Post on 09-Jan-2023
THE COCA-COLA COMPANY ANALYSIS
1. COMPANY OVERVIEW
1.1 Executive Summary
The Coca-Cola Company is currently the world’s largest
beverage company. Coca-Cola owns or licenses more than 400
brands, including diet and light beverages, waters, juice and
juice drinks, teas, coffees, sports and energy drinks. It has
ownership interests in numerous bottling and canning operations.
Coca-Cola sells finished beverage products bearing the Coca-Cola
trademarks in more than 200 countries. Examples of well-known
brands they own include Coke, Sprite, Fanta, Vitamin Water,
Minute Maid, Bonaqua and Powerade. As December 31, 2006, Coca-
Cola operated through eight segments: Africa; East, South Asia
and Pacific Rim; European Union’ Latin America; North America;
North Asia, Eurasia and Middle East.
1.2 History and Growth
Coca-Cola® originated as a soda fountain beverage in 1886
selling for five cents a glass. Early growth was impressive, but
it was only when a strong bottling system developed that Coca-
Cola became the world-famous brand it is today.
1894 – A modest start for a Bold Idea
In a candy store in Vicksburg, Mississippi, brisk sales of the
new fountain beverage called Coca-Cola impressed the store's
owner, Joseph A. Biedenharn. He began bottling Coca-Cola to sell,
using a common glass bottle called a Hutchinson.
Biedenharn sent a case to Asa Griggs Candler, who owned the
Company. Candler thanked him but took no action. One of his
nephews already had urged that Coca-Cola be bottled, but Candler
focused on fountain sales.
1899 The first bottling agreement
Two young attorneys from Chattanooga, Tennessee
believed they could build a business around
bottling Coca-Cola. In a meeting with Candler,
Benjamin F. Thomas and Joseph B. Whitehead obtained exclusive
rights to bottle Coca-Cola across most of the United States
(specifically excluding Vicksburg) -- for the sum of one dollar.
A third Chattanooga lawyer, John T. Lupton, soon joined their
venture.
1900-1909 … Rapid growth
The three pioneer bottlers divided the country into territories
and sold bottling rights to local entrepreneurs. Their efforts
were boosted by major progress in bottling technology, which
improved efficiency and product quality. By 1909, nearly 400
Coca-Cola bottling plants were operating, most of them family-
owned businesses. Some were open only during hot-weather months
when demand was high.
1916 … Birth of the contour bottle
Bottlers worried that the straight-sided
bottle for Coca-Cola was easily confused
with imitators. A group representing the
Company and bottlers asked glass
manufacturers to offer ideas for a distinctive bottle. A design
from the Root Glass Company of Terre Haute, Indiana won
enthusiastic approval in 1915 and was introduced in 1916. The
contour bottle became one of the few packages ever granted
trademark status by the U.S. Patent Office. Today, it's one of
the most recognized icons in the world - even in the dark!
1920s … Bottling overtakes fountain sales
As the 1920s dawned, more than 1,000 Coca-Cola bottlers were
operating in the U.S. Their ideas and zeal fueled steady growth.
Six-bottle cartons were a huge hit after their 1923 introduction.
A few years later, open-top metal coolers became the forerunners
of automated vending machines. By the end of the 1920s, bottle
sales of Coca-Cola exceeded fountain sales.
1920s and 30s … International expansion
Led by longtime Company leader Robert W. Woodruff, chief
executive officer and chairman of the Board, the Company began a
major push to establish bottling operations outside the U.S.
Plants were opened in France, Guatemala, Honduras, Mexico,
Belgium, Italy, Peru, Spain, Australia and South Africa. By the
time World War II began, Coca-Cola was being bottled in 44
countries.
1940s … Post-war growth
During the war, 64 bottling plants were set up
around the world to supply the troops. This
followed an urgent request for bottling equipment and materials
from General Eisenhower's base in North Africa. Many of these
war-time plants were later converted to civilian use, permanently
enlarging the bottling system and accelerating the growth of the
Company's worldwide business.
1950s … Packaging innovations
For the first time, consumers had choices of Coca-Cola package
size and type -- the traditional 6.5-ounce contour bottle, or
larger servings including 10-, 12- and 26-ounce versions. Cans
were also introduced, becoming generally available in 1960.
1960s … New brands introduced
Following Fanta® in the 1950s, Sprite®, Minute Maid®, Fresca® and
TaB® joined brand Coca-Cola in the 1960s. Mr. Pibb® and Mello
Yello® were added in the 1970s. The 1980s brought diet Coke® and
Cherry Coke®, followed by POWERADE® and DASANI® in the 1990s.
Today hundreds of other brands are offered to meet consumer
preferences in local markets around the world.
1970s and 80s … Consolidation to serve customers
As technology led to a global economy, the retailers who sold
Coca-Cola merged and evolved into international mega-chains. Such
customers required a new approach. In response, many small and
medium-size bottlers consolidated to better serve giant
international customers. The Company encouraged and invested in a
number of bottler consolidations to assure that its largest
bottling partners would have capacity to lead the system in
working with global retailers.
1990s … New and growing markets
Political and economic changes opened vast markets that were
closed or underdeveloped for decades. After the fall of the
Berlin Wall, the Company invested heavily to build plants in
Eastern Europe. And as the century closed, more than $1.5 billion
was committed to new bottling facilities in Africa.
