The case describes the introduction of New Coke in response to the Pepsi Challenge, an advertising campaign that used taste tests to support the claim that Pepsi Cola was a superior product. Instead of strengthening Coca-Cola's market share position, the product change resulted in a consumer rebellion and a publicity disaster for Coca-Cola.
Swot Analysis of "Launching New Coke" written by Markus Christen includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Coke Pepsi facing as an external strategic factors. Some of the topics covered in Launching New Coke case study are - Strategic Management Strategies, Marketing and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Launching New Coke casestudy better are - – technology disruption, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, wage bills are increasing,
increasing energy prices, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of Launching New Coke
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Launching New Coke case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Coke Pepsi, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Coke Pepsi operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Launching New Coke can be done for the following purposes –
1. Strategic planning using facts provided in Launching New Coke case study
2. Improving business portfolio management of Coke Pepsi
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Coke Pepsi
Strengths Launching New Coke | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Coke Pepsi in Launching New Coke Harvard Business Review case study are -
Training and development
– Coke Pepsi has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Launching New Coke Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Successful track record of launching new products
– Coke Pepsi has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Coke Pepsi has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Cross disciplinary teams
– Horizontal connected teams at the Coke Pepsi are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For Coke Pepsi digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Coke Pepsi has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Analytics focus
– Coke Pepsi is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Markus Christen can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Superior customer experience
– The customer experience strategy of Coke Pepsi in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Coke Pepsi has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Launching New Coke - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Sales & Marketing industry
– Launching New Coke firm has clearly differentiated products in the market place. This has enabled Coke Pepsi to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Coke Pepsi to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Coke Pepsi is present in almost all the verticals within the industry. This has provided firm in Launching New Coke case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
High brand equity
– Coke Pepsi has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Coke Pepsi to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Coke Pepsi has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Launching New Coke HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Coke Pepsi has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Weaknesses Launching New Coke | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Launching New Coke are -
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Coke Pepsi supply chain. Even after few cautionary changes mentioned in the HBR case study - Launching New Coke, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Coke Pepsi vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Coke Pepsi has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Skills based hiring
– The stress on hiring functional specialists at Coke Pepsi has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Launching New Coke, in the dynamic environment Coke Pepsi has struggled to respond to the nimble upstart competition. Coke Pepsi has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High operating costs
– Compare to the competitors, firm in the HBR case study Launching New Coke has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Coke Pepsi 's lucrative customers.
Slow to strategic competitive environment developments
– As Launching New Coke HBR case study mentions - Coke Pepsi takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High bargaining power of channel partners
– Because of the regulatory requirements, Markus Christen suggests that, Coke Pepsi is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Launching New Coke, is just above the industry average. Coke Pepsi needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Launching New Coke, it seems that the employees of Coke Pepsi don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Lack of clear differentiation of Coke Pepsi products
– To increase the profitability and margins on the products, Coke Pepsi needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, Coke Pepsi has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Opportunities Launching New Coke | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Launching New Coke are -
Loyalty marketing
– Coke Pepsi has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Coke Pepsi is facing challenges because of the dominance of functional experts in the organization. Launching New Coke case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Coke Pepsi can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Launching New Coke, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Coke Pepsi can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Coke Pepsi has opened avenues for new revenue streams for the organization in the industry. This can help Coke Pepsi to build a more holistic ecosystem as suggested in the Launching New Coke case study. Coke Pepsi can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Coke Pepsi can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Using analytics as competitive advantage
– Coke Pepsi has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Launching New Coke - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Coke Pepsi to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Coke Pepsi in the consumer business. Now Coke Pepsi can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Coke Pepsi can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Better consumer reach
– The expansion of the 5G network will help Coke Pepsi to increase its market reach. Coke Pepsi will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Coke Pepsi to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Learning at scale
– Online learning technologies has now opened space for Coke Pepsi to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Developing new processes and practices
– Coke Pepsi can develop new processes and procedures in Sales & Marketing industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Threats Launching New Coke External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Launching New Coke are -
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
High dependence on third party suppliers
– Coke Pepsi high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Coke Pepsi.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Coke Pepsi will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Environmental challenges
– Coke Pepsi needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Coke Pepsi can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Coke Pepsi business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Coke Pepsi in the Sales & Marketing industry. The Sales & Marketing industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Easy access to finance
– Easy access to finance in Sales & Marketing field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Coke Pepsi can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Coke Pepsi needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Sales & Marketing industry regulations.
Increasing wage structure of Coke Pepsi
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Coke Pepsi.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Coke Pepsi can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Launching New Coke .
Shortening product life cycle
– it is one of the major threat that Coke Pepsi is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Coke Pepsi needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Launching New Coke Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Launching New Coke needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Launching New Coke is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Launching New Coke is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Launching New Coke is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Coke Pepsi needs to make to build a sustainable competitive advantage.
