Advances in Social Science, Education and Humanities Research, volume 607

Proceedings of the 2021 3rd International Conference on Economic Management and

Cultural Industry (ICEMCI 2021)

Research on Competitive Strategy of Coca-Cola

Company
Xueyao Guo 1, a, †, Manyu Wen 2, b, *, †
1
Beijing Union University, Beijing, Beijing 100025, China;
2
Taiyuan University of Technology, Taiyuan, Shanxi 030000, China.
*
Corresponding author. Email: [email protected]
†These authors contributed equally.

ABSTRACT
In recent years, there are more and more kinds of drinks, people's demand for drinks is increasing, and the competitive
pressure in the beverage market is also increasing year by year. Coca-Cola has been a leader in the beverage market
for a long time, and the reasons for its success are worth our in-depth analysis. This paper analyzes the internal and
external situation of Coca-Cola company through Porter's Five Forces model. It analyzes the competitive strategy of
Coca-Cola Company to obtain the reasons for the success of Coca-Cola Company. Coca-Cola uses the differentiation
competition strategy to improve its core competitiveness, brand awareness, consumer loyalty, and value awareness to
occupy a dominant position in the industry. This paper can provide a reference for more soft drink enterprises through
the analysis of Coca-Cola's competitive strategy.

Keywords: Coca-Cola, Five force analysis, Differentiation strategy.

Professor Michael Porter of Harvard University

1. INTRODUCTION
pointed out that strategy creates a unique and valuable
The Coca-Cola Company is an American market position. He then put forward three general
corporation founded in 1892, engaged primarily in the strategies: total cost leading, differentiation, and
manufacture and sale of syrup and concentrate for Coca- concentration strategies. The so-called differentiation
Cola, a sweetened carbonated beverage. The company strategy, "that is, enterprises provide unique products or
also produces and sells other finished beverages. With services recognized by the whole industry", can be a
more than 500 brands available in over 200 countries pre-emptive strategy or a later strategy. Competitive
and 2 billion servings a day, Coca-Cola is the world's strategy is a part of enterprise strategy, which guides
largest beverage manufacturer and distributor. Coca- and manages the plans and actions of specific strategic
Cola has always been the leader in the soft drink business units under the restriction of the enterprise's
industry. However, after years of development, the soft overall strategy. The core problem to be solved in an
drink industry is approaching saturation. Maintaining a enterprise's competitive strategy is establishing and
high level of development and customer loyalty in this maintaining its products' specific position by
situation is an urgent problem for them to consider and determining the relationship among customer needs,
solve. However, as the beverage market continues to competitors' products, and its products. Differentiation
expand and people's life becomes increasingly rich, the strategy refers to the enterprise strives to be unique in
demand also expands, and the expectation of multi- the industry in aspects that customers widely value. It
beverage is far greater than before. At this time, more can be either a pre-emptive strategy or a strategy of
and more kinds of drinks appeared one after another, striking only after the enemy has struck. The famous
and Coca-Cola also began to enter other markets and cliche that "give is rewarded" captures the essence of
implement the diversified and differentiated differentiation strategy. Companies that follow a
management strategy. Coke's differentiation strategy has differentiation strategy try to persuade customers to pay
made its products from coffee to tea, juice drinks to extra for their goods or services by providing unique
sports drinks and water, as well as carbonated drinks, and desirable features [1]. When the customer demand
the most familiar names in the world. is diversified, the industry differentiation is not high,

Copyright © 2021 The Authors. Published by Atlantis Press SARL.

This is an open access article distributed under the CC BY-NC 4.0 license -http://creativecommons.org/licenses/by-nc/4.0/. 2879
 Advances in Social Science, Education and Humanities Research, volume 607