21st Century
The Coca-Cola bottling system grew up with roots deeply planted
in local communities. This heritage serves the Company well today
as people seek brands that honor local identity and the
distinctiveness of local markets. As was true a century ago,
strong locally based relationships between Coca-Cola bottlers,
customers and communities are the foundation on which the entire
business grows.
2. MISSION AND VISION STATEMENT
2.1 Current Mission
“The world is changing all around us. To continue to thrive
as a business over the next ten years and beyond, we must look
ahead, understand the trends and forces that will shape our
business in the future and move swiftly to prepare for what's to
come. We must get ready for tomorrow today. That's what our 2020
Vision is all about. It creates a long-term destination for our
business and provides us with a "Roadmap" for winning together
with our bottling partners.” (The Coca-Cola Company, 2013).
Coca-Cola’s Roadmap starts with their mission, which is enduring.
It declares their purpose as a Company and serves as the standard
against which they weigh their actions and decisions.
1. “To refresh the world in body, mind and spirit”
2. “To inspire moments of optimism through our brands and our
actions”
3. “To create value and make a difference everywhere we engage”
2.2 Current Vision
Coca-Cola’s vision serves as the framework for their Roadmap
and guides every aspect of their business by describing what they
need to accomplish in order to continue achieving sustainable,
quality growth.
People: Be a great place to work where people are inspired
to be the best they can be.
Portfolio: Bring to the world a portfolio of quality
beverage brands that anticipate and satisfy people's desires
and needs.
Partners: Nurture a winning network of customers and
suppliers, together we create mutual, enduring value.
Planet: Be a responsible citizen that makes a difference by
helping build and support sustainable communities.
Profit: Maximize long-term return to shareowners while being
mindful of our overall responsibilities.
Productivity: Be a highly effective, lean and fast-moving
organization.
2.3 Current Objectives
The main objectives for the Coca-Cola Company are to be
globally known as a business that conducts business
responsibility and ethically and to accelerate sustainable growth
to operate in tomorrow’s world. By having these objectives, it
forms the foundation for companies in the decision making
process.
2.4 Current Strategies
The Coca-Cola Company aims to be globally known, they do
this by targeting different areas across the globe with different
products, gaining their brand name and popularity. All the
bottling partners work closely with their customers such as
convenience stores, grocery stores, movie theaters and street
vendors to create and use localized strategies developed in
partnership with the Company. Their competition with other
beverage companies are also narrowed down as they own various
brands that could be possible competition. For example, the
Company sells Coke without the competition of other popular soft
drink brands like Sprite and Fanta because the Company owns those
brands as well. The Company often reviews and evaluates their
business plans and performance to improve their earnings and
analyze their competitive position in the market. They make
decisions in realigning their business models to match the
objectives of the Company by using strategies and tactics in the
analysis of their performance.
2.5 Improved Mission statements
(a) At Coca-Cola we're committed to achieving business and
financial success while leaving a positive imprint on
society – delivering what we call Performance with Purpose.
(b) Our mission is to be the world's premier consumer
Products Company focused on convenient foods and beverages.
We seek to produce financial rewards to in8vestors as we
provide opportunities for growth and enrichment to our
employees, our business partners and the communities in
which we operate. And in everything we do, we strive for
honesty, fairness and integrity.
2.6 Improved Vision statements
(a) The Coca-Cola Company responsibility is to continuallyimprove all aspects of the world in which we operate –environment, social, economic – creating a better tomorrowthan today."
(b) Our vision is put into action through programs and afocus on environmental stewardship, activities to benefitsociety, and a commitment to build shareholder value bymaking Coca-Cola Company a truly sustainable company.
Why it is improved:
It is our vision to be the best and leading provider of food
and beverage (F&B) products in the world, to facilitate the
people and we emphasis on consumer rather more than competitors.
We are among the top ten food and beverage companies in the world
by continually challenging present conventions and always staying
a step ahead of the competition.
It is our mission to be the number one F&B company in the
world by providing our customers with the highest product quality
in terms of taste, experience, and satisfaction. We will ensure
this through an unwavering dedication to the continuous
development of our products and processes ensuring that we remain
best in class. We will strive to hire the most competent and
dedicated employees whose work ethic will set the standard in the
industry. We will be paymasters, as we strongly believe that
human resource is the only asset that truly appreciates over
time. We will also be a responsible social corporate citizen,
and strive to enhance the quality of life in the markets we
serve.
3. SITUATION ANALYSIS
3.1 External assessment
3.1.1 Opportunities
It is highly difficult for the new entrants to enter in the
soft drink industry because of some factors such as brand image
and loyalty, bottling network, advertising expense, retail
distribution and fear of retaliation. Coke has significant
opportunities within global supply chain to encourage and develop
more sustainable practices to benefit consumers, customers and
suppliers. While, it is still in the premature stages of
exploring these opportunities and dedicated to the economic
vitality and health of the farming communities our supply chain
engages.
Coke can diminish the fear of substitute by diversifying
(related or unrelated) by offering substitute products. Focusing
on its advertising and differentiation can increase its profits.
Coke promotes and support sustainable agriculture not only
because it makes good business sense.
World population is expected to grow at 8 billion 2025, and
9.2 billion by 2050. Nearly 99% growth will take place in
developing countries. Changing consumer lifestyle; by becoming
health conscious and preferring substitute products. Coke
can relatively diversify and offering health conscious
products.
Bottled water consumption in increasing day by day, 11
percent growth is reported.
