VRIO Analysis – Cola wars case study


VRIO Analysis

Political Forces. Pepsi and Cola-Cola are influenced by the diverse regulations and guidelines in the markets they are operating. Both companies are expected to follow all the laws strictly. The management of the companies should conduct comprehensive legal review to ensure that the operations align with their set regulations in the markets. For example, Coca-Cola is required to strictly promote their product offerings as non-alcoholic beverages. Government is always monitoring their products to ensure that they meet the set health standards. Both companies document that it is continuous monitored by over 200 governments and health agencies including Muslim nation that demands for a Halal stamp on its product offerings. In addition, politicians could also push for laws that restrict the sale of the carbonated drinks in their economies. Such laws if passed would affect the performance and productivity of Pepsi and Coca-Cola. For example, the companies have faced lawsuits relating to its water products due to concerns of excess ingredients.
Cultural Forces. With a growing population, there are more companies pushing for a share of the beverage industry. As the diverse cultures emerge, Pepsi and Coca-Cola are able to change with them. For example, Pepsi has more people who are seeking to purchase their products and thus, the company expects to earn a larger profit and grow their market share. The company is keen on rely on the population growth to grow their revenue potential. However, the current population is more conscious about the health challenges of the carbonated drinks. In the global market, the sales of junk foods and sodas have reduced significantly. People are keen on living healthier lives by shifting away from junk products such as soda. The company was able to introduce low calorie products to align these changes. Other cultural aspects include the negative attitude towards Sodas produced by Coca-Cola Company and Pepsi. The company cannot underestimate the influence of the cultural factors shaping the marketing messages and campaigns.
Concentrate Producers and Bottlers
Low threats of new firms entering to the industry. The current industry of the bottlers and concentrate products is a duopoly with only two companies Pepsi and Coca-Cola Company. The economies of scale of the companies are huge. Considering the high volumes of sales, they are able to negotiate better prices with the customers. The cost of being a concentrate producer and bottler is too high. The initial cost of investment restricts potential entrants into the industry. In the time times, customers seem to prefer to get products from the concentrate manufacturers to lower the cost of charging the final customers. Bottlers are also integration towards bottling services. However, the comprehensive guidelines cannot be passed into the regulation of the industry because it would be impossible to implement such laws due to the high costs of machinery involved in the industry. Therefore, it is impossible for new firms to enter into the industry due to the high costs of investment required.
Supplier Power is huge factor. The concentrate producers have the significant influence. In terms of brand power, consumers are unlikely to be attracted to alternative firms. The suppliers will rely on the Bottlers and potentially consolidate their Bottlers. Bottlers operating independently will send up high and unreasonable prices pushing them of the market. It is also expensive for the suppliers to shift to other Bottlers. In most occasions, the suppliers usually signs contractual restrictions limiting them from taking on other Bottlers. Investing significantly with the current Bottlers would cost them significantly as such resources could have been invested in other functional areas such as marketing and advertising. The supplier power is immense and proper market evaluation should be done to determine the best Bottlers.
VRIO Analysis
The VRIO model reviews the internal capabilities and the resources of Coca-Cola Company. The resources and capabilities of Coca-Cola help in growing and maintaining the competitive advantage of the company.
• Value. All VRIO concepts of the distribution strategy of the company were excellent. The company has a wide distribution network across the global markets.
• Rarity. The size of the distribution network was also rare as the company supplies wide range of products to diverse buyers on an international level. The company was able to maintain competitive advantage through its efficient design of distribution channels.
• Inimitable. It was difficult to imitate the unique design of its distribution channels. Rival companies invested in developing their own distribution channels and they were unable to match the unique design of Coca-Cola Company.
• Organization. The organization of the company’s distribution strategy was comprehensive. They were able to exploit the distribution channels through getting significant market share in the foreign markets.
Differentiation is another capability of Coca-Cola that helps in promoting their competitiveness. The company’s product has distinct taste from its competitors.
• Value. The value of its original taste is also distributed among other product categories. The high level of customer loyalty also indicates the significant value of the company offerings.
• Rarity. The differentiation strategy of Coca-Cola is rare because the strong brand of Coca-Cola has been integrated into the minds of the consumers. Such strong mentality helps in retaining the strong competitive advantage.
• Inimitable. The specific Coca-Cola cannot be imitated even though many companies try to copy their brand products.
• Organization. Organization of the brand is effective to exploit their differentiation. The red color helps in promoting the differentiation of Coca-Cola Company its close competitors. The company has been able to exploit family brand images such as Santa commercials to market their products.
Based on the VRIO, it is clear that Coca-Cola has a strong resources and capabilities base that helps to sustain its competitive edge in the non-beverage markets.
Summary of the VRIO Test
Potential strategic capability Valuable Rarity Inimitable Organization Competitive advantage
Distribution Yes Yes No Yes Yes
Differentiation strategy Yes Yes No Yes Yes

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