Strategic Choice and Evaluation
A multi-domestic strategy is defined as “a multi- domestic corporation that views itself as a collection of relatively independent operating subsidiaries each of which focuses on a specific market” (Miltenburg, 2009, p.7). The Coca Cola Corporation adopts the multi- domestic strategy. Coca Cola manufactures all products independently in each country depending on the external and internal environments of each country. Coca Cola must develop their strategies based on the nature of the culture, status, and people in each country. The factors that must be identified in order for Coca Cola to realize growth are value disciplines, the generic strategies, and the ...view middle of the document...
Coca Cola strive to manufacture products to the highest specifications by using processes to ensure a consistent quality and safe products for their consumers (Coca Cola, 2011).
“Many planners believe that any long-term strategy should derive from a firm’s attempt to seek a competitive advantage based on one of the three generic strategies; low cost leadership, differentiation, and focusing” (Pearson & Robinson, 2011, p. 183 ).
Low cost leadership
A company that utilizes a cost leadership strategy manufactures their products at a lower cost compared to the competition. Cost leadership generally depends on economies of scale to acquire a cost advantage, thereby achieving a competitive advantage ( Pearson & Robinson, 2011). The cost leader in the beverage market is Coca Cola. This company has the buying power to purchase its raw materials at a low cost because of its size. Additionally, they benefit from economies of scale in divisions, such as advertising, and research and development. Coca Cola spends a substantial amount of cash on advertising and research and development and amortize the costs over large quantities. This process translates into low costs per unit.
The differentiation strategy occurs when a company highlights a unique attribute of the product compared to similar alternatives offered by competitors. The added value by the uniqueness of products sometimes permits a company to charge a higher price for them. The company anticipates that the higher prices will cover the additional costs obtained by offering a unique product. When products have unique attributes suppliers may raise their prices, thus creating the need to pass the costs along to its consumers who cannot locate substitute products without difficulty ( Pearson & Robinson, 2011).
Coca Cola differentiates by establishing a solid brand that differentiates on reliability or quality of products. Coca Cola creates differentiation by using a soft sell approach. A soft sell approach is a “subtle yet persuasive, low- pressure method of selling your product” (Okazaki & Taylor, 2010, p. 5). The basis for soft selling is to focus on creating relationships rather than aggressively pitching products. Developing a genuine relationship with consumers will help the company understand what the needs and wants are, and then Coca Cola can suggest their solution. Coca Cola allocates approximately 20% of their entire advertising budget to conserve their differentiation strategy (Coca-Cola Company, 2011).
Coca Cola has positioned effectively itself on the following principles; company reputation for innovation and quality, effective communication of value of their products, and creating a symbol of enjoy and fun. The company intends to isolate their competitors from the market by developing a powerful brand loyal customer base.
The focus strategy is directed at a particular target consumer group through...