3.1.2 Threats
Pepsi is the major and primary rival of the Coca-Cola in the
soft drink industry, Pepsi is 2nd in revenue behind the Coca-
Cola, and also hit Coca-Cola in some markets. Its primary
competitor PepsiCo is highly diversified by providing big range
of food products.
Coca-Cola also faces the tough competition from local brands
in all over world such as in Central and South America Kola Real
also known as Big Cola in Mexico is giving tough competition to
Coca-Cola etc.
Large numbers of substitutes are available in the market
such as water, tea, juices coffee etc.
Coca-Cola is facing different regulations and policies set
by government in different countries.
Low growth rate in carbonated drinks, which is recorded less
than one percent in primary market of Coca-Cola.
Changing consumer lifestyle; by becoming health conscious
and preferring substitute products. Different studies has been
conducted and found other drinks and Coke harmful if consumed
excessively.
3.1.3 Competitive Profile Matrix (CPM)
A competitive profile matrix (CPM) categorizes a firm’s main
rivals and its particular strengths and weaknesses in relation to
a design firm’s strategic position. In CPM, an organization
assess itself as well its rivals by giving rating and weights to
the critical/key success factors. It then recognizes its
strategic competitive place with its major rivals. A firm which
obtains superior weighted points would have the stronger
competitive place than its rivals. We will be using weighted
rating system for the construction of CPM. Some of the important
steps involved in the construction of CPM are given below:
1. In the first column, list down all the key success
factors of Coca-Cola (usually from 6 to 10).
2. In the second column, assign weights to each factor
ranging from 0.0 (not important) to 1 (most important).
Greater weights should be given to those factors which have
greater influence on the organizational performance. The sum
of all weights must equal 1.
3. Now rate each factor ranging from 1 to 4 for all the
firms in analysis. Here, rating 1 represents major weakness,
rating 2 shows minor weakness. Similarly, rating 3 indicates
minor strength whereas rating 4 shows major strength. It
means that weakness must receive 1 or 2 rating while
strength must get 3 or 4 rating.
4. Calculate weighted score by multiplying each factor’s
score by its rating.
5. Find the total weighted score of all the firms by adding
the weighted scores for each variable.
Competitive Profile Matrix of Coca-Cola Company
The competitiveness of a Company can be assessed on the basis of
its general strength rating. If the dissimilarity among firm’s
overall rating and the points of lower-rated rivals is greater
than the firm has greater net competitive advantage.
Alternatively, if the dissimilarity among a firm’s overall rating
and the points of higher-rated rivals is larger than the Company
has net competitive advantage.
Conclusion: In the above matrix, it demonstrates that Coca-Cola is
the market leader and dominates its rivals with highest points of
3.74. Pepsi is the runner up with 3.42 points and Cadbury
Schweppes is the weakest rival among these three with the score
of 2.80. This Matrix also shows that Coca-Cola is strong in all
the aspects of rivalry and has strong position in the market
place.
3.1.4 External Factor Evaluation (EFE) Matrix
External Factor Evaluation (EFE) Matrix is a strategic-
management device which is frequently use for evaluation of
current business environment. The EFE Matrix is a superior
instrument to prioritize and visualize the opportunities and
threats that a Company is facing. An external factor in the EFE
Matrix comes from social, political, legal, economic and other
external forces.
The EFE Matrix can be developed in five steps:
1. In the first column, lists down all the opportunities and
threats. EFE matrix should include 10 to 20 key external
factors as identified in the external-audit process.
2. In the second column assign weights to each factor that
ranges from 0.0 (not important) to 1 (most important). The
total weights must sum up to 1.00 (It should be noted that
the importance of weights depend upon the probable impact of
factors on the strategic position of the Company).
3. In the column three, rate each factor (ranging from 1 to 4)
on the basis of Company’s response to that factor. (Here, 1
shows poor response, 2 shows average response, 3 shows above
average response and 4 shows superior response).
4. In the column four, calculate the weighted score by
multiplying the each factor’s weight by its rating.
5. Sum the weighted scores for each variable to determine the
total weighted score.
External Factor Evaluation Matrix of Coca-Cola Company
By adding the weighted score of various opportunities and threats
of Coca-Cola Company, we get the total weighted score of 3.05.
Here it should be noted that the highest possible total weighted
score of a firm is 4 whereas the lowest possible total weighted
score is 1. The total weighted score remains in the limit of 1 to
4 regardless of the total number of opportunities and threats.
Similarly, the average total weighted score is 2.5. If the total
weighted score of a Company is 4, it means that the Company is
effectively taking advantage of existing opportunities and is
also able to minimize the risk. On the other hand, the total
weighted score of 1 show that firm is not able to take advantage
of current opportunities or avoid external threats.
Conclusion: In the case of Coca-Cola Company, the total weighted
score is above average, which means that the Coca-Cola Company
strategies are effective and the Company is taking advantage of
existing opportunities along with minimizing the potential
adverse effects of external threats.
3.2 Internal assessment
3.2.1 Strengths
World’s leading brand Coca-Cola has strong brand
recognition across the globe. The company has a leading brand
value and a strong brand portfolio. Coca-Cola is one of the
leading brands in their top 100 global brands ranking in 2006.
The value of the Coca-Cola was $67,000 million in 2006. Coca-Cola
ranks well ahead of its close competitor Pepsi which has a
ranking of 22 having a brand value of $12,690 million.
Furthermore, Coca-Cola owns a large portfolio of product brands.
