Coca-Cola (KO) SWOT Analysis / TOWS Matrix / MBA Resources
Beverages (Nonalcoholic)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Coca-Cola (Germany)
Based on various researches at Oak Spring University , Coca-Cola is operating in a macro-environment that has been destablized by – increasing commodity prices, increasing energy prices, central banks are concerned over increasing inflation, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, technology disruption,
wage bills are increasing, challanges to central banks by blockchain based private currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Coca-Cola can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Coca-Cola, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Coca-Cola 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 Coca-Cola can be done for the following purposes –
1. Strategic planning of Coca-Cola
2. Improving business portfolio management of Coca-Cola
3. Assessing feasibility of the new initiative in Germany
4. Making a Beverages (Nonalcoholic) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Coca-Cola
Strengths of Coca-Cola | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Coca-Cola are -
Diverse revenue streams
– Coca-Cola is present in almost all the verticals within the Beverages (Nonalcoholic) industry. This has provided Coca-Cola 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
– Coca-Cola has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Coca-Cola to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Beverages (Nonalcoholic) industry
– Coca-Cola has clearly differentiated products in the market place. This has enabled Coca-Cola to fetch slight price premium compare to the competitors in the Beverages (Nonalcoholic) industry. The sustainable margins have also helped Coca-Cola to invest into research and development (R&D) and innovation.
Ability to lead change in Beverages (Nonalcoholic)
– Coca-Cola is one of the leading players in the Beverages (Nonalcoholic) industry in Germany. Over the years it has not only transformed the business landscape in the Beverages (Nonalcoholic) industry in Germany but also across the existing markets. The ability to lead change has enabled Coca-Cola in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Beverages (Nonalcoholic) industry
- digital transformation varies from industry to industry. For Coca-Cola digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Coca-Cola 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.
Effective Research and Development (R&D)
– Coca-Cola has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Coca-Cola staying ahead in the Beverages (Nonalcoholic) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Coca-Cola has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Beverages (Nonalcoholic) industry. Secondly the value chain collaborators of Coca-Cola have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– Coca-Cola has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Coca-Cola 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.
Training and development
– Coca-Cola has one of the best training and development program in Consumer/Non-Cyclical industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
High switching costs
– The high switching costs that Coca-Cola 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.
Innovation driven organization
– Coca-Cola is one of the most innovative firm in Beverages (Nonalcoholic) sector.
Strong track record of project management in the Beverages (Nonalcoholic) industry
– Coca-Cola is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses of Coca-Cola | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Coca-Cola are -
High dependence on Coca-Cola ‘s star products
– The top 2 products and services of Coca-Cola still accounts for major business revenue. This dependence on star products in Beverages (Nonalcoholic) industry has resulted into insufficient focus on developing new products, even though Coca-Cola has relatively successful track record of launching new products.
No frontier risks strategy
– From the 10K / annual statement of Coca-Cola, it seems that company is thinking out the frontier risks that can impact Beverages (Nonalcoholic) industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Capital Spending Reduction
– Even during the low interest decade, Coca-Cola has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Beverages (Nonalcoholic) industry using digital technology.
Need for greater diversity
– Coca-Cola has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
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 Coca-Cola supply chain. Even after few cautionary changes, Coca-Cola is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Coca-Cola vulnerable to further global disruptions in South East Asia.
Lack of clear differentiation of Coca-Cola products
– To increase the profitability and margins on the products, Coca-Cola needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Coca-Cola is slow explore the new channels of communication. These new channels of communication can help Coca-Cola to provide better information regarding Beverages (Nonalcoholic) products and services. It can also build an online community to further reach out to potential customers.
Employees’ less understanding of Coca-Cola strategy
– From the outside it seems that the employees of Coca-Cola 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.
Workers concerns about automation
– As automation is fast increasing in the Beverages (Nonalcoholic) industry, Coca-Cola needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Compensation and incentives
– The revenue per employee of Coca-Cola is just above the Beverages (Nonalcoholic) industry average. It 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.
Low market penetration in new markets
– Outside its home market of Germany, Coca-Cola needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Coca-Cola Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Coca-Cola are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Beverages (Nonalcoholic) industry, but it has also influenced the consumer preferences. Coca-Cola can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Coca-Cola can use these opportunities to build new business models that can help the communities that Coca-Cola operates in. Secondly it can use opportunities from government spending in Beverages (Nonalcoholic) sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Coca-Cola can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Coca-Cola 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.
Creating value in data economy
– The success of analytics program of Coca-Cola has opened avenues for new revenue streams for the organization in Beverages (Nonalcoholic) industry. This can help Coca-Cola to build a more holistic ecosystem for Coca-Cola products in the Beverages (Nonalcoholic) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Coca-Cola 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Coca-Cola to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Coca-Cola to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Coca-Cola 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
– Coca-Cola can develop new processes and procedures in Beverages (Nonalcoholic) 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Coca-Cola 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 Coca-Cola to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Use of Bitcoin and other crypto currencies for transactions in Beverages (Nonalcoholic) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Coca-Cola in the Beverages (Nonalcoholic) industry. Now Coca-Cola can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Coca-Cola in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Beverages (Nonalcoholic) industry, and it will provide faster access to the consumers.
Using analytics as competitive advantage
– Coca-Cola has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Beverages (Nonalcoholic) sector. This continuous investment in analytics has enabled Coca-Cola to build a competitive advantage using analytics. The analytics driven competitive advantage can help Coca-Cola to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Coca-Cola External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Coca-Cola are -
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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.
Increasing wage structure of Coca-Cola
– 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 Coca-Cola.
Regulatory challenges
– Coca-Cola 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 Beverages (Nonalcoholic) industry regulations.
Stagnating economy with rate increase
– Coca-Cola can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Beverages (Nonalcoholic) industry.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Coca-Cola in the Beverages (Nonalcoholic) sector and impact the bottomline of the organization.
Consumer confidence and its impact on Coca-Cola demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Beverages (Nonalcoholic) industry and other sectors.
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 Coca-Cola.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Coca-Cola 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 Coca-Cola prominent markets.
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. Coca-Cola needs to understand the core reasons impacting the Beverages (Nonalcoholic) industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that Coca-Cola is facing in Beverages (Nonalcoholic) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Coca-Cola in Beverages (Nonalcoholic) industry. The Beverages (Nonalcoholic) 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.
High dependence on third party suppliers
– Coca-Cola 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.
Weighted SWOT Analysis of Coca-Cola Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Coca-Cola 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 Coca-Cola 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 Coca-Cola 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 Coca-Cola 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 Coca-Cola needs to make to build a sustainable competitive advantage.