Abstract
Business strategy is essential since it informs the company of required resources and capabilities, industry competition, and institutional conditions determining a company’s market strategy. This, in turn, dictates the company’s general performance. This paper evaluates the business strategy of Coca-Сola for penetrating the Pakistan market. Coca-Cola is seen as one of the leading prosperous corporations in retailing soft beverages across the globe. The achievement of the firm in trading beverages emanates from the idea that it possesses outstanding strategies to utilize the new and prevailing markets. When entering the Pakistan market, Coca-Cola employed a joint venture entry mode to get new intellects of the business operation in Pakistan. Thus, this paper employs resource-based, industry-based, and institution-based views to inform the analysis of Coca cola business strategy. These three views work together to form a strong strategy for Coca-Cola. The industry-based view determines the degree of competition in the beverage, allowing the Coca-Cola company to employ its resources and capabilities to outshine its rivals. The institution-based view controls the wide institutional image, entailing societal views. Thus, combining these views comprises all aspects of carrying out the business, enabling Coca-Cola to execute a business strategy of entering the Pakistan market. An outline of the present methodology regarding the techniques employed in gathering information and conducting the analysis. The key goal of this paper is to evaluate and analyse the business strategy of Coca-Сola for entering the Pakistan market based on institution-based, resource-based, and industry-based views. Therefore, this paper focuses on secondary sources of information concerning Coca cola’s strategy of entering the Pakistan market. Thus, information is obtained from sources like news online, journal articles, newspapers, country-related information, and the company’s website. Based on the preceding literature, many scholars have discovered that all three views, resource-based, industry-based, and institution-based views, determine the formation of business strategy for Coca-Сola to enter the Pakistan market.
1.0 Introduction
Coca-Cola firm is the planet’s top international drink manufacturer, mainly known for manufacturing coke drinks. As the Coca-Cola Company (2022) highlights, Dr. John Pemberton established the company in Atlanta in 1886. The company sells treacle and beverage distillates to bottling and canning providers, operators, fountain retailers and dealers. Its beverage products comprise of bottled and canned and drinks, concentrates, and treacle. Additionally, the firm makes and sells games beverages, tea, and coffee (The Coca-Cola Company, 2022). Since the company started creating its global network in the 1920s, Coca-Cola now operates in over two hundred nations and produces about four hundred brands. The corporation frequently renovates its objective of offering beverages with reduced sugar, thus fitting the customers’ desires and caring for their health. The firm’s key goal is to restore the planet via the broad collection of drinks it presents to the world (Coca-Cola, 2022). Thus, the firm is frequently renewing its portfolio via thorough study and expansion works to guarantee that its drinks stay fascinating to its clients and remain to hold a similar constructive picture that has resulted in the constant request for its products. The company’s other key objective is to be the world’s biggest manufacturer of the most consumed drink (Banutu-Gomez, 2012). This means that Coca-Cola aims to penetrate markets in nations with its presence. Therefore, the company needs reformed business strategies to penetrate such markets successfully. Tien et al. (2019) describe a strategy as an approach that is presided to a plan employed by an organization to accomplish its long-term objectives. It encompasses how resources are pulled together to attain their aim. Therefore, this paper focuses on a study of Coca cola’s business approach of penetrating the Pakistan market. The paper will employ views such as resource-based, industry-based, and institution-based views to inform the analysis of Coca-Сola business strategy.
2.0 Literature review
Coca-Cola has penetrated about each stall and shop across the globe. According to The Coca-Cola Company (2022), the product is sold in over two hundred nations and produces about four hundred related brands. In Pakistan, Coca-Cola products are accessible in each village, district, and the city of Pakistan (Shahid and Ashfaq, 2021). Therefore, to understand its business strategy, this section explains the analysis of the market penetration of Coca-Cola using a mix of views. Thus, in analyzing its business strategy of penetrating the Pakistan market, the approach utilized in this section is views like institution-based, resource-based, and industry-based views.