The company owns four of the top five soft drink brands in the
world: Coca-Cola, Diet Coke, Sprite and Fanta. Strong brands
allow the company to introduce brand extensions such as Vanilla
Coke, Cherry Coke and Coke with Lemon. Over the years, the
company has made large investments in brand promotions.
Consequently, Coca-Cola is one of the best recognized global
brands. The company’s strong brand value facilitates customer
recall and allows Coca-Cola to penetrate new markets and
consolidate existing ones. Coca-Cola Company has a large scale of
operation with revenues in excess of $24 billion. Coca-Cola is
the largest manufacturer, distributor and marketer of
nonalcoholic beverage concentrates and syrups in the world. Coco-
Cola is selling trademarked beverage products since the year 1886
in the US. The company currently sells its products in more than
200 countries. Of the approximately 52 billion beverage servings
of all types consumed worldwide every day, beverages bearing
trademarks owned by or licensed to Coca-Cola account for more
than 1.4 billion. The company’s operations are supported by a
strong infrastructure across the world. Coca-Cola owns and
operates 32 principal beverage concentrates and/or syrup
manufacturing plants located throughout the world. In addition,
it owns or has interest in 37 operations with 95 principal
beverage bottling and canning plants located outside the US. The
company also owns bottled water production and still beverage
facilities as well as a facility that manufactures juice
concentrates. The company’s large scale of operation allows it to
feed upcoming markets with relative ease and enhances its revenue
generation capacity. Robust revenue growth in three segments
Coca-Cola’s revenues recorded a double digit growth, in three
operating segments. These three segments are Latin America,
‘East, South Asia, and Pacific Rim’ and Bottling investments.
Revenues from Latin America grew by 20.4% during fiscal 2006,
over 2005. During the same period, revenues from ‘East, South
Asia, and Pacific Rim’ grew by 10.6% while revenues from the
bottling investments segment by 19.9%. Together, the three
segments of Latin America, ‘East, South Asia, and Pacific Rim’
and bottling investments accounted for 34.8% of total revenues
during fiscal 2006. Robust revenues growth rates in these
segments contributed to top-line growth for Coca-Cola during
2006.
3.2.2 Weaknesses
Company received negative publicity in India during
September 2006. The Company was accused by the Center for Science
and Environment (CSE) of selling products containing pesticide
residues. Coca-Cola products sold in and around the Indian
national capital region contained a hazardous pesticide residue.
These pesticides included chemicals which could cause cancers,
damage the nervous and reproductive systems and reduce bone
mineral density. Such negative publicity could adversely impact
the company’s brand image and the demand for Coca-Cola products.
This could also have an adverse impact on the company’s growth
prospects in the international markets. Sluggish performance in
North America Coca-Cola’s performance in North America was far
from robust. North America is Coca-Cola’s core market generating
about 30% of total revenues during fiscal 2006. Therefore, a
strong performance in North America is important for the company.
Summary in points:
Strengths:
1. The Coca-Cola Company operates in over 200 countries and
product line has over 400 brands – is the world’s largest
beverage Company.
2. Long history has built excellent brand recognition.
3. Partnership longevity with established sporting events
including the Olympics.
4. Industry leader in market capitalization with $112 billion.
5. Return on Equity yielded 30 percent in 2006.
6. Leader of dividend yields of 2.6 percent. The Company has
had 43 consecutive years of an annual dividend increase.
7. Joint venture between The Coca-Cola Company and Nestle has
resulted in the establishment of Beverage Partners Worldwide
(BPW).
8. Coca-Cola has formed a strong partnership with McDonalds, with
McDonalds becoming their largest customer.
Weaknesses:
1. Product line is limited to beverages.
2. A failed $16 billion acquisition of Quaker Oats hinders long-
term growth.
3. Negative publicity in India because of water issues has led to
poor brand image and hindered growth there.
4. Lack of management willingness to place foreign products into
American markets.
5. Marketing deficiencies due to turnover in leadership and a
16 percent decrease in advertising spending.
6. Coca-Cola’s inventory turnover is only 5.4 compared to
PepsiCo’s 8.0.
3.2.3 Internal Factor Evaluation (IFE) Matrix
Internal Factor Evaluation (IFE) Matrix is a strategic
management instrument for assessing main strengths and weaknesses
in useful areas of a Company. IFE matrix also gives a foundation
for recognizing and assessing associations among those parts. The
IFE matrix is utilized in strategy formulation. Steps in the
construction of IFE Matrix are given below:
1. In the first column, lists down all the strengths and
weaknesses. IFE matrix should include 10 to 20 key internal
factors.
2. In the second column, assign weights to each factor ranging
from 0.0 (not important) to 1 (most important). Greater
weights should be given to those internal factors which gave
greater influence on the organizational performance. The sum
of all weights must equal 1
3. In the third column, rate each factor ranging from 1 to 4.
Here, rating 1 represents major weakness, rating 2 shows
minor weakness. Similarly, rating 3 indicates minor strength
whereas rating 4 shows major strength. It means that
weakness must receive 1 or 2 rating while strength must get
3 or 4 rating.
4. In the fourth column, calculate weighted score by
multiplying each factor’s score by its rating.
5. Find the total weighted score by adding the weighted scores
for each variable.