and the market competition is fierce, enterprises choose business problems of enterprises systematically. The
to adopt a differentiation strategy according to their method is to identify and analyze the research-oriented
resources and capabilities and create creative products problems to create new knowledge or learn better
to gain a place for themselves. The focus of the methods to solve the problems related to these problems
differentiation strategy is to create recognized unique [8]. It can demonstrate the local community's value
products and services [2]. The realization of this when they are involved in the development of the brand.
strategy can cultivate users' loyalty to the brand and The case study can show the clear connection between
ultimately make enterprises obtain profits higher than each problem that the case shows. In addition, a case
the industry's average level. The implementation of study research design usually involves qualitative
differentiation strategy can be divided into product methods, but quantitative methods are sometimes also
differentiation strategy, service differentiation strategy, used. Case studies are good for describing, comparing,
personnel differentiation strategy, image differentiation evaluating, and understanding different aspects of a
strategy, and so on [3]. research problem.
Differentiation strategy does not apply to all This text takes Coca-Cola as an example.
industries. It is difficult for some industries to carry out Theoretically, the Coca-Cola company has successfully
product innovation, and it is difficult for consumers to selected and implemented the differentiation strategy,
accept innovation in some industries. At the same time, defined and adhered to its positioning. So, it can stand
it is difficult for any enterprise to hold a certain out in the fierce competition in the soft drink industry,
difference for a long time [4]. continuously occupy a large market share for many
years, and have a large customer group with high
In conclusion, based on Coca-Cola's current
loyalty.
situation and strategic theory analysis, we find that
Coca-Cola's outstanding performance in the beverage
industry is due to its good action in strategic choice. 2.2. Data
According to Porter's five forces analysis model, this This paper takes the Coca-cola Company as the
paper takes Coca-Cola company as an example from the research object. For one thing, this study's data comes
overall strategy perspective, studies how to find its own from the survey and interview of the middle and senior
appropriate positioning, and quickly formulate strategy. managers of Coca-Cola company to obtain first-hand
information combined with theory and data analysis to
2. METHOD AND DATA study the implementation of Coca-Cola company's
competitive strategy. For another, the second-hand
2.1. Method information obtained from online related information,
including annual reports on the official website of Coca-
Case studies play an important role in business Cola Company, China National Knowledge
research [5]. The case study is a type of research method Infrastructure, and Google Scholar.
commonly used in social, educational, clinical, and
business research [6]. A business case study is simply a The data collection of the case enterprises used in
story about how you successfully deliver a solution to this paper began in 2020, and the investigation lasted for
your client. It includes a deep and detailed investigation more than 3 months. The final determination of the
of a specific case. It is best defined as “an intensive theoretical framework includes theory extraction, data
study of a single unit to generalize across a larger set of collection, data analysis, and data verification.
units” [7]. A business case study is used to study the

Table 1. The main overview of the data collection of the selected enterprises in this article
Interview Enterprises Interviewees Topic

Coca-cola North America Director, Refreshment Tea Brands Paying it forward, the power of
kindness, doing the right things for
those around you
Coca-cola Company Chairman and CEO James Quincey Make sure the consumer
remains the center of every decision
they made
Coca-Cola Europe, Middle Walter Susini, VP of refresh the world and make
East and Africa (EMEA) marketing a difference
The main financial data analysis methods in this from multiple accounting periods. These data reflect the
paper are horizontal analysis and ratio analysis. changes of corresponding financial statement account
Horizontal analysis is used to compare historical data amount over some time, which helps to determine the

2880
 Advances in Social Science, Education and Humanities Research, volume 607

changing trend of Coca-Cola Company from 2018 to revenue and profit may be due to the United Kingdom's
2020 and the changing trend of Coca-Cola Company's withdrawal from the European Union, or events such as
future financial situation [9]. Ratio analysis is a kind of natural disasters, widespread outbreaks of infectious
quantitative analysis used to obtain financial diseases (such as the COVID-19 pandemic), power
performance indicators of a company in key accounting outages, labor strikes, political uncertainties or
areas [10]. governmental instability. Moreover, Cash and Cash
Equivalents in 2020 is 5% more than 2019, but 24% less
According to the Income Statement, there are some
than 2018. From 2018 to 2020, the Short-term
changes from 2018 to 2020. As shown in Table 2, Net
investments decreased by 27.6% in 2019; however, they
Operating Revenue increased by 17% in 2019 but
increased by 20.7% in 2020. As a result, the Total Asset
decreased by 11.4% in 2020. As a result of the decrease
increased by 5%. The Total Current Liabilities
in Net Operating Revenue, Gross Profit decreased by
decreased by 50%.
13.5% in 2020. The negative impact on net operating
Table 2: Main Financial Data in Consolidated Statements for Coca-Cola Company
Fiscal years ended January 31
Amounts in millions, except per share data
2020 ($) 2019 ($) 2018 ($)

