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SUBMITTED TO: SHAHEER ALAM
MBA. 3rd SEMESTER .GROUP (B)
I have the only pearl of eyes to admire the blessing of the Compassionate and Omnipotent because the words are bound, knowledge is limited and time is short to express His dignity. All thanks are due only toAlmighty Allah, most gracious, the most merciful, who gave me the strength to do this job. My special praise for Holy Prophet Muhammad (Peace Be Upon Him) who is, for even humanity as a whole. It is a matter of great honor and pleasure for me to express my ineffable gratitude and profound indebtedness to my venerable supervisor Sir SHAHEER ALAM, for his kind supervision, valuable suggestion and sympathetic attitude through my research. I am much impressed of his intellectual activities, inexhaustible energy to steer forth the student. His sympathetic and sincerest attitude is highly qualified experience.
The purpose of this report is to construct strategies by analyzing the general beverage industry– in particular, carbonated drinks – and the competitive environment. Coca- Cola is one of the most popular and recognizable brands in the world of business (Heller et al 2006,). Thus, from this analysis, COCA COLA’s potential growth and strategic management to maximize profitability will be examined. Eventually, these crucial factors in business management are affecting COCA COLA’s performance in the market, including expanding into larger market and launch takeovers of other companies that COCA COLA believe will create value for the company. This report will also discuss and outline each aspect in the general environment of COCA COLA and also the strength of each aspect in regards to Porter’s five forces. Along with the analysis, the effect that each aspect brings to strategic management will also be discussed, focusing mainly towards several aspects to COCA COLA’s strategic management.
Table OF Contents
CHAPTER #1 Introduction 1.1 Company Overview 1.2 History Of Coca-Cola Company 1.3 The Slogan 1.4 History Of Bottling 1.5 ( The Secret Formula Of Coca Cola) CHAPTER #2 Internal Analysis 2.1 Mission, Vision & Values Of Coca Cola Company 2.1.1 Our Mission 2.1.2 Our Vision 2.1.3 Our Wining Culture 2.2 Objectives Of Coca-Cola Company 2.2.1 The Corporate Objectives 2.3 Management Philosophy And Attitudes, Culture And Leadership 2.3.1 Decision-Making: 2.3.2 Organizing 2.3.4 Leading 2.3.5 Controlling 2.4 Market Share Of Coca Cola 2.5 Strategies 2.5.1 Positioning Strategy 2.5.2 Promotion Strategies 2.5.3 Utc Scheme 2.5.4 Getting Shelves 2.5.5 Eye Catching Position 2.5.6 Sale Promotion 2.5.7 Distribution Channels 2.5.8 Advertisement Strategies 2.5.9 Our Competitive Strategies 220.127.116.11 Marketing: 18.104.22.168 Innovation: 22.214.171.124 Globalization: 2.6 Value Chain Of Coca Cola
6 7 7
10 10 10 11 12 12 14 14 15 18 21 21 22 22 22 23 23 23 23 23 24 24 25 25 26 26
2.6.1 Our Suppliers 2.6.2 Our Customers: 2.6.3 Coca Cola Retailing Research Council 2.6.4 Collaboration Customer Relationship Process 2.6.5 Customer Development And Training 2.7 Financial Analysis Of Coca Cola Company CHAPTER #3 (External Analysis) 3.1 Coca-Cola Company, The Pestle Analysis 3.1.1 Political Analysis For Coca-Cola 3.1.2 Economic Analysis For Coca-Cola 3.1.3 Social Analysis For Coca-Cola 3.1.4 Technological Analysis For Coca-Cola 3.2 Industrial Environment And 5 Forces Model For Coca Cola 3.2.1 Bargaining Power Of Supplier 3.2.2 Bargaining Power Of Buyers 3.2.3 Threats Of Substitute 3.2.4 Rivalry Among Competing Firms 3.2.5 Threats Of New Entrants 3.3 Coca-Cola Company, The SWOT Analysis 3.3.1 Strengths 3.3.2 Weaknesses 3.3.3 Opportunities 3.3.4.Threats 3.4 General Analysis Of Coca Cola 5 Recommendation 6 Conclusion 7 REFRENCES
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29 29 30 31 32 33 33 33 33 34 34 35 36 38 39 40 42 43 44 44
CHAPTER #1 (INTRODUCTION)
1.1 COMPANY OVERVIEW
The Coca-Cola Company (Coca-Cola) is a leading manufacturer, distributor and marketer of Non-alcoholic beverage concentrates and syrups, in the world. The company owns or licenses more than 400 brands, including diet and light beverages, waters, juice and juice drinks, teas, coffees, and energy and sports drinks. The company operates in more than 200 countries. Approximately 74% of its products are sold outside of the US. The company is headquartered in Atlanta, Georgia and employs 71,000 people as of September 2008.The company recorded revenues of $24,088 million during the fiscal year ended December 2008, an increase of 4.3% over 2007. The increase in revenue was primarily due to increase in sales of Unit cases of company’s products from approximately 20.6 billion unit cases of the company’s Products in 2007 to approximately 21.4 billion unit cases in 2008, the increase in the Price and Product/geographic mix also boosted the revenue growth. The company-wide gallon sales and unit case volume both grew 4% in 2008 when compared to 2007. The operating profit of the company was $6,308 million during fiscal year 2008, an increase of 3.7% over 2007. The net profit was $5,080 million in fiscal year 2008, an increase of 4.3% over 2007.
1.2 HISTORY OF COCA-COLA COMPANY
Coca-Cola was first introduced by John Smyth Pemberton, a pharmacist, in the year 1886 in Atlanta, Georgia when he invented caramel-colored syrup in a three-legged brass kettle in his backyard. He first “distributed” the product by carrying it in a jug down the street to Jacob’s Pharmacy and customers bought the drink for five cents at the soda fountain. Carbonated water was teamed with the new syrup, whether by accident or otherwise, producing a drink that was proclaimed “delicious and refreshing”, a theme that continues 7
to echo today wherever Coca-Cola is enjoyed. Dr. Pemberton’s partner and book-keeper, Frank M. Robinson, suggested the name and penned “Coca-Cola” in the unique flowing script that is famous worldwide even today. He suggested that “the two Cs would look well in advertising.” The first newspaper ad for Coca-Cola soon appeared in The Atlanta Journal, inviting thirsty citizens to try “the new and popular soda fountain drink.” Handpainted oil cloth signs reading “Coca-Cola” appeared on store awnings, with the suggestions “Drink” added to inform passersby that the new beverage was for soda fountain refreshment. 1.3 THE SLOGAN: “ALWAYS COCA COLA”
1.4 HISTORY OF BOTTLING
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 worldfamous brand it is today. Year 1894: A modest start for a bold idea In 1894 the Coca-Cola Company is 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. In 21st century the Coca-Cola bottling system grew up with roots deeply planted in local communities. This heritage serves the Company well today as consumers 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.
