locations to produce with the highest efficiency available. Coca Cola operates by selling concentrates, beverage bases and syrups to bottling companies, which are responsible for manufacturing and distributing the final product to the consumer. Bottlers are either company owned, company controlled or independent bottlers. Using this business model has allowed Coca Cola to create an excellent distribution network that is efficient and flexible while maintaining a cost advantage over their competition.