Internal Factor Evaluation Matrix of Coca-Cola Company
The total weighted score ranges from 1 to 4 (where 1 is low, 4 is
high and 2.5 is average) regardless of the total number of
internal factors used in the analysis. If the total weighted
score is less than 2.5 it indicates that the organization is weak
internally. On the other hand, the scores above 2.5 show strong
internal position. An internal factor could be included twice in
the IFE matrix if the factor is both strength and weakness.
Conclusion: In case of Coca-Cola Company, the total weighted score
is above than average, it means that the Company is strong
internally.
4. STRATEGY DEVELOPMENT
4.1 Strengths-Weaknesses-Opportunities-Threats (SWOT)
Matrix
Business owner's challenge is to create products and
services the customer values and the means to produce and deliver
those products and services in ways that are exceptional compared
to the competition. To address these challenges, a company must
define business objectives and address operational issues based
on its current situation and the factors that impact its
financial and operational goals. Such decision-making processes
are frequently supported by structured brainstorming, which, in
turn, can be supported by a SWOT Matrix.
Advantages
The advantages of the SWOT methodology, such as its
appropriateness to address a variety of business issues, make it
a desirable tool to support some brainstorming sessions.
Disadvantages
However, to significantly impact company performance, business
decisions must be based on reliable, relevant and comparable
data. SWOT data collection and analysis entail a subjective
process that reflects the bias of the individuals who collect the
data and participate in the brainstorming session. In addition,
the data input to the SWOT analysis can become outdated fairly
quickly.
SWOT Matrix of Coca-Cola
Strengths Weaknesses
Intern
al
- Popularity
- Well known
- Branding obvious and
easily recognized
- A lot of finance
- Word of mouth
- Lack of popularity of
many Coca-Cola’s brands
- Most unknown and rarely
seen
- Customer loyalty
- International Trade
- Result of low profile or
non-existent advertising
- Health issues
Threats Opportunities
Extern
al
- Changing health-
consciousness attitude
- Legal issues
- Health ministers
- Competition (Pepsi)
- Many successful brands to
pursue
- Advertise its less
popular products
- Buy-out competition.
- More Brand recognition
Strengths: Coca-Cola is an extremely recognizable Company.
Popularity is one of its superior strengths that is
virtually incomparable. Coca-Cola is known very well
worldwide. It's branding is obvious and easily recognized.
Things like, logos and promos shown on t-shirts, hats, and
collectible memorabilia. Without a doubt, no beverage Company
compares to Coca-Cola's social popularity status. Some people
buy coke, not only because of its taste, but because it is
widely accepted and they feel like they are part of something so
big and unifying. At the other end of the spectrum, certain
individuals choose not to drink coke, based solely on rebelling
from the world's idea that coke is something of such great
power. Overwhelming is the best word to describe Coca-Cola's
popularity. It is scary to think that its popularity has been
constantly growing over the years and the possibility that there
is still room to grow. If you speak the words “Coca-Cola”, it
would definitely be recognized all around the world. Money is
another thing that is a strength of the Company. Coca-Cola deals
with massive amounts of money all year. Like all businesses,
they have had their ups and downs financially, but they have
done well in this compartment and will continue to do well and
improve. The money they are earning is substantially better than
most beverage companies, and with that money, they put back into
their own Company so that they can improve. Another strength
that is very important to Coca-Cola is customer loyalty. The
80/20 rule comes into effect in this situation. Eighty percent
of their profit comes from 20% of their loyal customers. Many
people/families are extremely loyal to Coca-Cola. It would not
be rare to constantly find bottles and cases of a product such
as coke in a house. It seems that some people would drink coke
religiously like some people would drink water and milk. This is
an improbable feat. Customers will continually purchase these
products, and will probably do so for a very long time. If two
parents were avid Coca-Cola drinkers, this will be passed down
do their children as they grow loyal to the Company. With Coca-
Cola’s ability to sell their product all over the world,
customers will continue to buy what they know and what they
like…Coca-Cola products.
Weaknesses: Coca-Cola is a very successful Company, with limited
weaknesses. However they do have a variety of weaknesses that
need to be addressed if they want to rise to the next level.
Word of mouth is probably a strength and weakness of every
Company. While many people have good things to say, there are
many individuals who are against Coca-Cola as a Company, and the
products in which they produce. Word of mouth unfortunately is
something that is very hard to control. While people will have
their opinions, you have to try to sway their negative views. If
bad comments and views are put out to people who have yet to try
Coca-Cola products, then that could produce a lost customer
which shows why word of mouth is a weakness. Another aspect that
could be viewed as a weakness is the lack of popularity of many
of Coca-Cola’s drinks. Many drinks that they produce are
extremely popular such as Coke and Sprite but this Company has
approximately 400 different drink types. Most are unknown and
rarely seen for available purchase. These drinks do not probably
taste bad, but are rather a result of low profile or non-
existent advertising. This is a weakness that needs to be looked
at when analyzing their Company. Another weakness that has been
greatly publicized is the health issues that surround some of
their products. It is known that a popular product like coke is
not very beneficial to your body and your health. With today’s
constant shift to health products, some products could possibly
loose customers. This new focus on weight and health could be a
problem for the product that are labeled detrimental to your
health.
Opportunities : Coca-Cola has a few opportunities in its business.