1950s … Packaging Innovations 192 0s and 30s …
Inte rnational ex pansion
1.5 ( The secret formula of Coca Cola)
The mystique of Coca-Cola was also enhanced of course, by its secret formula, whose blend of flowers was code-named 7x. Soon after frank Robinson brought him the formula, as a Candler changed it. His son said that he did so because the Palmerton product did not have an altogether agreeable taste. It was unstable; it contained too many things, too much some ingredients and too little of other the bouquet of several of the volatile essential oils previously used was adversely affected by some ingredients. The main reason that Candler modified the formula was to distinguish it from all the other recipes floating around. At least ten people had access to the origin Palmerton. Robinson had a particularly keen nose and pallet and could detect even a trace of an off flavor, although there are rumors of the secret formula is no longer a secret, the magical formula of Coca-Cola called 7x still remain distinctive in flavor till date.
CHAPTER #2 (INTERNAL ANALYSIS) 2.1 Mission, Vision & Values of Coca Cola Company
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.
2.1.1 OUR MISSION Our Roadmap starts with our mission, which is enduring. It declares our purpose as a company and serves as the standard against which we weigh our actions and decisions.
To refresh the world... To inspire moments of optimism and happiness...
To create value and make a difference.
2.1.2 OUR VISION Our vision serves as the framework for our Roadmap and guides every aspect of our business by describing what we 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.
2.1.3 Our Wining Culture
Our Winning Culture defines the attitudes and behaviors that will be required of us to make our 2020 Vision a reality.
2.1.4 Live Our Values
Our values serve as a compass for our actions and describe how we behave in the world.
• • •
Leadership: The courage to shape a better future Collaboration: Leverage collective genius Integrity: Be real
• • •
Accountability: If it is to be, it's up to me Passion: Committed in heart and mind Diversity: As inclusive as our brands
Quality: What we do, we do well Focus on the Market
Focus on needs of our consumers, customers and franchise partners Get out into the market and listen, observe and learn Possess a world view Focus on execution in the marketplace every day
• • •
Be insatiably curious
Act Like Owners
• • •
Be accountable for our actions and inactions Steward system assets and focus on building value Reward our people for taking risks and finding better ways to solve problems
Learn from our outcomes -- what worked and what didn’t
2.2 OBJECTIVES OF COCA-COLA COMPANY
•To engage Coca-Cola in exploring the viability and options for using their distribution
networks in developing countries to distribute ‘social products’ such as oral rehydration salts (ORS) and related educational materials on health, hygiene and sanitation. •To help engage an appropriate international NGO, or NGOs, to partner with Coca-Cola at a global level and local levels on this initiative. •To support Coca-Cola and its partners in modeling different scenarios which combine Coca-Cola’s distribution network with local health initiatives in order to achieve our aims. •To support Coca-Cola and its partners in selecting the most promising scenarios as the basis for field trials. 13
•To support the international NGO, or NGOs, to engage local NGOs and local Health Institutions in order to undertake trials linking this idea with local support infrastructure. •To engage and inform as many people as possible, encouraging them to support this campaign, managing expectations and offers of help and promoting constructive debate. •To establish a core group of enablers and activists to lead on the different aspects of this campaign. • To monitor the progress of the campaign and ensure that any trials and roll-outs are effectively monitored and evaluated.
2.2.1 THE CORPORATE OBJECTIVES:
The strategic goals are considered when company is thinking of the long-term objectives but at coca cola strategic objectives and goals are set up for three years. These strategic goals are decide by the top management with consultation by the parent company head quartered at Singapore. However, they are reviewed every year in the annual meeting to make sure that they are in line with the changing environment. They are: • To continue to be an organization providing the quality products to the valuable customers. • To select and retain the professional people for the organization. • To project an outstanding corporate image. • To satisfy the customer through extra ordinary service and an excellent service along with the complete tactical and operational support.
The top management of the company on an annual basis devises these goals together with the consultation of the lower level employees. Then each departmental director is given these annual tasks that then subdivide it on the quarterly or monthly basis to have a proper check to ensure that these objectives are achieved, mainly through marketing, is the job of the director of each division. For this year, these goals are:
• To increase the revenues by 20% as compared to last year. • To increase the total retail customers by around 10%. • To increase the market share by 5%. • To reactivate the discontinued customers by 30%.
Operational goals are decided by the top management in consultation with the lower level employees. They are following the concept of management by objectives (MBO). Each employee is assigned its goals and is told what is expected of him and then he is evaluated on the basis of certain rules and regulations followed evenly by the company. For example: a sales man is given following tasks, duties and certain targets: Each salesman has to oversee around 100-125 outlets. The frequency of visits to each outlet depends upon the sales of that particular outlet. Normally, a salesman has to visit a single outlet thrice a week i.e. every alternate day. This means that a salesman visits at least 2030 outlets per day.
The salesman has three basic functions to perform. • To find new customers, • To retain existing ones, • To bring back the discontinued account Each salesman has to bring in at least three new accounts every month. These may either be new customers or the reactivation of the discontinued accounts. Sales manager is made responsible for the performance and achievement of operational goals and is assigned to set certain milestones for the salesman so as to give him proper feedback, which definitely helps the salesman achievement of the above-mentioned goals.
