The simplified Coca Cola business model
By bobp on Jul 14, 2008
I like Coke as my favorite soft drink. If you see me drinking a soft drink it's usually that red can... (not the diet stuff). Let's take a hugely successful business that serves both tasteful and tasteless liquid for human consumption. The Coca Cola Company. Established in 1886, it provides 1.5 billion servings of its products per day with over 2800 different products. In a very competitive landscape it has managed to maintain demand of its most mature product "Coke" while constantly bringing newer beverages to market such as "Full Throttle." It is remarkable the beverage industry has convinced consumers to spend money buying bottled water which has become a huge industry.
The beverage "Coke" has been around for a long time yet consumers have not grown tired with its taste. In fact The Coca Cola Company in 1985 tried to change the taste and got a negative reaction from consumers. All companies want to retain their customers as well as acquire new customers. In other words grow. While "Coke" is a cash cow throughout the world (it does taste different in China), the Coca Cola Company has done a remarkable job of introducing newer products for growth. Just about every company with any longevity operates to sustain their core products while introducing new products to maintain and grow their revenue.
Just as investment banks make varying bets on different types of businesses. A venture capital investment carries a much higher risk and return than an investment bank who's advisory services guide an established business to divest, acquire, merge, etc.. A key part of strategy for any company is to be able to adapt the mix of established products with new products. You cannot starve off one for the other or your competition will take advantage. A plan that can absorb unanticipated changes, conditions and is willing to stay the course only draws investors appeal.