VRIO Framework: Coca-Cola's Sustainable Competitive Advantage Analysis

Coca-Cola Co. is the largest beverage manufacturer and distributor in the world and one of the longest running successful brands in history. Coca-Cola Co. can attribute its popularity to its iconic carbonated soft drink, “Coca-Cola” or “Coke”, introduced into the market in 1886. The popularity of this drink has led to positive brand perception and long-term customer loyalty due to its nostalgic taste and distinctive red and white logo. For most people, being a consumer of Coca-Cola over competitors is a strict purchasing trend that is carried through generations, giving Coca-Cola 48% of the beverage industry’s market share compared to competitor Pepsi, who holds only 20.5%. From the loyalty of consumers to the classic drink, the company has created strong competitive advantage and has evolved into a total beverage company that dominates the beverage industry. Here, we will use the VRIO framework to analyze how Coca-Cola’s strengths cause the brand to maintain a sustainable competitive advantage in such a competitive industry.

What is the VRIO Framework?

VRIO is an acronym for the framework used in marketing to help identify the assets and capabilities of a company to lead to long term competitive advantage. VRIO stands for value, rarity, imitability, and organization describing key factors in the success of a business. It is important for a company to identify its value to efficiently strategize marketing efforts in the right direction. Correctly identifying value of a brand helps make decisions in marketing strategy such as the offering market or category of operation, target market, and value propositions- all important decisions that can make or break a brand. Below is an example of the VRIO framework and how certain assets and capabilities lead to types of competitive advantage.

As pictured in the table above, sustainable long-term competitive advantage requires all four factors to be present. This means that the brand or product offering must be valuable, have rarity, be difficult to imitate, and have effective structure within the organization. Let’s use this framework to evaluate Coca-Cola’s competitive advantage.

Value of Coca-Cola

According to the VRIO framework, value measures whether the company’s assets and capabilities used in marketing strategy add value to either current or potential customers. Value is directly tied to physical fulfillment of a product or service and communicates why they should choose it over competition. The Coca-Cola brand prioritizes maximizing the value it holds for consumers due to its positive brand identity and large product portfolio. For Coca-Cola the value segment of the VRIO framework is the most prominent offering to consumers, differentiating them from competition.

One main reason for this is the brand’s reputable identity that has stemmed from the popularity of the Coca-Cola original soft drink. Brand identity is a driving factor for consumer purchasing motivations as those companies with reputable branding tend to retain current customers while gaining new ones through word of mouth or marketing efforts. Coca-Cola achieves this not only through consistent quality and taste since its beginning, but also through creating a multi-sensory brand identity. Think about it… it is nearly impossible to imagine Coke without its famous red and white logo even if you do not see the physical logo. 94% of its consumers have agreed as Coca-Cola marketing strategy has created a relation between a cold and refreshing sensation due to consumers’ experiences with their physical products as well as commercial advertising. To put it simpler, consumers like the feeling they experience when drinking Coke and retain that feeling, causing them to have a sense of nostalgia or comfort in the product. This has created a valuable visual identity for the brand that is easily recognizable and consistent, causing consumers to notice the product quickly and more likely to purchase that brand.

Coca-Cola also has an extensive product portfolio and continuously invests in research and development to ensure customers’ needs are met. Coca-Cola is a total beverage company, despite being most popular for its Coke soft drink and has expanded its product horizon into several beverage categories such as carbonated soft drinks, water, coffee and tea, juices, and sports drinks. Coca-Cola’s product portfolio is constantly evolving as they create products consistent with consumer trends, leading to innovative products being introduced into the market. For example, Coca-Cola noticed the prominence of consumers becoming more health conscious and seeking products containing healthier ingredients and less harmful ones. To act upon this trend, Coca-Cola released products low in sugar, or caffeine free such as Diet Coke and Vitamin Water, creating more diverse offerings for consumers. Coca-Cola also is environmentally conscious when it comes to production and distribution efforts as consumers are more aware and adamant on protecting the earth in the time of drastic environmental changes.

To keep up with these trends and create innovative products to stay ahead of competitors, Coca-Cola invests heavily in research and development and communicates its importance to the success of the brand. According to the Coca-Cola company website, “Rigorous scientific research is essential to support our innovation efforts, but also ensures we offer products that are safe and meet global regulatory requirements, and allows us to address questions of public health and consumer interest”. Meaning, Coca-Cola makes R&D a priority to ensure they are being socially responsible while also meeting consumer needs. By continuing to invest in research and development, Coca-Cola can ensure success despite evolving market situations.

So, does the Coca-Cola brand hold value in terms of the VRIO framework, opening them to opportunities and disarming threats? The answer is yes. The reputability of the brand allows them to easily launch new products with consumers trusting enough to try it, eliminating competing alternatives. The brand also continues to invest into R&D to properly respond to the ever-changing market, which has allowed them to optimize their product portfolio to meet a diverse range of the market’s needs. Overall, Coca-Cola has the competitive advantage of creating value in the eyes of consumers, giving them a competitive advantage in the industry.

Rarity & Imitability of Coca-Cola

Based on the VRIO framework, rarity and imitability go hand in hand. Rarity describes whether a company’s offerings are unique or scarce within the marketplace, while imitability measures the degree to which a company’s offerings can be duplicated. For Coca-Cola, their secret recipe takes large part in differentiating them from competitors and gives the brand an edge in competition.

Coca-Cola, specifically the original Coke, has a distinct taste that cannot be replicated, meaning that Coca-Cola is the only brand offering that specific taste. Because of this, Coke is a rarity as it is unique compared to competitors. Even though competitors such as Pepsi also offer unique flavors with their own recipe, Coca-Cola is the only beverage that tastes like it does. This recipe is also not imitable and considered a trade secret as the formula to create the beverage has been kept to only employees of the company to ensure that the taste consumers love is protected and unique to Coca-Cola brand. The uniqueness and inability of the product to be duplicated gives Coca-Cola a long-term sustainable competitive advantage against competitors. On the VRIO framework table, both rarity and imitability would be marked as “yes” for the Coca-Cola brand’s competitive advantage.