2.3 Management philosophy and attitudes, culture and leadership
Competing in the market place is like a war. You have Injuries and casualties, and the best strategy win” (John Collins) The decision-making process in CCBPL is centralized. The model used is classical, whereby the top management takes their time while making decisions and explore and evaluate all the possible alternatives before choosing the rationally economic and feasible situation. Programmed decisions are made only by the top management with no consultation what so ever with the line managers while the daily and routine decisions are made by the line managers at the middle level with the prior permission or approval from the general manager. Decisions, which are normally taken at the top management, are related to • The package positioning • Trade discounts • Advertisement • Price reductions • Distribution While recruiting new employees, the top management approves the vacancies and asks the Human Capital Department to conduct the written test and this test normally is conducted for the employees at the lower level. Then prospective applicants are short listed through the interview process. Then the Business and operations manager or general manager personally interviews the employees and then makes the final decision about the selection himself. Hence, the style of decision-making followed by the CCBPL model is AII. That is, the decisions are made on the basis of the inputs provided by the lower level employees and the managers at the middle management level. Top management asks for the suggestions and ideas of his subordinates and then takes the final decision himself. However, the remaining decisions, which are mainly related to the daily operations, are made by the respective managers who are eventually made responsible for the results. The management is very much cooperative and encourage its employees to come up with new ideas related to their duties and the work they do so as to increase the overall efficiency of the organization and eventually increasing the profits..
CCBPL is divided into different departments on the basis of functional approach. People are grouped together on the basis of common skills and work activities. This approach helps company in achieving the economies of scale through high quality of problem solving and lesser needs of the training of the employees. CCBPL is headed by the General Manager. There are five departments at CCBPL namely, Production, Industrial Relations, Sales and Marketing, Human Capital, and Finance and Accounting. •Production Department is responsible for the overall production of the CCBPL. There are 8 plants of CCBPL operating throughout the country. Different areas are distributed the products on the basis of nearness so as to reduce the transportation cost. • Industrial Relations Department is responsible for dealing with the Problems related to the working environment of the employees and the Issues related to the labor unions. • Sales and Marketing Department is responsible for the making the Product available in the market and to deal with the issues related to the advertisements of the products. • Human Capital Department is responsible for looking for the efficient pool of workers, selecting the professionals and makes them happy so that they should stick to the company. The Human Capital department deals with management level employees’ grievances. • Finance Department deals with the overall costing and pricing of the products. This also handles the import related issues of the company. Accounting department assists the sales department in making invoices and payroll entries. WORK SPECIALIZATION The work specialization is high, as each Manager is made responsible for only a particular function, which is his expertise. There is no boredom or monotony as each salesman is meeting the different sort of person and the work is challenging and promotions are based on performance there is no monotony and boredom. AUTHORITY AND RESPONSIBILITY: The salesman has to report to the sales manager. These sales managers are responsible for the performance of the sales man and they are required to provide them timely feedback. They are also required to provide the guidance at any time and related to the issues related to the
performance of the employees. These salesmen are monitored on an on-going basis by their manager, which serves as an effective control mechanism. The employees have a lot of authority, responsibility and information relative to the work that they are doing. However, all the information and authority relative to the work is provided by their respective managers. The procedure is same in the other departments as well. DELEGATION AND ACCOUNTABILITY: There is a high degree of delegation and delegation is done with proper authority and responsibility. Each manager is also made accountable for the actions of his subordinates. Proper instructions and guidance is given at time to time to achieve the objectives by the respective managers. Apart from the delegating every manager is responsible for motivating his juniors so as to increase the effectiveness and efficiency of the employees. Human Capital department also helps employees realize their potential and motivate them through different methods. They make sure that they give the best in return to their managers. This increases their performance, the quality of their work, and customer satisfaction.
SPAN OF CONTROL: The span of control is low as there are 3-5 employees reporting to their managers. This low structure is due to the fact that organization is a vertical and different people have different works to do so. It is also difficult to control more than five people and still manage the resources and people in an effective manner. RESOURCE ALLOCATION: As far as resource allocation is concerned, the managers of each department have the authority to utilize the organizational resources whenever needed for the functions of his department. They have to get the approval from the other managers if these assets belong to other managers. These resources may be capital, human or any other available. ORGANIZING THE HUMAN RESOURCES:
Recruitment is normally done on the required positions and not on the standby basis. Recruitment starts whenever a supervisor or sales manager needs a salesperson and it is first approved by the general manager before sending it to the human resources department. All the vacancies are first internally advertised so that all the employees who fulfill the requirements can avail this opportunity. If there aren’t any suitable persons for a particular job then human resource department search its data bank and if there is no suitable person then at last it is advertised in the newspaper but it is rarely the case at coca Cola for the sales man. Selection is based on different criterion for different positions. Education requirements are the first and the most important and are the first part of the screening of the personnel. After the screening stage, applicant is called for the aptitude test. For a salesman job simple arithmetic and general knowledge is tested. Know how of English is also necessary in some cases. After passing the aptitude test applicant is asked to appear for an interview. This interview is normally carried out by the sales and human resource department. Purpose of this interview is to confirm the data and claims, which the applicant has produced and made. If the applicant is selected, he is asked for four sureties or any other references, which he can make and sometimes, human resource department also like to confirm from their Ex-Employers about the conduct and the reason for leaving of the applicant.
At Coca cola on the job training is given the utmost importance. At first a sales man is given information about the product, sales environment and company policies and procedures. Ethical behavior is emphasized most so as not to create any sort of bad habits which can cause great problems for the company. Normally a new sales man is supposed to work under another salesman to learn the basics of selling techniques and the overall environment in which he will be working. A salesman is then allowed to work under the salesman but he is asked to perform all the operations by his own. These include filling out the route card, dealing with the customers, communicating with to loader, cash management, setting the visi cooler and the next days order to be loaded. After doing this entire if has any problems in learning then he is guided by salesman, market developer, and sales manager if required.
Apart from this on the job training, the company also has some in-house training facilities. The company has a sales hall in which all the sales personnel are given some tips regarding the changes in the selling environment and how to improve efficiency and efficacy. These tips are normally given by the general manager. Coca Cola also arranges some type of seminars, work shops and modules related to the sales management, Forecasting of the daily sales, merchandising, selling skills, supervisory techniques and other areas related to the sales. Coca Cola does not have any library and special trainers but they do have the separate space for the training and they also use some sort of videos to elaborate and show the examples of effective selling skills and techniques. To maintain the professional employees company has a policy of promotion from within. Promotions are based on the performance, which is measured very objectively. Apart from this the company pays its employees more than the industry wages. Not only the wages and salary but different other benefits are also given to employees to motivate and retain them in the organization. The company also has an effective incentive plan.
