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 – competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, technology disruption, geopolitical disruptions, challanges to central banks by blockchain based private currencies, there is backlash against globalization,
supply chains are disrupted by pandemic , increasing commodity prices, 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 -
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.
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.
Learning organization
- Coca-Cola is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Coca-Cola is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Coca-Cola emphasize – knowledge, initiative, and innovation.
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.
Analytics focus
– Coca-Cola 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 Beverages (Nonalcoholic) industry. The technology infrastructure of Germany is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Low bargaining power of suppliers
– Suppliers of Coca-Cola in the Consumer/Non-Cyclical sector have low bargaining power. Coca-Cola has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Coca-Cola to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy of Coca-Cola comprises – understanding the underlying the factors in the Beverages (Nonalcoholic) industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
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.
Superior customer experience
– The customer experience strategy of Coca-Cola in Beverages (Nonalcoholic) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
Innovation driven organization
– Coca-Cola is one of the most innovative firm in Beverages (Nonalcoholic) sector.
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 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.
Slow to strategic competitive environment developments
– As Coca-Cola is one of the leading players in the Beverages (Nonalcoholic) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Beverages (Nonalcoholic) industry in last five years.
Skills based hiring in Beverages (Nonalcoholic) industry
– The stress on hiring functional specialists at Coca-Cola 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 at Coca-Cola, in the dynamic environment of Beverages (Nonalcoholic) industry it has struggled to respond to the nimble upstart competition. Coca-Cola has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Interest costs
– Compare to the competition, Coca-Cola 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.
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.
Products dominated business model
– Even though Coca-Cola has some of the most successful models in the Beverages (Nonalcoholic) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Coca-Cola should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Coca-Cola has a high cash cycle compare to other players in the Beverages (Nonalcoholic) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High operating costs
– Compare to the competitors, Coca-Cola has high operating costs in the Beverages (Nonalcoholic) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Coca-Cola lucrative customers.
Increasing silos among functional specialists
– The organizational structure of Coca-Cola is dominated by functional specialists. It is not different from other players in the Beverages (Nonalcoholic) industry, but Coca-Cola needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Coca-Cola to focus more on services in the Beverages (Nonalcoholic) industry rather than just following the product oriented approach.
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.
Coca-Cola Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Coca-Cola are -
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Beverages (Nonalcoholic) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Coca-Cola can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Coca-Cola can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Buying journey improvements
– Coca-Cola can improve the customer journey of consumers in the Beverages (Nonalcoholic) industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
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.
Leveraging digital technologies
– Coca-Cola can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
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.
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.
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.
Manufacturing automation
– Coca-Cola can use the latest technology developments to improve its manufacturing and designing process in Beverages (Nonalcoholic) sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
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.
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.
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.
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. Coca-Cola can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help Coca-Cola to increase its market reach. Coca-Cola 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.
Threats Coca-Cola External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Coca-Cola are -
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.
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. Coca-Cola 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.
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 Coca-Cola business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Coca-Cola may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Beverages (Nonalcoholic) sector.
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.
Easy access to finance
– Easy access to finance in Beverages (Nonalcoholic) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Coca-Cola can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
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.
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.
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.
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.
Technology acceleration in Forth Industrial Revolution
– Coca-Cola has witnessed rapid integration of technology during Covid-19 in the Beverages (Nonalcoholic) industry. As one of the leading players in the industry, Coca-Cola needs to keep up with the evolution of technology in the Beverages (Nonalcoholic) sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
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.