Net operating revenue 33,014 37,266 31,856

Cost of goods sold 13,433 14,619 11,770

Operating expense 10,584 12,561 11,386

Gross profit 19,581 22,647 21,233

Operating income 8,997 10,086 8,700

Cash and cash equivalents 6,795 6,480 8,926

Trade account receivables 3,144 3,971 3,396

Short-term investments 1,771 1,467 2,025

Total asset 87,296 86,381 83,216

Total current liabilities 14,601 26,973 29,223

Table 3: Profitability Ratio for Coca-Cola Company

Subject/Year 2019 2020

Basic earnings per share ($) 2.09 1.8

Diluted earnings per share ($) 2.07 1.79

Net Assets Per Share ($) 4.43 4.49

Cash Flow per Share ($) 2.44 2.29

Capital Reserves Per Share ($) 4 4.09

Operating Income per Share ($) 8.7 7.67

Operating cycle (days) 116.4 127.83

Inventory days (days) 79.42 89.04

Inventory turnover rate (times) 4.53 4.04

2881
 Advances in Social Science, Education and Humanities Research, volume 607

Accounts receivable turnover days (days) 36.98 38.79

Accounts receivable turnover rate (times) 9.74 9.28

Current Assets Turnover Ratio (times) 1.64 1.67

Fixed assets turnover rate (times) 3.65 3.05

Total assets turnover ratio (times) 0.44 0.38

Relative Growth Rate of Net Assets Per Share at the Beginning of the Year (%) 11.36 1.25

The relative growth rate of total assets at the beginning of the year (%) 3.8 1.06

The growth rate of shareholders' equity attributable to the parent company at the beginning
11.78 1.68
of the year (%)

Current ratio 0.76 1.32

Quick ratio 0.63 1.09

Equity Ratio (%) 3.44 3.42

Total equity/liabilities attributable to shareholders of the parent company (%) 0.29 0.29

following aspects: product differentiation, service

3. RESULTS differentiation, personnel differentiation, marketing
Based on the above data, we find that Coca-Cola's channel differentiation, and promotion differentiation.
differentiation strategy is mainly reflected in the

Figure 1 Overview of Coca-Cola differentiation strategy

1)Product differentiation healthy products, including health drinks and juices,

aimed at health-conscious customers.
Coke has secrete recipes, and to meet people ’ s
tastes and preferences, the company is making changes 2)Service differentiation
through the following four actions: reducing added
Coca-Cola maintains its customer service practices
sugar, making smaller packages, offering more drinks
via online chat with a virtual agent on the official
with additional nutrition and hydration benefits, giving
website of the company's dedicated customer service
people the information. It has introduced a number of
phone.

