Mike Lubig
Regent University
ECON 230
6/29/2022
Week 2 ECON Blog
The Coca-Cola Company is a multinational corporation that is based in Atlanta, Georgia (headquarters). It is the world’s largest nonalcoholic beverage drink with products such as soft drinks, hydration products such as Dasani, juice, and dairy products (Coca-Cola, 2022). The largest competitor that Coca-Cola has is Pepsi co. However, Coca-Cola has a comparative advantage over its rivals as it concentrates on one product line, the beverage drink, unlike Pepsi, which has a diversified product line to include snacks. This has made Coca-Cola to be identified as one of the brand leaders in soft drink energy as it concentrates all its efforts on producing soft drinks. This means that the labor specification in Coca-Cola is all about beverage drinks, making it the best producing company in the soft drink industry, differentiating the quality of both the products produced by Coca-Cola and its rivals; Coca-Cola is at the top according to the sales that it makes. It has larger sales than its rivals, showing that clients prefer it to those of its rivals, which could also signify that it has better quality than its rivals. The top product of the Coca-Cola company is the Coca-Cola drink which, when compared to its top competitors, is more nutritious as it has less sugar and also it has two different versions that are the original Coca-Cola and the sugar-free Coca-Cola. This attracts a diverse number of consumers compared to its rivals, giving the company comparative advantage over its rivals (Nagaraj, 2020).
With a large presence in over 200 countries and also due to its brand awareness, Coca-Cola is leading in market power and cost leadership. This means that with its wide presence, Coca-Cola can either reduce the prices of its products or increase them accordingly. Still, it maintains an average price due to economies of scale and thus giving it a comparative advantage over its rivals. The economies of scale allow it to purchase raw materials at a relatively lower price and make their investments in labor, materials, and equipment pay off and also provide consumers with cheap quality goods. It also has market power due to the brand awareness in the different markets, thus making larger sales and influencing the prices of soft drinks in those markets.
The key product of Coca-Cola is the soft drinks it produces and, more specifically, the Coca-Cola drink that comes in two ways. That is the normal Coca-Cola and the coke zero, which are designed to attract more health-conscious consumers. With this said, the demand and supply of Coca-Cola follow the law of supply and demand. That is, when the price of Coca-Cola is high relative to those of its substitutes, then the demand for Coca-Cola is low. Furthermore, the demand for coke is also affected by the festive seasons or holidays. According to its marketing campaign, the product is termed as one that brings a family together, and with that, the demand for its products increases during the festive season as families prefer the drink when they are together, but overall, the demand if the product is higher than similar tasting products from its rivals. In addition to this, the demand has also been affected by the different tastes and preferences of the various consumers. That is, with the introduction of the coke zero, the demand for the product has risen as it has been able to capture the demographics of both consumers. Furthermore, the supply of coke is influenced by the state of technology available. With the advancement in technology over the years, the supply of coke has increased immensely, and it has also been able to include the coke zero increasing the supply of the product. Moreover, the supply of the product is also affected by the number of consumers. Back in the days when the only consumers it could supply were based in the United States, the supply of the product was low, but with the increase in the number of countries that the product can be sold in, the supply of the product has increased immensely (Kolli, 2019).
The Coca-Cola company is based in Atlanta, Georgia, in the United States. According to World Bank data, the United States of America had a GDP of $20.95 trillion in 2021. The GDP of the United States has been increasing; in 2009, the GDP stood at $14.45 trillion, which was a drop from the preceding year when the GDP stood at $14.71 trillion, and this could be attributed to the financial crisis of 2008. Since 2009, the United States GDP has grown by $6.5 trillion up to 2020, and this figure could have been higher if not for the recent pandemic disrupting economies worldwide. One of its key markets is China, as with the large population it has, it provides Coca-Cola with large sales. In 2020, the country’s GDP was $14.72 trillion, and this was a rise from the previous year when the GDP stood at 14.28 trillion dollars. The GDP growth rate in 2018 was 6.7%, 5.9%, and 2.3%, respectively (World Bank, 2021).
When the GDP of a country drops, the profitability of the company also drops as the company takes on cost-cutting measures to save extra cash for when the economy is back on its feet. Such as in 2019, when the GDP of America was high, the company reported net revenue of $9.1 billion, and in 2020, when the GDP dropped, the company reported net revenue of $7.2 billion (Coca-Cola, 2022). Also, when the GDP is low, investments in the company tend to reduce, and this affects the ability of the company to do massive operations that could ensure higher profitability. In addition to this, patents have protected coca colas products, such as the copyright on the coke recipe, which has ensured that no other company could produce coke that tastes similar to that of Coca-Cola. This has ensured that customer preference is in favor of Coca-Cola, and with that, it has enjoyed a larger market share, ensuring that it makes more money than its rivals. Moreover, having patents and copyrights on various means of production, especially technology, give Coca-Cola an edge over its competitors, thus maintaining higher profitability.
References
Nagaraj, S. G. (2020). Coca-Cola Competitive Strategies. Medium. Retrieved June 29, 2022, from https://medium.com/@shwethagowri/coca-cola-competitive-strategies-6af18bb70d6f
Kolli, S. (2019). Demand and supply analysis of Coca-Cola: Medium. Retrieved June 29, 2022, from https://medium.com/@sahithik.isme1921/demand-and-supply-analysis-of-coca-cola-9a5addc2cb7e
Coca-Cola. (2022). About. The Coca-Cola Company. Retrieved June 29, 2022, from https://investors.coca-colacompany.com/about
Coca-Cola. (2022). Financial results. The Coca-Cola Company. Retrieved June 29, 2022, from https://investors.coca-colacompany.com/financial-information/financial-results
World Bank. (2021). GDP (constant 2015 US$) - China, United States. World Bank Data. Retrieved June 29, 2022, from https://data.worldbank.org/indicator/NY.GDP.MKTP.KD?locations=CN-US
Mich,
Thank you for your insight. Coca-Cola has been a powerhouse among consumer beverages. One thing I thought that was particularly interesting was that you mentioned that Coca-Cola has market power in other markets due to brand awareness.
I used to work for a broadcast corporation. In 2020, the corporation had author Lisa Tawn Bergren on our list of interviews for the year. She mentioned her famous “God Gave Us” Children’s book series. Lisa Tawn Bergren was working on the series over the holiday season when Coca-cola was advertising their bear with the warm fuzzy feelings of friends and family. The coca-cola polar bear became the mascot inspiration for the Children’s book “God Gave Us, You,” which sold over 1 million copies (103 Country). During the early 2000s, coca-cola pushed the polar bears and became a friendly American staple. It fits perfectly with the theme of her book. “Give. Live. Love. Coke” (Newswire) is their 2005 advertising slogan that accurately represents the feel of Coca-cola marketing, a parallel to the sense Lisa Tawn Bergren was trying to write through her books.
This influence of Coca-cola’s brand awareness displays how economics and business are so intertwined within the realm of advertising and marketing. Because of Coca-Cola’s strategic business developments and multi-national business, they could find a competitive advantage unique to their corporation. As their empire grew, it is plain to see how their influence seeped into other business areas, such as children’s book publishing. Economics and business are highly interconnected, and sometimes their connection makes for a stronger bond for the growth and development of many parties involved.
References:
“Coca-Cola Polar Bears and Penguins Join Coca-Cola Santa for the Holidays.” PR Newswire, PR Newswire Association LLC, 2005, p. 1–.
103 Country Broadcast. (2020). Interview with Lisa Tawn Bergren. https://www.instagram.com/tv/CCR4A5UJpbk/