The Coca-Cola Company is an American multinational corporation that manufactures and markets non-alcoholic beverage concentrates and syrups, which are sold as finished products globally. Coca-Cola products are known for being refreshing and delicious, and they have a wide variety of options available. The company uses porter’s five forces model and SWOT analysis concept to stabilize its growth and beat its competitors in the market. By having reasonable pricing and stable vendors, the company becomes efficient in its operational management. The Coca-Cola company has been able to diversify its product offerings over the years, which has helped it stay competitive in the soft drink market. Product diversification is defined as the act of expanding a company’s product line to include new and related products. Producing various products is an international business strategy of capturing the entire global market since it creates space for clients from different cultures to choose what suits them the most. SWOT analysis and Porter’s five forces aid Coca-Cola in improving its operations and adopting product diversification which helps the company to grow internationally.
Porter’s five forces help Coca-Cola company gain a competitive edge by having reliable suppliers, setting realistic prices, and thus dominating the market through cost leadership strategies. On the other hand, SWOT analysis assists the Coca-Cola company in maximizing its strengths while minimizing its weaknesses and similarly knowing its areas for adjustment, therefore, promoting the business growth. The Coca-Cola company has been able to build a competitive advantage through its product diversification (Sharma et al., 2019). By expanding its portfolio to include juices, water, and other sodas, the company is better able to meet the needs of consumers and differentiate its products from those of its competitors. This expanded product line similarly allows the company to target different market segments, which helps it reach more consumers and grow its market share.
Porter’s Five Forces
Supplier power is the ability of a supplier to raise prices or the availability of its products or services. By Coca-Cola expanding its product range and partnering with a variety of suppliers, the company has been able to increase its bargaining power and stay ahead of the competition. For example, Coca-Cola does not only produce soft drinks; it also offers juices, bottled water, tea, sports drinks, and more. This offers it a wider appeal and allows the organization to tap into different markets. And by partnering with numerous suppliers, it is able to get the best terms and prices for the raw materials. It gives the brand a cost advantage over companies that are less diversified or have weaker supplier relationships (Sharma et al., 2019). Similarly, having many suppliers means a stable source of raw materials, thus no stock and lost sales, which translates into more sales and perfect customer service.
Buyer power is the ability of buyers to force prices down or demand better terms. It is one of the five forces that control a company’s competitiveness. This force is determined by the number of buyers a company has, the importance of those buyers, and how easy it is to switch to other suppliers. Coca-Cola has a strong competitive advantage in product diversification; the company has many different brands and products that cater to different markets (Sharma et al., 2019). This gives them many buyers who are both important and difficult to replace. Additionally, it is easy for customers to switch to other Coca-Cola products if they are not satisfied with one brand. This makes it difficult for competitors to gain market share from Coca-Cola.
Substitute products are products that can be used in place of another product. The availability of substitute products affects a company’s competitiveness by impacting the power of buyers and the threat of new entrants. Product diversification can give companies a competitive advantage for a number of reasons (Sharma et al., 2019). The most important advantage is that it helps protect a company from the competition by creating substitutes. For example, if Coca-Cola expands into other types of beverages such as energy drinks, tea, or bottled water, it makes it more difficult for competitors like Pepsi to enter the market for carbonated soft drinks. This is because Pepsi would then have to compete with Coca-Cola on multiple fronts rather than just one. Another way in which product diversification gives Coca-Cola company a competitive edge is by enabling the company to target new markets.
Similarly, Coca-Cola has been able to maintain its competitive edge by diversifying its product line. This not only allows them to appeal to a wider range of customers but it similarly makes it difficult for new entrants to come into the market and steal market share. By having a variety of products available, Coke threatens potential new entrants with the prospect of being shut out of certain segments of the market (Sharma et al., 2019). This is known as the threat of new entrants, and it is one of the five forces that Porter identified as key drivers of competition. Conversely, offering a wide range of products means that there are products and services for all customers, and no one competitor can really dominate the market by focusing on a single type of drink. Additionally, this helps to protect Coca-Cola from any potential threats of rivalry, as it is very difficult for another company to replicate the vast array of drinks that Coke has on offer.