LEADERSHIP STYLE: The general manager of the company is at the topmost position in the organizational hierarchy; Even though he is not directly involved in its operations he is responsible for taking major administrative decisions regarding the company policy and Operations. Departmental managers are responsible for leading and directing their subordinates. These leaders focus on these areas: • Increasing business with a coordinated approach by helping each other in its operations. • Encouraging the employees to give new ideas so as to increase the customer satisfaction. As there is a very high degree of delegation and participation so they believe that the leadership style used in all the departments of CCBPL is democratic. The concept of team management is only practiced in the sales and marketing department as they have to work in dependence of one another. Subordinates are given a fair treatment and are dealt in a very good manner so as to give them a feeling that you are not only an employee but also a member of the family. The managers at CCBPL are very supportive as they use teams and treat subordinates as equals, and have a highly open communication system. They are participative since they encourage the
involvement of the employees in decision-making and make use of group discussions. However, some monetary and non-monetary rewards are used to create a high involvement from the employees especially at the lower level. MOTIVATION: Employee motivation is given a very high consideration at CCBPL. At CCBPL they have the policy of promotion from within policy. Promotions are bestowed on the performance basis. This performance base motivates employees to work hard and achieve the goals, which are very objective and are perceived achievable by most of the employees. Apart from this compensation plan is also a motivating factor as CCBPL is paying more than the industry averages. Not only this different campaigns and competitions between the employees itself are also used to motivate the employees. Managers play a vital role in motivating employees as they give them the timely feedback about their activities. They also help them solve different problems, which can be job related or personal problems. Working environment and a challenging milestone are a major factor in employee motivation at CCBPL. COMMUNICATION: There is open environment in CCBPL, which discourages barriers among the members sharing information. The top management consults lower ranks before deciding on the policy matters and then these things are communicated downwards. Every employee is allowed to see the general manager at any time if he has any problem. Inter departmental communication is done through formal and informal manners. Grapevine is also used to get the feedback about the employees’ views about the management. CORPORATE CULTURE: The Top management at coca cola also tries to emphasize to follow the prescribed culture of the organization. CCBPL has formal and documented values that are communicated to all the employees. To ensure proper application of the rules and behaviors of the values, the top management act as role models, and closely administer and review their employee’s behaviors. Our Winning Culture Our Winning Culture defines the attitudes and behaviors that will be required of us to make our 2020 Vision a reality. Our values serve as a compass for our actions and describe how we behave
in the world. • Leadership: The courage to shape a better future • Collaboration: Leverage collective genius • Integrity: Be real • Accountability: If it is to be, it's up to me • Passion: Committed in heart and mind • Diversity: As inclusive as our brands • Quality: What we do, we do well Focus on the Market • Focus on needs of our consumers, customers and franchise partners • Get out into the market and listen, observe and learn • Possess a world view • Focus on execution in the marketplace every day • Be insatiably curious Work Smart • Act with urgency • Remain responsive to change • Have the courage to change course when needed • Remain constructively discontent • Work efficiently Act like Owners • Be accountable for our actions and inactions • Steward system assets and focus on building value • Reward our people for taking risks and finding better ways to solve problems. • Learn from our outcomes -- what worked and what didn’t Be the Brand • Inspire creativity, passion, optimism and fun 2.3.5 CONTROLLING Control is done through the evaluation, which is based on the very objective basis. Certain criteria are fixed in advance and if these criteria are not met then the employees are asked and evaluated for the reasons and corrective actions are taken by the respective managers. Different departments
have different criteria and different reporting and controlling systems. The reporting, evaluation and control system of sales departments is follows:
Sales Person’s reporting system:
Every sales person directly reports to market developer of his area. A sales person is supposed to give him a daily report of his activities and he is free to ask for any kind of assistance from the market developer. Every salesperson is given an attendance punch card, which records his arrival and departure time. He is also given a route call card, which he is supposed to fill out. This card includes all the details about the visits of the outlets, time spent on these outlets, sales made on these outlets, time spent on these outlets, sales made on these outlets, time during traveling, names of the loaders and salesperson’s time in and time out of the vehicle. Apart from this a sales person is also given a form to fill up for the next days order to be loaded in the truck. This basically tells about the total sales of the salesman according to the brand and the size of the product. This basically is used by the human resources department to evaluate the performance and calculating the total salary of the salesman.
Sales Person’s Evaluation System:
Every salesperson’s evaluation is done on quarterly basis. Evaluation helps the company to promote the people to the higher levels of the organization. This evaluation also motivates salespeople to work hard and get the promotion or at least the monetary rewards, which are given not only to the best salesman but the best market developer and the best sales manager of the year. Performance is evaluated on the basis of performance development plan. Performance is measured on the basis of achievement of the targets, which are set and communicated at the very beginning of the year to each sales manager, each quarter to every market developer and every month to each salesperson. This performance development plan evaluates the sales people on the basis of call slips, Route call, Call
2.4 Market Share of Coca cola:
Being the biggest company in the soft drink industry, Coca Cola enjoys the largest market share. This company controls about 59% of the world market.
2.5.1 POSITIONING STRATEGY It means that you try to give image to your product in the mind of the customers. To give a true and positive picture of the product is the best positioning. The company should promote its good points or comparative advantage which it has over its competitor. DIFFERENTIATION STRATEGY In order to serve your target market you introduce different things to your product so that your product can be differentiated from other products. • Basis of Differentiation There are many bases on which a product can be differentiated Coke has differentiated its product on the following base: • Product Differentiation but Coke
differentiate its product from its competitors on the basis of brand, quality and taste. • Image Differentiation Logo is used for image differentiation. Logo is what establishes a brand name in the consumer mind. It is the brands identification, signature and image. Coca cola has kept on changing its logo from time to time. 2.5.2 PROMOTION STRATEGIES Price Strategy Trade Promotion:
Coca Cola Company gives incentives to middle men or retailers in way a that they offer
them free samples and free empty bottles, by this these retailers and middle man push their product in the market. And that's why coca cola seen more in the market. And they have a good sale in the market because according to the expert which product seen more in the market that sells more."Seen as sold" They do agreements with a shop keepers and stores to exclusive sale in those stores. These stores are called as KEY accounts in their local language. And coke also invest heavy budget on these stores and offers them free samples and free bottles and some time cash incentives. 2.5.3 UTC Scheme
UTC mean under the crown scheme, coca cola often do this type of scheme and they offer very handy prizes in it. Like once they offer bicycles, caps, TV sets, cash prizes etc. This scheme is very much popular among children. 2.5.4 Getting shelves Coca Cola gets or purchase shelves in big departmental stores and display their products in those shelves in that style which show their product clearer and more attractive for the consumer. 2.5.5 Eye Catching Position Salesman of the coca cola company positions their freezers and their products in eye-catching positions. Normally they keep their freezers near the entrance of the stores. 2.5.6 Sale Promotion Coca Cola Company also does sponsorships with different college and school's cafes and sponsors their sports events and other extra curriculum activities for getting market share. Normally they keep their freezers near the entrance of the stores. Sale Promotion Company also does sponsorships with different college and school's cafes and sponsors their sports events and other extra curriculum activities for getting market share.