It has many successful brands that it should continue to exploit
and pursue. Coca-Cola also has the opportunity to advertise its
less popular products. With a large income it has the available
money to put some of these other beverages on the market. This
could be very beneficial to the Company if they could start
selling these other products to the same extent that they do
with their main products. Another opportunity that we have seen
being put to use before is the ability for Coca-Cola to buy out
their competition. This opportunity rarely presents itself in
the world of business. However, with Coca-Cola’s power and
success, such a task is not impossible. Coca-Cola has bought out
a countless number of drink brands. An easy way to turn their
profit into your profit is too buy out their Company. Even
though this may cost a vast amount of money initially, in the
long run, if all goes to plan, it results in a large profit.
Also, the Company will no longer need to worry about this
product being part of the competition. Brand recognition is the
significant factor affecting Cokes competitive position. Coca-
Cola is known well throughout 90% of the world population today.
Now Coca-Cola wants to get there brand name known even better
and possibly get closer and closer to 100%. It is an opportunity
that most companies will ever dream of, and would be a supreme
accomplishment. Coca-Cola has an opportunity to continue to
widen the gap between them and their competitors.
Threats: Despite the fact that Coca-Cola dominates its market, it
still has to deal with many threats. Even though Coca-Cola and
Pepsi control nearly 40% of the entire beverage market, the
changing health-consciousness attitude of the market could have
a serious effect on Coca-Cola. This definitely needs to be
viewed as a dominant threat. In today’s world, people are
constantly trying to change their eating and drinking habits.
This could directly affect the sale of Coca-Cola’s products.
Another possible issue is the legal side of things. There are
always issues with a Company of such supreme wealth and
popularity. Somebody is always trying to find fault with the
best and take them down. Coca-Cola has to be careful with
lawsuits. Health minister could also be looked at as a threat.
Again, some people may try to exploit the unhealthy side of
Coca-Cola’s products and could threaten the status and success
of sales. Other threats are of course the competition. Coca-
Cola’s main competition being Pepsi, sells a very similar drink.
Coca-Cola needs to be careful that Pepsi does not grow to be a
more successful drink. Other product such as juices, coffee, and
milk are threats. These other beverage options could take
precedent in some people’s minds over Coca-Cola’s beverages and
this could threaten the potential success it presents again.
4.2 Strategic Position and Action Evaluation (SPACE)
Matrix
The Strategic Position and Action Evaluation (SPACE) Matrix
is one of the important tools to assess the company and its
environment.
Advantages
It is relatively easy to understand and use method as a decision
aid. It has four quadrants and each quadrant indicates which
strategy a firm should adopt i.e. competitive, aggressive,
conservative, or defensive in a current position. These four
dimensions are the most important determinants of a firm’s
overall strategic position. Each dimension holds many factors
from EFE, IFE, and SWOT Analysis etc.
Disadvantages
However, as pointed out by Radder and Loew, there are some
drawbacks in the method. For example: While the method is
applied, the factors included in each dimension are considered
of equal importance. Whilst the factors may be considered of
equal importance (as a hypothesis) one has to take into
consideration the fact that most of the time, the factors under
each dimension does not have equal weights. Hence, the final
result may show some differences and this will affect the
outcome of the method, i.e. the appropriate strategy of the
company under evaluation.
Strategic Position and Action Evaluation Matrix of Coca-Cola
SPACE Matrix calculations
ES Average Score = -1.83 + Average FS Score (+5.00) = +3.17
CA Average Score = -1.50 + Average IS Score (+5.00) = +3.50
According to the graph above, we noticed that the Coca-Cola
Company falls into the aggressive quadrant of the SPACE matrix.
It is located at the coordinates of +3.50 for x-component and a
y-component of +3.17. It shows that the company has an admirable
position to use its IS in order to take advantage of external
opportunities, overcome weaknesses, and avoid threats.
Conclusion: In this position Coca-Cola has set of possible
strategies such as market development, product development,
market penetration, forward integration, backward integration,
horizontal integration, horizontal diversification, concentric
diversification and conglomerate diversification depending on
detailed conditions that face the company.
4.3 Grand Strategy Matrix (GSM)
Grand Strategy Matrix is famous tool for alternative
strategies in addition to SPACE Matrix, and SWOT Matrix. All the
firms can fall one of the GSM’s four strategy quadrants. GSM
evaluation is based on two dimensions i.e. market growth and
competitive position. Each quadrant provides the set of possible
strategies in which company falls such as quadrant 2 contains
market development, market penetration, horizontal integration,
divestiture, and liquidation strategies. Quadrant 3 contains the
set of retrenchment, related diversification, divestiture,
unrelated diversification and liquidation strategies. Quadrant 4
contains the set of diversification, joint ventures and
unrelated diversification strategies.
Advantages
The model allows better implementation of strategy because of
the intensified focus and objectivity. It conveys a lot of
information about corporate plans in a simplified format.
Disadvantages
However, it may not be as simple as it seems, upon application
to real life due to the unforeseen factors and also
complications in the business world. In addition, the
relationship between market share and profitability differs in
different industries.
Another issue about this model is that, the grand strategy
options are mostly concern on cash related issues but not values
of the firm.
Grand Strategy Matrix of Coca-Cola
Conclusion : As figure identify that Coca-Cola comes in the 1st
quadrant. The company management must focus on current market
and achieve growth by adopting product development, market
development and market penetration strategies. The company has
abundant resources and competitive advantage through which it
can achieve growth by adopting the backward and forward
integration strategies. Coca-Cola can also adopt the related
diversification strategy to reduce its risk with broad portfolio
or product line. Coca-Cola can afford to take benefit of
external opportunities in many areas. It can also take risks
being aggressive when necessary.