2.1 Resource-based view
Freeman, Dmytriyev, and Phillips (2021) describe the resource-based view as a method utilized to look at a company’s internal capabilities while uncovering internal weaknesses. Freeman et al. (2021) discovered that, according to this view, firm-specific differences, particularly resources and capabilities, drive a strategy, as shown in figure 1 below.
Figure 1: A resource-based approach to strategy formation (Source: Madhani, 2011).
Resources are grouped into tangible and intangible resources. Tangible resources are physical in nature, such as facilities and supplies, and can easily be recognized by a company and its rivals. While intangible resources are those with no physical value, for instance, goodwill and intellectual power; however, they are owned by firms (Freeman et al., 2021). oca cola’s intangible resources include goodwill, technical, and intellectual resources. The firm’s technical resources have greatly improved the making of products with the help of technical proficiency. Such expertise is also responsible for making several drink flavors. This shows that the company has excellent knowledge and expertise with great intellectual control (Alahi and Bass, 2018). Additionally, the company’s marketing sections have intellectual skills; thus, they work proficiently to understand traders’ needs and the company’s rivals. This allows the company to develop a successful business strategy that helps it to penetrate the Pakistan market.
The company’s financial, human, and other physical resources have allowed Coca-Cola corporation to manufacture high-quality drinks and trade them at a reduced price compared to other companies in the same industry (Baah and Baker, 2015). The accessibility of such tangible resources in the company guarantees that it does not rent its equipment, but controls the production cost to be low. Besides, the company’s architectural plans guarantee that the company sticks to the strategic goals of the firm to safeguard that the business activity runs smoothly. The tangible resources that allow Coca-Cola corporation to penetrate the Pakistan market easily include supplies, infrastructure, materials, and facilities (Baah and Baker, 2015). With these resources, Coca-Cola is able to outperform other players in the market, enabling the company to generate a unique consumer base with a great desire for its unique and high-quality drinks.
2.2 The institution-based view
Institution-based view entails institutional transitions and conditions when presenting suitable reactions to the crucial questions of strategy (Peng, Wang, and Jiang, 2008). Thus, this view emphasizes on the active relationships of institutions and firms. It also ponders tactical decisions as a consequence of such a relationship. Particularly, tactical decisions are not only directed by company capabilities and industry situations, but are also an indication of informal and formal restrictions of a particular institutional structure that firm managers encounter. Thus, this view constitutes two elements; informal and formal institutions. Formal institutions comprise laws and regulations, political, and economic systems. In contrast, informal institutions include ethics, culture, and norms that are directed by cognitive and normative pillars (Peng et al., 2009).
Figure 2: The dimension of institutions (source: Peng et al., 2009, p 64)
The formal political condition in Pakistan is not quite stable. This is because strikes and incidents happen in various sections of the nation that could negatively affect Coca cola’s entry strategy, sales, and profitability in the Pakistan market (Kumar, Mujtaba, and Jumani, 2016). For example, Coca-Cola is sold in restaurants, schools, hotels, universities, and other areas. However, if any part of Pakistan is shut because of political conditions, penetrating such a region could be complicated, negatively impacting the company’s sales.
In recent times, Pakistan’s economic conditions have not been attractive. Besides, the Pakistan buying power parity has also reduced in recent years (Kumar et al., 2016). Nevertheless, as Coca-Cola lowers the price of its products, stabilizing the demand, the use of the company’s products is not affected to a greater level by the country’s economic conditions. Socio-cultural conditions also have a considerable effect on the entry strategy, sales, and success of Coca-Cola Company in the Pakistan market, as Kumar et al. (2016) explain. For example, the understanding of being health-conscious has motivated several customers of Coca-Cola to change from using beverages to products like juice and zero sugar drinks that are healthier. Moreover, several individuals in Pakistan prefer consuming local products to international products like Coca-Cola. Thus, because of such concern, Coca-Cola invented a zero sugar coke that attracted many customers, allowing the company TO penetrate further into the Pakistan market, as Chu (2020) notes.
