the Resources and Capabilities of Coca-Cola
Tutors name: Akin Ajolo
In the competitive corporate world it is very important for organizations to have a strategy. This strategy should be based on resources and capabilities that the firm has and also taking into consideration the opportunities that arise in the external environment enabling companies to achieve sustainable competitive advantage. (Grant, 2005). The company that I have chosen is Coca-Cola. The reason behind me choosing this company is because from my point of view, Coca-Cola has been a company that has always invested, upgraded and leveraged its resources and capabilities to be the most successful brand in the soft drink industry for more than 120 years. According to Interbrand´s report on Best Global Brands, Coca- Cola has been ranked in the first position for the 13th consecutive years. Estimating its brand value at $77.8 billion and having a rise in 8% since last year annual report. (The New York Times, 2012).
Coca-Cola´s was discovered by John Pemberton, a pharmacist from Georgia, as a result of an accident, which has now become the most consumed soft drink in the world. (The Coca-Cola Company, 2012). Around 1.7 billion of Coke products are consumed in a day. (The World Fact Book, 2012). Its portfolio of products range from the traditional Coca-Cola, carbonated soda water, bottled water, tea, sports drink and fruit juices, having over 3,500 products and brands. The company holds 275 bottling partners around the world; these companies are dedicated to produce, package and distribute most of the company´s products. The company competes in over 200 countries. (The Coca-Cola Company, 2012).
The resource based view is a framework that suggests that companies obtain competitive advantage by focusing on strategies that exploit their internal strengths by responding to the external opportunities and trying minimize external threats and internal weaknesses. (Barney, 1991). The advantage of this model is that the firm can consider factors that are within their control. (Connely, 2010). Moreover, this model has two assumptions in analyzing resources. The first one is that the firm is heterogeneous to the strategic resources they control. The second is that resources aren’t perfectly mobile across firms and thus heterogeneity can be long lasting. (Barney, 1991).
Before talking about Coca-Cola´s resources and core capabilities it is important to understand the difference between these two. “Resources are the productive assets owned by the company, capabilities are what the firm can do well. Resources can be classified as three types; tangible resources, intangible resources and human resources.” (Grant, 2005, p. 136-137). Authors such as Teece and Pisano (1997) suggest that an organization has to always renew and recreate its resources to meet the needs of changing environments. They are three basic types of dynamic capabilities the ones sensing opportunities and threats, the ones concerning seizing opportunities and the ones concerned in re-configuring the capabilities of an organization. Dynamic capabilities can take various forms such as recruitment and management process, major strategic moves, such as acquisitions and alliances.
Tangible resources are physical and financial resources that can take a variety of forms. These assets and capabilities determine how efficiently and effectively a company performs its functional activities”. (Grant, 2005, p.139). To determine if a company has a strong financial position financial analyst tend to evaluate in general the gross profit margin, operating margin, ROA and ROE ratios. The Coca Cola Company has a very strong financial position, its sales were $46.542 billion, its gross profit margin in the year 2011 was 60.86%, 2010 it was 63.86%, in 2009 it was 64.22% meaning that the...
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