5. LONG-TERM OBJECTIVES
Willing continue to intensify and expand it Research and
Development (R&D) capacity to further enhance its competitive
edge in the industry.
To ensure profitability and benefits of its shareholders and
consumers.
To gain customer loyalty by fulfilling consumer preferences.
6. RECOMMENDATIONS
6.1 Good quality and
price
Quality is always an important factor. Coca-Cola should
concentrate on receiving the product with less cost so that it
can calculate in the purchasing pattern if it requires. The
suppliers should have strong connection with the production
process so that no mistake can take place or the late delivery
can avoid. COCA COLA should maintain the chain of quality with
the comprehensive price system so that customer feel attached.
There should have an especial focus on quality ensuring as well
lowering the price for capturing the market.
6.2 Relationship
between Coca-Cola and its environment
Due to the growing voice for the environmental
consciousness, Coca-Cola should concentrate on this closely. It
should assure the people about the environment friendly
production. Company factory should erase the carbon emission and
should focus on using the green energy in transportation and
other means. There should have strong rule to demotivate the
child labor and this should incorporate in the marketing
strategy of Coca-Cola.
Everyone should get concern over the limited resources in
the earth. Coca-Cola is strongly inspiring people in this regard
through using the plastic bag so that it can use repeatedly.
7. PROPOSED STRATEGIES
7.1 Consumer
Engagement
What differentiates Coke from its competitors is the level at
which is performs consumer engagement. Notice the word
used here is ‘consumer’ rather than ‘customer’ because
Coke’s direct customers are actually the distributers; however
they are wise enough to know that it is the end customer’s
demand and level of satisfaction that truly matters. Due to
this they have formulated many different marketing
strategies that help them engage customers, and that is
what customers truly admire and enjoy about Coke. For
example, The latest Coke marketing campaign attempts to
unite the people of Pakistan and India by installing a Coke
machine which allows you to make a friend across the border and
you can also play an interactive game with them on the spot.
Consumers believe Coke to be a full of life and fun brand which
has then intrigued and loyal at
all times. This technique gives Coke its competitive edge
and it something we propose they should continue to do in
the future too.
7.2 Use of Bottlers
Coke should keep on manufacturing and bottling its own products
as it is doing in most places.
This ensures good quality and timely delivery. They
should definitely follow this whilst in a country where
they face strong competition. Initially upon entering Pakistan
they used a local bottler and many a time a complaint was
recorded about insects being found in the bottles. This
deteriorated the image of the brand in the mind of the
Pakistani’s and had a role to play in the dominance of Pepsi
over Coke in the country.
7.3 Licensing
Coke should refrain from using Licensors in countries
with strong competition prevailing in them. This is because
Coke mainly beats its competitors over two things: Taste and
Marketing. The marketing budget of a Licensee can never
match that of a Licensor; hence the marketing campaign
created there will not be of the value that Coke is known for.
This is why they should keep the marketing in their own hands.
7.4 Africa
Although Coke is present in Africa the research showed
that in 2010 the Annual Per capita consumption of Coke
in Kenya was only 39 servings. This was due to the
trade barriers and unfavorable environment present in the
area. However, today the wars in Africa are ending and they are
making a conscious effort to reduce trade barriers. Coke
should take a quick step forward and step into the market
fully before its competitors have a chance to, because it has
reached maturity or near maturity in many countries, and many
growth opportunities are present in Africa that will increase
its global market share.
Contingency plan: Penetrating the impoverish market can be a
difficult task. Therefore, Coke shall use Bottom of the Pyramid
strategy when going into the impoverished areas. Coke can come
up with buddy packs and introduce them for the people who cannot
afford the big packs. They will also have to lower their prices
in such area. Frequent sales on bulks can also be a good tact to
market product.
7.5 Packaging
Packaging plays a large role in the image that is
created in the minds of consumers about a brand. Coke
has previously launched limited edition packaged products
which has different names written on the bottles and the
slogan was for example: “Share a Coke with Sarah”.
Limited edition packaging makes Coke stand out from its
competitors and portrays the image of it being an exciting
product rather than a mundane one. It should continue
to launch similar marketing strategies.
Contingency Plan: People can become reluctant to new packaging
style. Therefore heavy advertising of the new packaging can be
done to attract customers.
7.6 Pricing
Coke should price its products in such a manner that it is
cheaper than water, especially in places where water itself is
a rare commodity. They should create strategies that create the
image of Coke as being a substitute of water in the minds of
consumers and thereby increase the intake of coke, making it
higher than the intake of water. For example, till
recently Coke was actually cheaper than water in Saudi Arabia
which is why it became the most popular beverage in the area.
Contingency Plan: Coke has its side effects on health. Day
by day, we can see that the benefits of drinking water
are being highlighted on TV and internet. The trend of
healthy drinks are increasing therefore this strategy can
backfire. In such a case Coke can introduce their other brands
like Kinley and Minute Maid.
7.7 Target Market
Coke should focus their efforts on countries with a growing
population thereby increasing the
total beverage consumption of their product. Here the focus is
not on per-head consumption but
on total beverage consumption. This is a strategy that
can be focused upon in countries like India.