2.3 Industry-based view
This view maintains that conditions in an industry, to a greater level, determine a company’s business strategy (Peng et al., 2008). According to this view, industry-specific traits perform a crucial task in establishing a strategy for the firm’s advancement and successful competition in the industry. Thus, this view assesses a company from the exterior viewpoint (the environment) that can be viewed as a company’s threats and opportunities, as Peng et al. (2008) reveal. To emphasize this, Porter offered five competitive forces that are connected to the industry’s competitiveness. The first force in the rivalry model is the strength of competition among rivals. According to Khurram, Hassan, and Khurram (2020), competition among rivals has been a key concern. Firms such as Minute maid and Pepsi are key rivals of Coca-Cola with facilities in a similar market. Even though data indicate that Coca-Cola is the leading corporation, Pepsi has a more significant market share in Pakistan (The Coca-Cola Company, 2022). Therefore, for the firm to stay top in this industry, the company has concentrated on consumers’ preferences since clients’ gratification is a primary concern. The firm has also enhanced its advertisement and marketing techniques to earn a broader market (Chu, 2020). Besides, the company has also made its products available in remote areas at a reasonable price, motivating many customers to consume them. Coca-Cola has also engaged in sports sponsorship and other programs, making it more widespread.
The second force is the new entrants’ threat. The new entrants’ threat in this industry is low because of the barrier of distribution channels and a high cost of entry (Kumar et al., 2016). However, Coca-Cola has strong distribution channels, making it hard for new entrants to enter and compete with it in the Pakistan market. Additionally, the company has invested hugely in manufacturing and has a good transportation network, offering it more significant economies of scale that assist in lowering the production cost (Chu, 2020). This, in turn, prevents new firms from entering the market since new entrants cannot compete with low-cost drinks.
The third force is the threat of substitutes. Substitutes’ threat in the beverage industry can challenge existing products. There are a variety of non-alcoholic alternatives in the beverage industry, extending from tea, juice, coffee, and other health beverages (The Coca-Cola Company, 2022). These drinks are sold at low prices, attracting several customers and making it hard for Coca-Cola to penetrate further into the Pakistan market. Thus, to overcome such a barrier, Coca-Cola has enhanced its promotion and marketing techniques to enable it to enter the Pakistan market, as Chu (2020) denotes.
Next is bargaining power of suppliers. The bargaining power of suppliers in this industry is low (Manuel, 2007). This is because raw materials like water, sugar, flavors, carbonate, sugar, water, and bottling equipment are readily accessible due to many suppliers lowering their prices. This makes it possible for Coca-Cola Company to penetrate further into the Pakistan market, as Nisar (2014). The last force is consumers’ bargaining power. Consumers are not restricted to purchasing Coca-Cola from one shop. This is because Coca-Cola drinks can be found in malls, supermarkets, fast food cafes, and retail shops. Besides, shops, hotels, and distributors restock their supplies, thus making the product readily accessible to several consumers, enhancing consumers buying power, as Nisar (2014) asserts.
3.0 Methodology
This section offers the techniques employed in gathering information and conducting the analysis. It also describes how the conclusion is made based on the available information and the methods used to acquire them. As denoted earlier, this paper aims to evaluate the business strategy of Coca-Cola for penetrating the Pakistan market. Based on the literature review, many scholars have evaluated the strategy of Coca cola for entering the Pakistan market. Thus, to successfully understand the strategy, secondary information will be gathered from sources such as newspapers, news online, the organisation’s website, country-related info, and relevant journal articles. The data collected is compared and analyzed.
3.1 Data collection
As stated in the methodology, this analysis is based on secondary data obtained from sources like online news, journal articles, newspaper, country-related information, and company website. Therefore, data is collected from such information. Additionally, since the analysis is grounded on Coca-Cola business approach of penetrating the Pakistan market, data is collected from sources containing Coca-Cola and the Pakistan market.
3.2 Data analysis and results
Data is analyzed through a descriptive statistical approach. This is because the method is simple and easy to follow. Firm-specific capabilities and resources, the beverage industry’s competition, and institutional transitions and conditions drive Coca-Cola’s business strategy. The availability of its capabilities and resources enables it to partner with local Pakistan firms. n the meantime, the intensity of competition in the beverage industry directly determines the formation of its business strategy. Additionally, institutional conditions such as socio-cultural factors directly influence the business strategy of Coca-Cola for penetrating the Pakistan market.