2882
 Advances in Social Science, Education and Humanities Research, volume 607

3)Personnel differentiation the core value that the Coca-Cola brand has always
advocated. In China, Coca-Cola's support for The cause
The company pays employees good salaries and also
of Chinese football has enabled it to properly localize its
complements the payments with rewards. They also
brand's global connection with football, thus
give them more than 700,000 associates within the
establishing a powerful emotional communication
Coca-Cola system the tools, training, and resources
model with Chinese fans.
needed to ensure their safety.
Finally is the Coca-Cola promotion. Coca-Cola has a
4)Marketing channel differentiation
special sale. A method of lowering prices periodically
This part includes two levels. The primary level during a specified period to promote sales. Special sales,
involves distributing the concentrates and syrups to generally in festivals and soft drink sales season, or
various bottlers throughout the world. The secondary fierce competition to use more. During the Spring
level involves bottlers distributing the final beverage Festival in 2002, Coca-Cola in C city carried out the
products to their respective geographical markets. The promotion activity of "special sale of limited time and
company also uses two routes under its secondary limited quantity" in the supermarket channel. From the
distribution level. The first involves distributing the peak time when the supermarket has the largest
ready-to-consume products via retail distributors. In customer flow, the daily activity time is limited to 2
contrast, the second involves distributing the hours. Special sales are carried out for its PET1.5 L and
concentrates and syrups and ready-to-consume products 2.25 Coca-Cola series products (Coca-Cola, Sprite,
to restaurants and other food preparation businesses. Fanta, striking), producing a good promotion effect.
Coca-Cola also has incremental packaging. The price of
5)Promotion differentiation
the product remains the same, but the packing capacity
First is Coca-Cola AD. Coca Cola employs celebrity has increased. For example, coke's previous products
endorsements and uses the super attraction of stars, with 1.25-liter and 2-liter PET packaging capacities
which is beyond the reach of ordinary advertisements in were later increased to 1.5 liters and 2.25 liters,
the complex media environment. Because stars respectively. However, the price was still sold according
unconsciously have attracted the attention of target to the standard before the increase of capacity. In other
consumers to the information demanded by words, incremental packaging is a "volume without
advertisements. They can affect consumers' emotions, price" method of promotion.
attitudes, and buying behavior and increase target
consumers' favorable impression of the brand 4. DISCUSSION
exponentially. In its series of advertisements, Coca-Cola
uses stars with distinct personalities to explain its Porter ’ s five forces framework (rivalry existing
unique personality. The image of stars perfectly competitors, threat of new entrants, power of suppliers
integrates with the brand and brings out the best in each and buyers, substitute products and services) is based on
other so that the advertising effectively improves the the perception that an organizational strategy should
brand value. Coca-Cola is good at using mass media and encounter the opportunities and threats in the
spares no effort to build its own network transmission organization's external setting [9]. The constraints
system. Coca-Cola Chinese website, for example, Coca- among them can determine the intensity of competition
Cola can speak Chinese elements in various festivals in and affect the profitability potential of the industry.
China and integrate them into the Coca-Cola Chinese Analyzing these five aspects of their own competitive
website. Through the mass media and network environment can be very good to formulate the
interaction, Coca-Cola maintains the continuity and corresponding competition strategy and establish the
consistency of online and offline advertising to highlight industry advantage.
the effectiveness of the media integration.
1)The threat of new entrants
The second is the sponsorship by Coca-Cola.
New entrants in the industry bring new production
Sponsorship is a form of public relations. Coca-Cola
capacity and resources simultaneously, hoping that the
sponsors sports, education, culture, and other activities
existing enterprises have been finished in the market to
to strengthen its brand image, enhance its brand
win a place. It is likely to compete with the existing raw
reputation and create a drinking atmosphere to promote
material enterprises for market share and eventually led
the sales of its products. Sponsor world and Chinese
to lower existing corporate profits in the industry. That
football. Globally, football has been one of Coca-Cola's
may seriously endanger the survival of these enterprises.
most important sponsorship and its most valuable
The severity of the threat of competitive entry depends
market asset. As a long-time partner of FIFA and the
on two factors, namely the size of the barriers to entry
World Cup, Coca-Cola has been one of the major
and the expected response of existing enterprises to
sponsors of every World Cup since 1974 and has an
entrants.
undisputed global leader in advancing the sport of
football. The spirit that runs through football is exactly

