SWOT Analysis – Strategic Management

Coca-Cola Company
Every day, organizations face various challenges ranging from human resources to economic sabotage leading to a decline in productivity. For instance, according to a report by IBIS World (2017), soft drink consumption has been significantly affected by the demand for healthier beverages, leading to a decline in sales of both regular and carbonated soft drinks. The heavy media coverage on the undesirable impact of sugary beverages has ultimately affected the Soda industry and especially the giant soda producers such as Coca-Cola. Nonetheless, as a company that has been in existence for more than a century, Coca-Cola has made huge achievements and won a bigger market share in the soda production sector. Consistently company has its strengths, weaknesses, opportunities, and threats. Based on Porter’s Five Forces we perform an assessment of Coca Cola’s external environment to identify key opportunities and threats. Then using the Function Approach, we do an internal analysis to identify the key strength and weaknesses at Coca-Cola based on, human resources, marketing, and operations management, which are some of the key functional areas of the company.
External Environment Analysis using Porter’s Five Forces
Porter’s five forces is a model that is used by companies to identify and analyze the competitive forces that determine why a company can sustain profitability. The five forces consider the external factors and their impact on the competitive positioning of the organization. Through the simple framework of Porter’s five forces model, companies and analysts can evaluate and analyze a company’s competition intensity, attractiveness, and profitability in the market share.
Competition in the Industry
The significance of this force is to help organizations in analyzing the number of competitors and their ability to threaten the existence and profitability of a company. According to Hill, Jones, and Schilling (2017), when rivalry in competition is low, a company is more empowered to achieve greater sales and profits. Over the years, Pepsi is probably one of the greatest rivals to Coca-Cola. The two companies have been competing for more than a century now. The two companies have the same ingredients, same interests, which affects the way they compete. If the economic trends do not favor the soda industry, both companies are affected by the wave. Notably, Pepsi is better placed in the soda market because of its other lines of business, which include Rice-A-Roni, Quarter Oats, and Doritos (Hauter, 2012). Nonetheless, Coca-Cola has a loyal following, which means that even if the trends shifted, the risk would be moderate.
Potential of a New Entrant in the Industry
The power of a company is also likely to be affected by the force of new entrants into the market. According to Hill et al. (2017), an industry with strong barriers to entry is an attractive feature for companies that prefer operating in an area with fewer competitors. Within the beverage industry, a new entrant is a possibility, although as Gelles (2014) notes, Coca-Cola has special licensing deals such as selling their products in food chains such as McDonald’s among others. Another company could only be a threat to Coca-Cola if it matched up to its standards of the brand and an international customer base such as Coca-Cola. Granted, the competitor would have to spend a fortune to create a viral image and brand recognition. Besides, as consumers shift towards health beverage options, it would not be a new entrant posing a threat, but several new entrants to the industry.
Bargaining Power of Suppliers
The force addresses the way suppliers can drive up the cost of goods and services. In any particular industry, the number of suppliers determines the power of the suppliers and the ability to drive the cost up (Hill et al., 2017). More specifically, the fewer the number of suppliers, the more the power the supplier has and vice versa. For Coca-Cola, the force has minimal risk because there is a variety of sources doe the company’s raw materials.
Bargaining Power of Consumers
The force deals with the ability of the consumer to drive the prices down. As Hill et al., (2017) note, the number of buyers or consumers a company has and how much it would cost a customer to shift their loyalty to another company determines the power of the consumer. Considering that the consumers are moving towards the consumption of healthier beverages, the bargaining power of buyers has a significant risk for Coca-Cola. Consumers are more likely to substitute Coca-Cola products with healthier beverages such as smoothies or fresh juices. Nonetheless, as mentioned, Coca-Cola enjoys a huge following of loyal customers, which means the risk is average.
Threat of Substitutes
The force address the fact that competitor’ substitutes can replace a company’s products, which may pose a threat. For instance, if consumers rely on a specific company to offer a certain product that can be substituted with another, then a company’s power is threatened. In this case, as consumers become more health conscious, they could shift to buying healthier products such as fresh processed juices instead of the bottled beverages.
Key Strengths and Weaknesses at Coca-Cola
Strengths
Virtually, as a company that has been in existence for more than 100 years, Coca-Cola has several opportunities that are directly linked to its innovative culture and aggressive brand marketing. Coca Cola’s strength lies in its dominance of the carbonated soft drinks market supported by its huge recognition of its brand all over the world. The company also has one of the most diverse workforces around the world, with employees from almost every country. The human resource is a great source of passion, energy, and innovation that has helped Coca-Cola transform their business. According to their 2015 report, one particular group that has critically contributed to the success of the company is the diverse set of young associates who help in the recruitment and retention of top talent nurturing an entrepreneurial culture within the organization. Having the millennial as part of their human resource has helped shape everything from technology to recycling initiatives, employee benefits packages, having flexible workplace policies among other significant programs. Along with that, Coca-cola is one of the companies that are not resistant to change. Over the years, the soda production industry has been awash with changing consumer tastes and preferences alongside innovations in retail and supply chain. Therefore, to seize this opportunity, the company reviewed their operating structure and set to revamp the areas that would enable them to work faster, smarter, and efficiently. According to their report, the company eliminated the functional management layer and connected their regional businesses directly to headquarters. The company also streamlined some of the most significant internal processes and eliminating barriers that prevented them from being effective.
Weaknesses
Amidst the company’s reputation for innovation and current line of product expansion, the company is also struggling with some weaknesses that could pose a threat to the wellbeing of the company is it remains unchecked. The company is struggling with a bigger workforce that it has been unable to sustain owing to the declining sales, thus the need to lay off some of its employees (Monica, 2017). The company has also had some negative publicity in their products as the high levels of sugar has caused an uproar on the increasing health conscious world (Mercer, 2008). Along with that, due to the complex size of the organization, there is a communication gap between the operations management and hierarchy of superiors and subordinates. This means, fixing problems, and conveying ideas may be delayed.
Important Strengths and Weaknesses, and most salient Opportunities and Threats
Strengths
Weaknesses
Strong Brand Image
Existing market share
Value of company
Distribution channels
Negative Publicity
Opportunities
Threats
Growing consumption of beverages
Growth of the company
Competition from Pepsi
Threat of substitute products in the form of healthier beverages

