However there are also some disadvantages, which mainly are the costs. These costs come in the form of market research costs to know what people want and what they are looking for. The surveys and sending people out will make short-term costs rise. This will cause a short-term fall of profits. Another disadvantage is the research and development of the product itself. Maybe the innovated good requires new machinery that has to be purchased. It may also mean introducing a new production process. This will surely raise costs causing a short-term fall in profit and could need a lot of time to change so production stops for a while Opportunity cost will be another disadvantage of using innovation. This is the benefit of the next best option foregone when making a choice between a number of alternatives. It may mean spending money on a new product instead of spending money on advertisement. The risk of failure maight be quite big. It may be that the product is a complete floc and would make the company lose large sums of money, making its reputation fall amongst its costumers, as well as short term profit.
Another technique that coca cola can use is reputation. This is the image that costumers and stakeholders have of the company. Stakeholdres are groups of people affected by any decision of the company. Reputation can be gained in a number of ways. Marketing and its brand name that it has from being established and trusted in the market. This is a very important factor for coca cola. In order for the company to maintain its strong market position, Coca Cola needs to continuously strengthen its brand to maintain brand loyalty and positive responses and differentiate itself from its competitors. If coca cola used strong marketing it may raise barriers to entry, thus decreasing the threat of new entrants to the industry. Potential rivals within Coca Cola's target segments will experience difficulties in entering the market, due to difficulties in winning the 'Coca Cola loyalists' as well the company's large capital. Brand name adds to the value-chain as it represents quality, taste and excitement to the market, qualities that remain unmatched by the company's competitors, thus severely reducing any threat of being substituted. This means a higher price can be charged for the product. Increased brand awareness and publicity will reinforce Coca Cola's product s' benefits to its customers, which will make it more difficult for rivals to compete on the same level.This is due to the fact that no matter what the people in the advertisement are doing, the advert portrays them enjoying themselves. This message that is conveyed through Coco Cola's advertisements implies that no matter what personality or what ever kind of lifestyle someone has drinking cola boosts their confidence as well as allowing them to get pleasure from every day activities that are considered as being dull. This makes marketing very essential for coca cola because it is what it gives it this effect on people. All the adverts are dominated by the colour red. This gives a bright, bubbly, lot of energy, loving and not to mention lively atmosphere. The white meaning a loyal, pure and trustworthy company. It makes the product easily identifiable and recognisable which, again, increases deamand and sales, making coca cola achieve competitive advantage.
The disadvantages of this are obviously the high costs of advertisement. It takes lots of money to employ specialists who know how to catch peoples attention and make advertisements successful. It is also expensive to pay for actors, TVs and other requirements in order to do the actual advertisement. As an example the first year's gross sales were $50 million which was not enough to cover the $73.96 million advertising costs. However it is vary rare for this to happen now since there are things which can be used to predict if it is going to be good or not. Advertising elasticity of demand is and example. It shows the responsiveness of demand to a change in advertising expenditure. With this coca cola could predict how much to spend on advertising and if it would be worth it or not.
Furthermore another technique that can be used is to have good relations with stakeholders and workers in the company. These are groups of people affected by any decision of the company. I will use workers as an example. Having a good and friendly atmosphere can bring many advantages to a company. Something which coca cola can do is employ a diverse mix of people of different sexes, races or ages. Then it should concentrate on this group and try and motivate them in order for the levels of productivity to be high. The advantages of having a motivated workforce are that the levels of errors and waste are quite low and productivity levels are high. If productivity increases then output will increase and it may give coca cola economies of scale which will reduce its average costs. Moreover the quality will be better and therefore there will be a better reputation. This may lead to an increase in demand since people know that their workers are being treated well and more people will want to purchase the product. Also costumer service will increase. The advantages of having a mixed workforce are that since coca cola is so global workers may reflect the community they trade in. This can help them tailor their goods and services so as to build trust and goodwill among customers and suppliers. It may also solve problems that customers may have such as language barriers and poor access for disabled people. Another advantage of having good relationships is that things like strikes will be low and other industrial action may be inexistent. This is good because it decreases the loss of time and makes productivity stay at high levels. These good realtions and destinctive workforce will give coca cola its competitive advantage.
The disadvantages of this are the costs. The financial costs of motivating them are quite high. Coca cola might have to pay for higher salaries to motivate workers. Another possible cost is making a good and attractive environment for workers. The costs of high technology and colourful furniture are quite high. This in a short term may decrease coca colas profits, however due to motivation and the increase of productivity profits will start to rise again.