8. PROJECTED RATIOS AND FINANCIAL STATEMENTS
PROJECTED INCOME STATEMENT 2013 2012
$ Percent $Percen
t
Income Statement(in
millions)
(inmillions)
Revenue 46,573 100.0% 38,810 100.0%Cost of Goods Sold 18,693 40.1% 13,156 33.9%Interest Expense 421 0.9% 381 1.0%Tax Expense 3,027 6.5% 2,834 7.3%Income from Cont Operations 9,827 21.1% 8,189 21.1%Net Income 9,827 21.1% 8,189 21.1%
PROJECTED BALANCE SHEET 2013 2012Balance Sheet Cash 3,984 12.7% 3,306 10.8%Short Term Investments 324 1.0% 66 0.2%Accounts Receivable 2,704 8.6% 2,281 7.4%Inventory 1,641 5.2% 1,424 4.6%Current Assets 8,441 26.9% 10,250 33.5%Long Term Investments 6,783 21.6% 6,922 22.6%Net Fixed Assets 6,903 22.0% 5,786 18.9%Other Assets 7,843 25.0% 6,652 21.7%Total Assets 31,374 100.0% 30,638 100.0%Current Liabilities 8,942 28.5% 8,272 27.0%Total Liabilities 13,178 42.0% 12,968 42.3%Stockholders' Equity 17,256 55.0% 16,843 55.0%
Cash Flow Cash Flow from Operations 11,644 9,703 Dividends Paid 4,489 3,982 Interest Paid 421 381 Per Share Market Price at Year End 92.00 77.00 Earnings Per Share - Basic 4.20 3.51
25- PROJECTED RATIO ANALYSIS Growth Ratios
Sales Growth 20.0% #DIV/0!
Income Growth 20.0% #DIV/0!
Asset Growth 2.4% #DIV/0!
Activity Ratios Receivable Turnover 18.7 34.0 Inventory Turnover 12.2 18.5 Fixed Asset Turnover 6.7 6.7 Profit Ratios Profit Margin 21.1% 21.1% Return on Assets 31.7% 53.5% Return on Equity 57.6% 97.2% Dividend Payout Ratio 45.7% 48.6% Price Earnings Ratio 21.9 21.9 Liquidity Ratios Current Ratio 0.94 1.24 Quick Ratio 0.78 0.68 Solvency Ratios Debt to Total Assets 0.42 0.42 Times Interest Earned (Accrual) 31.53 29.93 Times Interest Earned (Cash) 28.66 26.47
9. STRATEGY EVALUATION AND CONTROL
9.1 Procedures
Performance measurement is the process whereby an
organization establishes the parameters within which
programs, investments and acquisitions are reaching the desired
results.
Coca Cola links the mission and vision to its operations
and functions in a very good way. The whole performance is
managed in a very well manner in order to get best out of it.
Managers and employees are highly involved in the system to take
decisions which results in employee loyalty.
Goals of the company are formulated at the higher level,
than head of the departments make their own goals accordingly,
and then comes the unit office, then functional heads which
generate reports, in the end supervisors and employees also set
their goals. All these incomparable policies lead to the
success of Coca cola globally.
After the goals and strategy has been formulated,
performance is measured in order to check the
implementation of strategy and goals. Monthly review is
done to check the implementation results. During review
periods no changes in the goals can be changed. During the mid-
year stage goals can be further refined or altered and new
policies can be designed to achieve the organizational level
goals. At the final stage the performance is matched with the
standards and goals of the organization. If there are positive
results with increase in overall productivity, the
individual performance of the employees is evaluated and
the rewards are then given on the basis of performance.
9.2 Critical Success Factors
Product quality and taste is a key success factor for Coca-
Cola. These both attributes are very important to get high
customer base.
Product diversity and innovation is one of the most
important critical success factors for Coca-Cola. Changing
customer’s needs with time should be recognized by the
company in order to keep its customers satisfies.
Market share and size of the firm is also a critical
success factor. Due to the high market share, Coca-Cola has
been able to negotiate with large distributers and thus
making the product available in most of the regions. In
order to remain competitive it’s highly important for the
company to maintain effective distribution channel.
Company image leads to the brand loyalty which is very
important for the success. Brand loyalty in return
increases the market share.
Global expansion plays a very vital role in the company’s
success. Brands that are globally present are usually
preferred by the customers.
9.3 Balanced Scorecard
For performance measurement at smaller units, balanced
scorecard should be used:
Perspective Goal Measurement
Financial Firm financial
growth in terms of
profitability
Annual sales growth
Net profitability
improvement
Reduce cost of
production
Customer Value creation,
satisfaction,
support
High market share,
leading position
globally
Consistent decrease
in cost of sales
Internal Business Efficient
production with
waste production
Brand expansion
Consistent decrease
in cost of
production,
increased
productivity
Number of new
markets entered
Learning and growth Innovation
Employee training
and satisfaction
New products and
processes added in
the company
Reduced rate of
employee turnover
10. CONCLUSION
The Coca-Cola Company has a very rich history and spread
over the world, the study in this analysis especially the
particular SPACE matrix tells us that Coca Cola Company should
pursue an aggressive strategy. Coca Cola Company has a strong
competitive position in the market with rapid growth. It needs
to use its internal strengths to develop a market penetration
and market development strategy. This includes focus on Water
and Juices products, and catering to health consciousness of
people through introduction of different coke flavor and
maintaining basic coke flavor. Further company should integrate
with other companies, acquisition of potential competitor
businesses, innovation in branding and aggressive marketing
strategy can bring long term profitability.
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has-prosperous-2013-ahead-it/20272/?
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The Coca-Cola Company (2013). Coca-Cola Journey. Available at
http://www.coca-colacompany.com
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