Based on the SWOT analysis, it is clear the Coca-Cola has important strengths. The strong brand image and brand awareness are present in almost every nation of the world, which makes the company enjoy a high degree of popularity. The strong brand image and popularity has helped them face any financial crisis and emerge stronger. However, negative publicity based on the continuing pressure to shift towards healthier beverages has also affected the popularity of the company. Along with that, the company has major opportunities from the emerging markets and can benefit by expanding their brand in these specific markets. The threat of competition also keeps on increasing. Alongside Pepsi, Coca-Cola also faces threats from substitute of healthier products due to the growing demand for healthy beverages. Nonetheless, amidst the weaknesses and threats, Coca-Cola is the leading soft drink since 1896 and seems unlikely that they will lose the loyalty of their customers. The company’s brand is their durable competitive advantage that will help Coca-Cola overcome any economic crisis even in the future.

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References
Coca Cola. (2015). 2015 annual review. Retrieved from: http://www.coca-colacompany.com/2015-year-in-review/downloads
Gelles, D. (2014). Coke and McDonald’s, Growing Together Since 1955. New York Times. Retrieved from: https://www.nytimes.com/2014/05/16/business/coke-and-mcdonalds-working-hand-in-hand-since-1955.html
Hauter, W. (2012). Foodopoly: The battle over the future of food and farming in America. New York: New Press.
Hill, C. W. L., Jones, G. R., & Schilling, M. A. (2017). Strategic management theory. Boston, MA. Australia, Brazil, Mexico Cengage Learning.
IBIS World. (2017). Soda Production – US Market Research Report. Retrieved from: https://www.ibisworld.com/industry-trends/market-research-reports/manufacturing/beverage-tobacco-product/soda-production.html
Mercer, C. (2008). Coca-Cola facing storm on human rights. Beverage Daily. Retrieved from: https://www.beveragedaily.com/Article/2006/01/16/Coca-Cola-facing-storm-on-human-rights
Monica, P. R. L. (2017). Coca-Cola to cut 1,200 jobs as sales slump. CNN. Retrieved from: http://money.cnn.com/2017/04/25/investing/coca-cola-job-cuts-earnings/index.html

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