2.5.7 Distribution Channels
Coca Cola Company makes two types of selling o o Direct selling Indirect selling
1. Direct Selling: In direct selling they supply their products in shops by using their own transports. They have almost 450 vehicles to supply their bottles. In this type of selling company have more profit margin. 2. Indirect Selling : They have their whole sellers and agencies to cover all area. Because it is very difficult for them to cover all area of Pakistan by their own so they have so many whole sellers and agencies to assure their customers for availability of coca cola products. Facilitating the Product by Infrastructure
For providing their product in good manner company has provided infrastructure these includes. • Vizi cooler • Freezers • Display racks • Free empty bottles and shells for bottle 2.5.8 Advertisement Strategies Coca Cola Company use different mediums for advertisement. • Print media • Pas material • TV commercial • Billboards and holding (1)Print Media: They often use print media for advertisement. They have a separate department for print media.
(2)TV Commercials: As everybody know that TV is a most common entertaining medium so TV commercials is one of the most attractive way of doing advertisement. So Coca Cola Company does regular TV commercials on different channels.
2.5.9 Our Competitive strategies
The Coca-Cola Company is one of the largest, most successful and most widely recognized corporations in existence. Coca-Cola is a dominating force in the beverage industry and sets a very high standard of competition. Research shows that its trademark is recognized by over 94% of the world’s population. There are many factors contributing to Coca-Cola’s success, however, we believe that their key success factors are Marketing, Innovation, and Globalization. 126.96.36.199 Marketing:
Coca-Cola is seen as one of the founding fathers of the modern day marketing model. They were among the pioneers of advertising techniques and styles used to capture an audience. They were also one of the first companies to offer a gimmick with their product, this being a mini yo-yo. It was around 1900 when Coca-Cola began presenting their signature drink as a delicious and refreshing formula. This slogan has been repeated for over the last 100 years selling Coke all over the world. Through its intense marketing campaigns, Coke has developed an image that is reflected in what we think of when we buy Coke and what we associate with drinking Coke. This image has been subconsciously installed in our brain by the advertising campaigns that show Coca-Cola associated with “good times.” 188.8.131.52 Innovation: Coca-Cola has been able to survive and grow in an ever-changing market because of its ability to systematically innovate and deliver new products. In the late 90s the company, typically showing earnings growth of 15-20% per year, turned in three straight years of falling profits. It was apparent that the market was changing and in order to keep up with these changes, Coca-Cola had to move from a single core product to a total beverage company. This was a major change because their past success was base on having one successful core product. Coca-Cola began to employ a strategy referred to as “play to win innovation.” The company began operating in a decentralized environment that was unfeasible in previous years. Now Coca- Cola offers nearly 400 different products in and is still dominating the beverage industry. This is made possible by the company’s ability to innovate and adapt to changing markets.
184.108.40.206 Globalization: Today’s big business takes place on a global scale, and Coca-Cola is no exception. Technology is continually changing business, and these constant changes have been making it more feasible and profitable for businesses to expand their operations globally in order to serve all different types of diverse markets around the world. This global view is reflected in Coke’s recent “I’d like to teach the world to sing” commercial. Coca-Cola is taking advantage of the large revenue opportunities made possible by participating in a global market and now offers products in 200 countries around the world.
2.6 Value Chain Of Coca Cola
2.6.1 Our Suppliers
Our suppliers are business partners who provide our system with materials, including ingredients, packaging and machinery, as well as goods and services. Our Company's Supplier Guiding Principles (SGP) communicates our values and expectations, emphasizing the importance of responsible environmental and workplace policies and practices. Suppliers' policies and practices must comply, at a minimum, with all applicable laws and regulations, including those concerning child labor; forced labor; abuse of labor; freedom of association and collective bargaining; discrimination; wages and benefits; working hours and overtime; health and safety and environmental practices. New agreements with suppliers require compliance with our SGP. We have communicated these expectations, trained suppliers and started a comprehensive auditing process. In 2007, we conducted 1,313 supplier audits, a 28 percent increase since 2006. We have also worked with our bottling partners so that they have similar principles to target suppliers not covered by our program.
2.6.2 Our Customers:
We seek to better understand the impact of the Coca-Cola business along our entire value cycle and partner with our customers to address areas of concern and add value beyond our beverage products. Our customers include large international chains of retailers and restaurants and small independent businesses. We work with them equally to create mutual benefit. Together with our bottling partners, we serve our customers through account management teams, providing services and support tailored to their needs. Our customers are continually looking for ways to reduce costs, improve sales and profits, and deliver better-quality, more diverse products to consumers. We work to create additional value for our customers by anticipating their demands and interests and to proactively deliver viable solutions for their businesses.
2.6.3 Coca Cola Retailing Research Council
In Africa, Asia, Europe, Latin America and North America, Coca-Cola Retailing Research Councils conduct research on issues affecting the retail food industry. The results are communicated through a collaborative website that allows retailers to gain information necessary to strategically respond to the changing marketplace.