2883
 Advances in Social Science, Education and Humanities Research, volume 607

Coca-Cola Company processes low customer beverages in the market, and the switching costs are low
switching costs and high capital requirements. From for the customers. In addition, the quality of those is
operations to marketing, every part requires a large good enough. Therefore, the substitute has strong
investment, and it will take some time for any brand to bargaining power.
build customer loyalty. Some local brands may start on
5)Industry rivalry
a smaller scale but still need to invest heavily in
marketing and hiring qualified staff. The level of There are two major players in the soda industry,
customer loyalty in the industry is moderate, and it will Coca-Cola and Pepsi. The rivalry between the two
take some time for any brand to build customer loyalty. major players is intense. There are a few smaller
players, too, but they do not pose a major competitive
2)Bargaining power of suppliers
threat. The two main players are of the same size, and
Suppliers influence the profitability and product they have similar products and strategies. The level of
competitiveness of existing enterprises in the industry differentiation between the two brands is also low, and
mainly through their ability to increase input factors and therefore the price competition is intense. And barriers
reduce the quality of unit value. The strength of the to exit are high. This is because the Coca-Cola
supplier power mainly depends on what kinds of inputs Company has a long history in the soft drink industry,
they provide to the buyer. When the value of the input with long-term and huge advertising investment, making
elements provided by the supplier accounts for a larger Coca-Cola a symbol of American culture. Therefore, the
proportion of the total cost of the product, the buyer is industry rivalry is high.
very important for buyers product production process,
or seriously affect the buyer the quality of the product, 5. CONCLUSION
the potential bargaining power of suppliers against
buyers is greatly enhanced. By clarifying the competitive environment of the
industry, Coca-Cola Company complies with the
Coca-Cola has many suppliers, with a large number development of the times. It widens the litigation points
of suppliers, forward integration difficulties, and low of consumers. Also, it meets the multidimensional needs
switching costs. Coca-Cola can easily switch from one of consumers through the combination of various
supplier to another. While there are several suppliers, differentiation strategies to make Coca-Cola take a
the size of individual suppliers is small or moderately leading position in the competitive soft drink industry.
large. Moreover, forward integration is a distant
possibility for most of its suppliers. Even if there are no Differentiation strategy differentiates a company's
substitutes for raw materials like sugar, the number of products, services, and corporate image from its
suppliers is still high. Therefore, coke's suppliers have competitors to gain a competitive advantage. This
low bargaining power. strategy aims to create products and services that are
perceived as unique by the industry and customers.
3)Bargaining power of customers Differentiation strategy has many methods, such as
Buyers affect the profitability of existing enterprises product differentiation, service differentiation, and
in the industry mainly through their ability to lower image differentiation. Coca-Cola uses the product
prices and demand higher quality products or services. differentiation strategy to enable the company to obtain
profits higher than the average level of the same
Individual customers generally buy small volumes industry.
and are not concentrated on one specific brand.
However, the level of differentiation is low. Switching The soft drink industry has a long history and is
costs are low for customers, and they do not price gradually diversified. In the future, it will attract more
sensitive. Backward integration is not a possibility for players, and the competition will be more intense. The
the customers. Therefore, the bargaining power of results show that when the homogeneity of products in
customers is not high. the industry is high, the advantages of differentiation
strategy can be better reflected. Soft drink enterprises
4)Threats of substitutes should actively use differentiated marketing strategies to
Two enterprises in different industries may compete improve their core competitiveness and brand
because the products they produce are substitutes for identification, cultivate consumer loyalty and value
each other. Such competition derived from substitutes identity, and realize the sustainable and healthy
will affect the competitive strategies of existing development of soft drink enterprises.
enterprises in the industry in various forms.
REFERENCES
The main substitutes for Coca-Cola products are the
beverages made by Pepsi, fruit juices, and other hot and [1] Edwards J. Mastering Strategic Management: 1st
cold beverages. The number of substitutes for Coca- Canadian Edition[J]. 2018.
Cola is high. There are several juices and other kinds of

2884
 Advances in Social Science, Education and Humanities Research, volume 607

[2] Lacy-Nichols Jennifer, Scrinis Gyorgy, Carey [6] Gerring J. What is a case study and what is it good
Rachel. The evolution of Coca-Cola Australiaâs for?[J]. American political science review, 2004:
soft drink reformulation strategy 2003â 2017: 341-354.
Athematic analysis of corporate documents[J].
[7] Dul J, Hak T. Case study methodology in business
Food Policy,2020,90(C):.
research[M]. Routledge, 2007.
[3] Zhuo Zhang. Risk Analysis of Two Leader Drink
[8] Aithal P S. An effective method of developing
Company: PepsiCo and Coca-Cola[J]. Asian
business case studies based on company
Business Research, 2019, 4(3):.
analysis[J]. International Journal of Engineering
[4] Okechukwu V. Nwokorie, Patrick J. Devlieger. ‘ Research and Modern Education (IJERME), ISSN
We only got Coca-Cola ’ : Disability and the (Online), 2017: 2455-4200.
paradox of (dis)empowerment in Southeast [9] H. Barringer, C.S. Pasareanu, D. Giannakopolou,
Nigeria[J]. African Journal of Disability,2019,8:. Proof rules for automated compositional
[5] Mialon Melissa,Mialon Jonathan. Analysis of verification through learning, in Proc. of the 2nd
corporate political activity strategies of the food International Workshop on Specification and
industry: evidence from France.[J]. Public health Verification of Component Based Systems, 2003.
nutrition,2018,21(18):. [10] Bruijl G H T. The relevance of Porter's five forces
in today's innovative and changing business
environment[J]. Available at SSRN 3192207,
2018.

2885