Concerning strengths, Coca-Cola’s product diversification strategy has been successful in allowing the company to continue to grow and prosper. The company has been able to expand its product offerings beyond its core soda business by acquiring other businesses and developing new products. This has allowed Coca-Cola to tap into new markets and grow its customer base. The company’s products now include coffee, tea, juices, water, and sports drinks. This diversity of products gives Coca-Cola a competitive advantage as it allows the company to meet the needs of a wide range of customers (Sharma et al., 2019). Additionally, this strategy helps to insulate Coca-Cola from economic downturns as demand for one type of product may decrease while demand for another type of product increases. Under SWOT analysis, product diversification can have a weakness for Coca-Cola company because it can lead to a decline in focus on the company’s core products and a loss of market share in those products. Additionally, product diversification can lead to increased costs and complexity, which can negatively affect the company.
Under opportunities, the Coca-Cola Company has many success chances when it comes to product diversification. The company may want to consider expanding into new markets; for example, it could create a line of organic beverages and research areas they have not ventured into to increase their sales. Venturing into new regions will be easier because Coca-Cola is a popular brand; thus, people will accept it easily. On threats, maintaining a product diversification strategy can be expensive for a company, as it requires significant research and development investments to ensure that each product line is profitable and successful. If Coca-Cola company fails to execute this strategy effectively, it can experience losses in market share and revenue.
One Business Issue
Product diversification is always a difficult decision for companies; Coca-Cola is no exception. Diversifying products can mean big rewards but also big risks. One risk is that the company may lose focus on its core product and dilute its brand identity. Another is that Coca-Cola could enter into a market where it has little or no control and face strong competition from entrenched players (Sharma et al., 2019). As with any business decision, Coca-Cola must carefully consider the risks and rewards of product diversification before taking any action.
Main Product Dilution Strategic Implications and Its Impact on Stakeholders
There are several potential reasons why the dilution of the company’s main product may have strategic implications for Coca-Cola. First, it may signal to investors that the company is not confident in its ability to compete with one major product in the market. This could lead to a loss of confidence in the company and result in a decreased investment. Additionally, if Coca-Cola is seen as unfocused by being identified by the main product, which would yield huge profits, it may be less attractive to potential partners or collaborators. This could limit the company’s ability to enter into new markets or programs that could be beneficial (Sharma et al., 2019). Finally, losing focus on one key product or service could simply result in an overall decline in performance as the company stretches its resources too thin. Any of these outcomes would likely have negative implications for Coca-Cola’s business.
It is important for companies to maintain focus on a specific product in order to be successful. Diversification can be a strategy to achieve growth, but it can also lead to problems if a company loses focus on its core products and operations. One of the negative impacts of focusing on product diversification is that a company can spread itself too thin with little profits than when the company majored in a specific product. This can lead to decreased sales and visibility for the company’s core products and ultimately lead to less profitability, thus demotivating the stakeholders (Sharma et al., 2019). In addition, when a company diversifies its product line, it often needs to invest more heavily in marketing and advertising in order to generate awareness for the new products. This can make the product development and pricing too expensive with low profits, thus discouraging the stakeholders. On the other hand, when the company focuses on one main product, the capital required will be little, making it feasible for the stakeholder to contribute. They participate with the aim that there will be high sales since the company is popular on that one product line.
In conclusion, Coca-Cola’s product diversification efforts have been underway for quite some time now, and the company has had great success in expanding its product portfolio. Coca-Cola now offers a wide variety of beverages, including sodas, juices, teas, and sports drinks. The organization has similarly extended into new regions with its bottled water and energy drink products. Coca-Cola company has been working hard to remain relevant in the market by having many suppliers and producing excellent products that the competitors are not able to deliver. One business issue relating to product diversification is that the company can lose focus on its main or majorly known commodity or service. The Coca-Cola company opted for product diversification to offset their main product’s declining sales. They did this by introducing new products into different markets in the hopes of reaching new consumers.
Sharma, A., Larkin, J., Fernandez, I., & Esteves, G. (2019). The diversification of Coca-Cola: globalization & strategic fit. Journal for Global Business and Community, 10(1). Web.