2.6.4 Collaboration Customer Relationship Process
Our Collaborative Customer Relationship process has been refined in three lead markets -- Japan, Mexico and Switzerland -- and is now being implemented with key customers in other markets around the world. We work with our customers to improve shopper marketing and supply chain collaboration and to accelerate innovation in order to provide superior beverage selections to every consumer on every shopping trip. Coca-Cola Mexico's Collaborative Customer Relationship program was recently recognized by Oxxo, a convenience store chain that has 5,700 stores in 30 states in Mexico. The program has proven successful in understanding shopper needs, drives and preferences, and migrating from a transactional and commercial link to a collaborative and multifunctional business relationship.
2.6.5 Customer Development and Training
We provide support to smaller customers to help make their businesses more efficient and profitable. In Latin America, for example, we have established customer development training centers, the largest ones in Argentina, Brazil, Chile, Mexico and Peru. We also work with customers to broaden the range of beverages they offer, provide nutritional information and ensure our beverages are marketed responsibly.
2.7 Financial analysis of Coca Cola Company
Latest 12 Months Data Items Latest Full Context Quarter Ending Date (2010/03)
Profit Pre-Tax Profit Margin 29.7%
Interest Coverage 27.0
Current Ratio 1.3
68.8% Quick Ratio Receivables Turnover Asset Turnover Return Capital on Invested
Most Recent Data
Return on Assets Total Equity 0.47 Gross Margin 68.5% 5-Year P/E Ratio 20.7 Profit Net Profit Margin Current P/E Ratio 16.9 5-Year Ratio 26.3 20.6% Avg. 12 Month Normalized P/E Ratio 16.6 High P/E Debt/ 14.9% 5-Year Averages Return on Equity 28.5% 25.1% Return Capital on Invested
CHAPTER #3 (EXTERNAL ANALYSIS)
3.1 COCA-COLA COMPANY, THE PESTLE ANALYSIS
A scan of the external macro-environment in which the firm operates can be expressed in terms of the following factors: •
Political Economic Social Technological
The acronym PEST (or sometimes rearranged as "STEP") is used to describe a framework for the analysis of these macro environmental factors. A PEST analysis fits into an overall environmental scan, which consists of significant political, economic, social and technological analysis for a firm to reach their desirable position or to attain the goals and objectives. Coca-Cola Company’s perform/ operate their business unit in different country based on the developing of the PEST analysis. The PEST analysis of Coca-Cola Company is as following.
3.1.1 Political Analysis for Coca-Cola
Non-alcoholic beverages fall within the food category under the FDA. The government plays a role within the operation of manufacturing these products in terms of regulations. There are potential fines set by the government on companies if they do not meet a standard of laws. The following are some of the factors that could cause Coca-Cola company's actual results to differ materially from the expected results described in their underlying company's forward statement: Changes in laws and regulations, including changes in accounting standards, taxation requirements, (including tax rate changes, new tax laws and revised tax law interpretations) and environmental laws in domestic or foreign jurisdictions. Changes in the non-alcoholic business environment. These include, without limitation, competitive product and pricing pressures and their ability to gain or maintain share of sales in the global market as a result of action by competitors. Political conditions, especially in international markets, including civil unrest, government changes and restrictions on the ability to transfer capital across borders. Their ability to penetrate developing and emerging markets, which also depends on economic and political conditions, and how well they are able to acquire or form strategic business alliances with local bottlers and make necessary infrastructure enhancements to production facilities, distribution networks, sales equipment and technology. 31
E: Economic change, for example a recession creating increased activity at the lower
ends of product price ranges. Rate of interest raises depressing business and causing redundancies and lower spending levels.
3.1.2 Economic Analysis for Coca-Cola
Last year the U.S. economy was strong and nearly every part of it was growing and doing well. However, things changed. Most economists loosely define a recession as two consecutive quarters of contraction, or negative GDP growth. On Monday 26, the government officially declared that the U.S. has been in recession since March. (CBS Market Watch. "U.S. Officially in a recession." Rex Nutting. [Nov 26, 2001]. www.cbsmarketwatch.com) However, because of aggressive action by the Federal Reserve and Congress it will be short and mild. The economy will return to sustained, positive growth in the first half of 2002. Future Outlooks The Federal Reserve is doing all that it can help the economy recover. They have cut the interest rate ten times this year. The rate now lies at a 40-year low of 2%. Lowering the interest rates will ultimately excite consumer demand in the economy. Companies will expand and increase use of debt as a result of the low borrowing rates. Coca-Cola can borrow money for investing in other products as the interest rates are low. It can use the borrowing on research of new products or technology. As researching for new products would cost less the Coca-Cola Company will sell its products for less and the people will spend as they would get cheap products from Coca-cola. Before the attacks on September 11, 2001, the United States was starting tot see the economy recover slightly and it is only just recently that they achieved the economic levels. Consumers are now resuming their normal habits, going to the malls, car shopping, and eating out at restaurants. However, many are still handling their money cautiously. They believe that with lower inflation still to come, consumers will recover their confidence over the next year. The non-alcoholic beverage industry has high sales in countries outside the U.S. According to the Standard and Poor's Industry surveys, "For major soft drink companies, 32
there has been economic improvement in many major international markets, such as Japan, Brazil, and Germany." These markets will continue to play a major role in the success and stable growth for a majority of the non-alcoholic beverage industry.
S: Social change involves changing attitudes and lifestyles. The increasing number of
women going out to work, for example, led to the need for time-saving products for the home.
3.1.3 Social Analysis for Coca-Cola
Many U.S. citizens are practicing healthier lifestyles. This has affected the non-alcoholic beverage industry in that many are switching to bottled water and diet colas instead of beer and other alcoholic beverages. Also, time management has increased and is at approximately 43% of all households. (http://www.cdf-mn.org). The need for bottled water and other more convenient and healthy products are in important in the average day-to-day life. Consumers from the ages of 37 to 55 are also increasingly concerned with nutrition. There is a large population of the age range known as the baby boomers. Since many are reaching an older age in life they are becoming more concerned with increasing their longevity. This will continue to affect the non-alcoholic beverage industry by increasing the demand overall and in the healthier beverages.
T: Technological change - creates opportunities for new products and product
improvements and of course new marketing techniques- the Internet, e-commerce.
3.1.4 Technological Analysis for Coca-Cola
Some factors that cause company's actual results to differ materially from the expected results are as follows: The effectiveness of company's advertising, marketing and promotional programs. The new technology of internet and television which use special effects for advertising through media. They make some products look attractive. This helps in selling of the products. This advertising makes the product attractive. This technology is being used in media to sell their products.