4.0 Discussion
The resource-based, industry-based, and institution-based views work together to form a robust Coca cola’s business strategy for entering the Pakistan market. The industry-based determines the degree of competition in the beverage industry. Such competition includes consumer and suppliers’ bargaining power, substitutes threat, the new entrants’ threat, and competitors’ threat. This allows the company to employ its resources and capabilities to outshine its rivals. The institution-based view controls the wide institutional image, entailing societal views. Thus, the combination of these views comprises all aspects of the business, enabling Coca-Cola to execute a business strategy of entering the Pakistan market.
4.1 Why has Coca-Cola chosen joint venture as the entry mode in Pakistan based on the perceived business strategy?
Coca-Cola chose a joint venture entry mode to economize on the information needed to expand its operation. To attain this goal, Coca-Cola is required to pool its resources and those of its partner since its competitive edge is its firm-specific capabilities and resources. According to Collinson, Narula, and Rugman (2017), penetrating international markets requires a considerable obligation of human and financial resources, and thus, the selection of an entry strategy relies on the financial power of a company. Coca-Cola has enhanced financial, human, and other physical resources that allow it to manufacture high-quality drinks and trade them at a reduced price compared to other companies in the same industry, as Baah and Baker (2015) notes. Besides, the accessibility of such tangible resources in the company guarantees that the company does not rent its equipment, but controls the production cost in the Pakistan market, making it possible to choose a joint venture entry strategy.
Realizing revenue-improving and cost-lessening profits is another reason for selecting a joint venture entry mode. According to Cui, Fan, Liu, and Li (2017), lacking state-specific information about a host nation, such as the local authority and the kind of the indigenous market (comprising its contacts, business activities, and culture), can be expensive for a multinational business to participate in business operations entailing writing, implementing and applying multifaceted agreements with market agents. Nevertheless, the normal fascination of a multinational company rests in its control of a rent-producing resource. Therefore, when Coca cola’s rent-producing resource is mixed with the resources of its local associate, the synergistic impact could yield extra rents to balance the cost of creating a joint venture. Thus, choosing a joint venture entry mode is possible since the benefits of a joint venture’s revenue-improving and cost-lessening perspective could outweigh the benefits of other entry modes like franchising, exporting, and licensing.
5.0 Conclusion
Business strategy is an approach that is presided over a plan employed by an organization to accomplish its long-term objectives. This paper has evaluated Coca cola business strategy of penetrating the Pakistan market based on various views. Such views include institution-based, resource-based, and industry-based views. The industry-based aspect inspects a company from the outside viewpoint (the environment) that can be perceived as a company’s threats and opportunities. This view maintains that forces in the beverage industry, to a greater level, determine a company’s business strategy. Thus, the various forces that determine the strategy of Coca cola in penetrating the Pakistan market include new entrants’ threat, the strength of competition among rivals, substitutes’ threat, consumers’ bargaining power, and suppliers’ bargaining power. The resource-based view considers firm-specific differences, particularly resources and capabilities that drive a strategy. Coca-Cola has tangible and intangible resources that direct its business strategy of entering the Pakistan market. Coca-Cola’s intangible resources include goodwill, technical, and intellectual resources. At the same time, tangible resources include facilities, equipment, and supplies. These resources enable the company to produce high-quality drinks and market them to consumers. The institution-based aspect concentrates on the active relationships of organizations and institutions and ponders tactical decisions as a consequence of such a relationship. Both informal and formal institutions drive a business strategy of Coca-Cola for entering the Pakistan market. For instance, socio-cultural factors inform Coca-Cola of health-conscious consumers, enabling the company to invent a zero sugar coke that attracts many customers in Pakistan. These views work together to form a strong strategy for Coca-Cola. The industry-based determines the degree of competition, allowing the company to employ its resources and capabilities to outshine its rivals. The institution-based view controls the wide institutional image, entailing societal views. Thus, the combination of these views comprises all views of carrying out the business, enabling Coca-Cola to execute a business strategy.
6.0 References
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