Finally coca cola can use relations to achieve competitive advantage. Coca cola has chosen to be “environmentally friendly”. Nowadays there are many people who are said to be “green” and which would therefore praise coca cola for being environmentally friendly. Being green can be done through recycling. “The Company is working with industry and regulators to establish clearer “design-for-recycling” guidelines. The Company also continues to make recycling of its PET plastic easier by using recycling friendly caps, labels, adhesives and colors. Coca cola can use recycled raw materials or recycle them” said coca colas spokesman. Many of coca colas plastic bottles are recycled and as a result less resources are lost and costs decrease. This makes profits increase. For example in 2003 the recycling rate was 76%. This means that 76% of the products were recycled or reused. Coca cola is also using methane processing in its beverage industry. This process reduces the production of waste and CO2 emissions. By making clean-burning bio-fuel from their garbage, the Coke company will save about $577,000 per year on waste disposal fees and about U.S. $78,000 on light and fuel costs. Coca cola has also chosen to introduce HFC-free refrigirrations which reduces global warming by producing 700,000 fewer tons of greenhouse gases.
The advantages of this are that there would be a good reputation between the consumers. Being “green” will make people “back up” the company and they may become brand loyal. If this happens then coca cola may have guaranteed sales because people will always be encouraged to buy products from an “environmentally friendly” company. It attracts a new market segment of green consumers such as “green peace” followers. It may also give coca cola price inelasticity. The fact that it is green and that nearly no caompany does anything to respect the environment will give coca cola a distinctive feature which will give it its competitive adavantage.
The costs of this are high. Trying to be environmentally friendly may mean having to invest in non-pollutant machinery which generally is much more expensive. Coca cola company has invested more than have $30 million in the HFC-free refrigerators. It also means having limited choice of suppliers because it has to look for ones which respect the environment. This will mean they might have to put up with high prices since they have no other choice. It may also mean introducing new production methods which will make costs increase and a possible slow down in the process. This will generally mean a short term reducement of profits and may result in a slight increase of price which is risky if the product isn’t price inelastic enough, i.e. if there is a cheaper alternative from a competitor or if being “green” isn’t the most important factor for consumers.
Conclusion:
Competitive advantage is very significant to Coca cola for the reasons mentioned above, and can be achieved by the combination of the mentioned strategies. It means higher sales, higher market share, a very high total revenue and high brand loyalty and recognition, to keep ahead of its biggest rival, Pepsi.
However it is very important to note that the most important factor for coca cola is the marketing. The product is widely known by everyone and the company gains brand loyalty. Demand increases since everyone will want to purchase their products. By increasing sales revenue will increase, and so will market share. The unique disadvantage is the costs of advertisement but nowadays with the “word of mouth” means that there is less need for a large advertising campaign. Also coca cola is already a well established company which means that nearly everyone knows the product and less advertisement is needed. The heavy marketing makes the trademark of coca cola well-known. Trademarks make it easier for consumers to quickly identify the source of a given good. Instead of reading the print on a can of cola, consumers can directly look for the Coca-Cola trademark. By making goods easier to identify, trademarks also give coca cola an incentive to invest in the quality of their goods. If a consumer tries a can of Coca-Cola and finds the quality lacking, it will be easy for the consumer to avoid Coca-Cola in the future and instead switch to Pepsi. Another thing which reflect that competitive advantage is due to its brand name is that coke has built an image that is now the world’s most recognizable brand name. Research has shown that the word "Coke" is recognized by 94% of the world’s population.
It is essential for coca cola to retain competitive advantage. For this to happen coca cola must be market aware. This means that the have to contact costumers through market research. Constantly do surveys and other figures which can indicate coca cola what changes in needs to do in order for people to buy its products. Moreover coca cola should be efficient. It shouldn’t waste resources or money and keep costs as low as possible so it can be invested in things like advertisement. Coca cola should pay close attention when using innovation to achieve competitive advantage because if the product isn’t successful then large sums of money will be lost.
Coca cola needs to be flexible and dynamic in order to keep ahead of changes. It needs to constantly revenue things and adapt them to the new needs of consumers.
Finally it needs to try and add as much value as possible. This is good because then coca cola can set a high price on something which costumers are willing to pay for without losing demand.
Combining the techniques means coca cola should have a strong competitive advantage enabling it to have high profits, sales and retain its market share.Competitive advantage has made coca cola have 44.3 percent of the market share whilst Pepsi owns only 31.4 percent of the market share.