Introduction of cans and plastic bottles have increased sales for Coca-Cola as these are easier to carry and you can bin them once they are used. As the technology is getting advanced there has been introduction of new machineries all the time. Due to introduction of this machineries the production of the Coca-Cola company has increased tremendously then it was few years ago. CCE has six factories in Britain which use the most stat-of the-art drinks technology to ensure top product quality and speedy delivery. Europe's largest soft drinks factory was opened by CCE in Wakefield, Yorkshire in 1990. The Wakefield factory has the technology to produce cans of Coca-Cola faster than bullets from a machine gun.
3.2 Industrial Environment and 5 Forces Model for Coca Cola
Applying Porter’s 5 forces allows the garnering a retrospective view of the potential attractiveness in terms of profitability of the company. Analyzing the beverage industry will also allow a more accurate outlook on its potential. The analysis below will concentrate on the industry from COCA COLA perspective and also its effect on strategies discussed before.
3.2.1 Bargaining Power of Supplier
Inputs, such as materials, labor, supplies, etc. are standard rather than unique or differentiated. This allows variable substitutes of inputs readily and resulted in numerous potential suppliers. Suppliers themselves will find it hard to enter business like COCA
COLA and perform function in-house. Since COCA COLA is producing at large scale, to suppliers, this business is very important; however the cost of purchase has significant influence on overall costs. This requires COCA COLA to carefully choose its suppliers to suppress cost problem.
3.2.2 Bargaining Power of Buyers
There are a large number of buyers and customer relative to the number of firms in the industry, each with relatively small purchases. However, there is no cost incurred in switching suppliers. COCA COLA’s product is very unique to some degree and has accepted branding. However, customers are very highly sensitive to price, therefore choosing the most cost efficient suppliers are very crucial to minimize cost, thus maximizing profit.
3.2.3 Threats of Substitute
Generally, substitutes have performance limitations that do not completely offset their lowest price or their performance is not justified by their high price. Obviously, it cost the customers nothing to switch to COCA COLA’s substitutes, such as coffee, tea and juice. Besides, there has been a high potential of customers to substitute COCA COLA products COCA COLA can further develop its competitive advantage against substitutes through takeovers to minimize the potential of decrease in sales.
3.2.4 Rivalry among Competing Firms
COCA COLA’s main rival is Pepsi and the biggest threat that they pose is price. When prices change, the effect on beverage industry towards the consumption of soft drink is drastic. Although the product is not complex, which makes it easier for other companies to compete against COCA COLA; they do not own a share in the market as large as either COCA COLA or Pepsi are. This is because it is hard to commit into this industry, as it will be hard to get out of this business, involving specialized skills, facilities and long-term contract commitments. Capital needed to enter the business line is very large.
this will result in less competition, thus enabling COCA COLA’s chance to gain more market share.
3.2.5 Threats of New Entrants
Large companies like COCA COLA, have a cost or performance advantage in the beverage industry, because of established brand identities. Beside Pepsi, there are proprietary product differences in the industry. The capital needed to enter the industry and to be frontline in the industry like COCA COLA today is very expensive, for the reason to build production plant, managing the company, commercialization, etc. and also a long time frame to build the confidence and loyalty in the target market. Newcomers also face difficulty in accessing the distribution channels and it may be more costly compared to what COCA COLA has to pay, given their level of experience in the industry. Licenses, insurance and qualifications are difficult to obtain. However, upon entering the industry, newcomer can expect a strong retaliation in the market. When this happens, their position may pose a threat to COCA COLA and COCA COLA may find more challenges in implementing strategies to obtain more market share and maintain customer’s loyalty. Overall, COCA COLA are not competing mainly against Pepsi. The fight is against its substitutes. Their main goal is so that public should reach to Coke whenever one feels like drinking something. As a result, a strategic management to win the fight is to put up a large number of vending machines at every street corner, restaurants and cafes. Consequently, sales will take a quantum jump and COCA COLA have less to worry about competitor and substitutes.
3.3 COCA-COLA COMPANY, THE SWOT ANALYSIS
The Coca-Cola Company (Coca-Cola) is a leading manufacturer, distributor and marketer of Non-alcoholic beverage concentrates and syrups, in the world. Coca-Cola has a strong brand name and brand portfolio. Business-Week and Inter brand, a branding Limca
Common drink. Fanta Basically Preferred by Ladies and Kids. Maaza also Ladies and Kids Sprite not clearly defines. Kinley Soda Mostly those who consume liquor Consultancy, recognize Coca-Cola as one of the leading brands in their top 100 global brands ranking in 2008. The Business Week- Interbred valued Coca-Cola at $67,000 million in 2008. Coca-Cola ranks well ahead of its close competitor Pepsi which has a ranking of 22 having a brand value of $12,690 million The Company’s strong brand value facilitates customer recall and allows Coca-Cola to penetrate markets. However, the company is threatened by intense competition which could have an adverse impact on the company’s market share.
