The purpose of this integrated essay is to explore the strengths and weaknesses of Coca Cola (Coke) using the Value Chain Analysis Framework developed by Michael Porter. Using Exhibit I from Porter’s Framework, I examined the linkages and strategic significance of Coke’s value system.
DESCRIPTION OF THEORIES/CORE CONCEPTS
According to Michael Porter (1985), information technology changes the way companies operate by specifically targeting how companies create their products. Porter divided the business operation process into value activities that were either technologically or economically based. Porter then stated that performing the value activities at a lower cost or creating a differentiated, premium-paid product yields a competitive advantage.
Exhibit I classified the value chain activities as either primary or secondary. Primary activities include all facets dealing with product creation, sales, delivery, and servicing new products. On the contrary, secondary activities support the primary activities by providing all services necessary to ready the product for the customer. (Porter, 1985). An example of a supporting activity would include the hiring activities of the human resource department. Their duty is to hire skilled employees to produce the company’s products.
Lastly, Porter addressed the linkages that exist between interdependent activities in the company’s value chain and with suppliers. Often interdependent activities lead to trade-offs in areas such as performance, cost, and quality. Optimization of those trade-offs leads to a strong competitive advantage. Whereas a failure to capitalize on those trade-offs causes numerous issues include low sales, loss of competitive edge, and layoff.
Coca Cola (Coke) is the largest manufacturer of non-alcoholic beverages in the world. Coke markets over 500 products in over 200 countries. With that being said, Coke’s revenue for 2013 only surmised to $46 billion as opposed to the $64 billion posted by PepsiCo, Coke’s top rival. Upon further examination, I discovered that PepsiCo operates in both the snack and beverage industry unlike Coke, which solely deals in beverages. Of the $46 million in revenues posted by Coke, at least 75% of the revenue came from beverage sales. In comparison, PepsiCo has a diversified portfolio with at least 25% of revenue attributed to beverage sales. Therefore, in reality, the $64 billion reported by PepsiCo equates to roughly $16.5 billion in comparable sales (“KO Income Statement”, n.d.).
Coke’s strongest competitive advantage lies in their name. With having such a long history and loyal customer base, Coke has endured many years of increased profits. In addition, another plus for Coke is the marketing strategy used. Coke makes a stance that Coke is for everyone regardless of age. On the other hand, Pepsi’s slogan targets the young with their new age marketing approach. Lastly, Coke is everywhere. It is in stores, restaurants, vending machines, and served on airlines. Not only is Coke delivering their products to consumers through normal channels, but Coke also uses strategic partners, such as McDonalds, who sell Coke products alongside their company product. This partnership increases Coke’s sales, broadens the customer base, and reduces delivery cost (“SWOT of Coca Cola”, n.d.).
Coke’s biggest weakness is failing to enter another arena. As I mentioned earlier, PepsiCo is also in the snack market (“SWOT of Coca Cola”, n.d.). If Coke enters this market, its profits could more than double. Coke is aware of this major weakness and began a grassroots effort to persuade their employees to purchase substitute and, preferably non-Pepsi, product. For instance, on my first day as a contractor with Coke, I received a pamphlet showcases all of Pepsi’s products. Coke made me aware that if our 80,000 employees purchased a PepsiCo product once a week for a year, our competitor yields roughly $16 million a year. Needless to say, I felt obligated to decrease my loyalties to Doritos and Kentucky Fried Chicken.
In short, Value Chain Analysis aids companies in identifying which activities are necessary to sustain business operation and which are not. In addition, this tool is also useful in identifying a company’s competitive strengths that could lead to a competitive advantage in their industry.
In my opinion, Coca Cola’s future prospects are unlimited. Coke has successfully launched several new products including their sparkling beverage line and freestyle drink machines. Even with direct competition from PepsiCo, Coke remains the front leader.
EXTENDING THE CONVERSATION
My greatest strength is my strong educational background with emphasis on my accounting and financial skills. I am able to offer any company ten years of experience in general accounting in full cycle accounts payable, various areas of accounts receivable including Cash Applications, Credit, and Collections. I also offer over four years of experience as an Accountant and three years of experience as a Financial Analyst. For governmental and overseas employers, I offer four years of Middle East experience and a Moderate Risk Security Clearance.
With my background, I believe I have a slight competitive edge over similarly situated candidates. For that reason, I choose to pursue my Doctorate in Business Administration (DBA) for quick access to top financial positions that have eluded me for some time. Having my DBA will place me in the right arena even against more seasoned candidates.
When considering future opportunities that would add value to my resume and simultaneously affect social change, I think organizations such as the Federal Emergency Management Agency (FEMA), the United Nations, and the Peace Corps. These organizations are well-known advocates for peace and well-being in other countries. The overall goal of those companies is not only to into influence the lives of the individuals in another country, but also to influence in a positive manner. I think I can have a successful career with one of those companies, but I do enjoy helping others.
If you worked for Coke, how far would you be willing to go to be part of the team? Would you fully commit to Coke and give up all PepsiCo products?
What is your personal competitive advantage?
KO Income Statement | Coca-Cola Company (The) Common Stock – Yahoo! Finance. (n.d.). Retrieved September 4, 2014, from http://finance.yahoo.com/q/is?s=KO&annual
Porter, M.E. & Millar, V.E. (1985). How information gives you competitive advantage. _Harvard Business Review, 63_(4), 149-161. Retrieved from http://zaphod.mindlab.umd.edu/docSeminar/pdfs/Porter85.pdf
SWOT of Coca Cola. (n.d.). Retrieved September 4, 2014, from http://www.marketing91.com/swot-coca-cola/