Strengths Internal -Popularity -well known -branding recognized -A lot of finance -customer loyalty -International Trade obvious and Weaknesses -Word of mouth -lack of popularity of many Coca Cola’s easilybrands -Most unknown and rarely seen -result of low profile or non-existent advertising -health issues
Threats Opportunities External -changing health-consciousness attitude -many successful brands to pursue -legal issues -Health ministers -competition (Pepsi) -advertise its less popular products -buy out competition. -More Brand recognition
3.3.1 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. Business-Week and Interbrand, a branding consultancy, recognize. Coca-Cola as one of the leading brands in their top 100 global brands ranking in 2006 The Business Week-Interbrand valued Coca-Cola at $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. Large scale of operations: With revenues in excess of $24 billion Coca-Cola has a large scale of operation. CocaCola 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. 38
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 3.3.2 WEAKNESSES Negative publicity: The 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 Performance in North America: Coca-Cola’s performance in North America was far from robust. North America is CocaCola’s core market generating about 30% of total revenues during fiscal 2006. Therefore, a strong performance in North America is important for the company. In North America the sale of unit cases did not record any growth. Unit case retail volume in North America decreased 1% primarily due to weak sparkling beverage trends in the second half of 2006 and decline in the warehouse-delivered water and juice businesses. Moreover, the company also expects performance in North America to be weak during 2007. Sluggish performance in North America could impact the company’s future growth prospects and prevent Coca-Cola from recording a more robust top-line growth. Decline in cash from operating activities: The company’s cash flow from operating activities declined during fiscal 2006. Cash flows from operating activities decreased 7% in 2006 compared to 2005. Net cash provided by operating activities reached $5,957 million in 2006, from $6,423 million in 2005. Coca-Cola’s cash flows from operating activities in 2006 also decreased compared with 2005 as a result of a contribution of approximately $216 million to a tax-qualified trust to fund retiree medical benefits. The decrease was also the result of certain marketing accruals recorded in 2005. Decline in cash from operating activities reduces availability of funds for the company’s investing and financing activities, which, in turn, increases the company’s exposure to debt markets and fluctuating interest rates. 3.3.3 OPPORTUNITIES Acquisitions For the last one year, Coca-Cola has been aggressively adopting the inorganic growth path. During 2006, its acquisitions included Kerry Beverages, (KBL), which was subsequently, reappointed Coca-Cola China Industries (CCCIL). Coca-Cola acquired a
controlling shareholding in KBL, its bottling joint venture with the Kerry Group, in Hong Kong. The acquisition extended Coca-Cola’s control over manufacturing and distribution joint ventures in nine Chinese provinces. In Germany the company acquired Apollinaris which sells sparkling and still mineral water in Germany. Coca-Cola has also acquired a 100% interest in TJC Holdings, a bottling company in South Africa. Coca-Cola also made acquisitions in Australia and New Zealand during 2006. These acquisitions strengthened Coca-Cola’s international operations. These also give Coca- Cola an opportunity for growth, through new product launch or greater penetration of existing markets. Stronger international operations increase the company’s capacity to penetrate international markets and also gives it an opportunity to diversity its revenue stream. Growing bottled water market: Bottled water is one of the fastest-growing segments in the world’s food and beverage market owing to increasing health concerns. The market for bottled water in the US generated revenues of about $15.6 billion in 2006. Market consumption volumes were estimated to be 30 billion liters in 2006. The market's consumption volume is expected to rise to 38.6 billion units by the end of 2010. This represents a CAGR of 6.9% during 2005-2010. In terms of value, the bottled water market is forecast to reach $19.3 billion by the end of 2010. In the bottled water market, the revenue of flavored water (waterbased, slightly sweetened refreshment drink) segment is growing by about $10 billion annually. The company’s Dasani brand water is the third best-selling bottled water in the US. Coca-Cola could leverage its strong position in the bottled water segment to take advantage of growing demand for flavored water. Growing Hispanic population in US: Hispanics are growing rapidly both in number and economic power. As a result, they have become more important to marketers than ever before. In 2006, about 11.6 million US households were estimated to be Hispanic. This translates into a Hispanic population of about 42 million. The US Census estimates that by 2020, the Hispanic population will
reach 60 million or almost 18% of the total US population. The economic influence of Hispanics is growing even faster than their population. Nielsen Media Research estimates that the buying power of Hispanics will exceed $1 trillion by 2008- a 55% increase over 2003 levels. Coca-Cola has extensive operations and an extensive product portfolio in the US. The company can benefit from an expanding Hispanic population in the US, which would translate into higher consumption of Coca-Cola products and higher revenues for the company. 3.3.4. THREATS Intense competition Coca-Cola competes in the nonalcoholic beverages segment of the commercial beverages industry. The company faces intense competition in various markets from regional as well as global players. Also, the company faces competition from various nonalcoholic sparkling beverages including juices and nectars and fruit drinks. In many of the countries in which Coca-Cola operates, including the US, PepsiCo is one of the company’s primary competitors. Other significant competitors include Nestle, Cadbury Schweppes, Groupe DANONE and Kraft Foods. Competitive factors impacting the company’s business include pricing, advertising, sales promotion programs, product innovation, and brand and trademark development and protection. Intense competition could impact Coca-Cola’s market share and revenue growth rates. Dependence on bottling partners: Coca-Cola generates most of its revenues by selling concentrates and syrups to bottlers in whom it doesn’t have any ownership interest or in which it has no controlling ownership interest. In 2006, approximately 83% of its worldwide unit case volumes were produced and distributed by bottling partners in which the company did not have any controlling interests. As independent companies, its bottling partners, some of whom are publicly traded companies, make their own business decisions that may not always be in line with the company’s interests. In addition, many of its bottling partners have the right to
manufacture or distribute their own products or certain products of other beverage companies. If Coca-Cola is unable to provide an appropriate mix of incentives to its bottling partners, then the partners may take actions that, while maximizing their own short-term profits, may be detrimental to Coca-Cola. These bottlers may devote more resources to business opportunities or products other than those beneficial for Coca-Cola. Such actions could, in the long run, have an adverse effect on Coca-Cola’s profitability. In addition, loss of one or more of its major customers by any one of its major bottling partners could indirectly affect Coca-Cola’s business results. Such dependence on third parties is a weak link in Coca-Cola’s operations and increases the company’s business risks. Sluggish growth of carbonated beverages: US consumers have started to look for greater variety in their drinks and are becoming increasingly health conscious. This has led to a decrease in the consumption of carbonated and other sweetened beverages in the US. The US carbonated soft drinks market generated total revenues of $63.9 billion in 2005, this representing a compound annual growth rate (CAGR) of only 0.2% for the five-year period spanning 2001-2005. The performance of the market is forecast to decelerate, with an anticipated compound annual rate of change (CAGR) of -0.3% for the five-year period 2005-2010 expected to drive the market to a value of $62.9 billion by the end of 2010. Moreover in the recent years, beverage companies such as Coca-Cola have been criticized for Selling carbonated beverages with high amounts of sugar and unacceptable levels of dangerous chemical content, and have been implicated for facilitating poor diet and increasing childhood obesity. Moreover, the US is the company’s core market. Coca-Cola already expects its performance in the region to be sluggish during 2007. Coca-Cola’s revenues could be adversely affected by a slowdown in the US carbonated beverage market 3.4 General
ANALYSIS of Coca Cola
Coca Cola being the multinational and reputed organization apply all the good traits of planning, organizing, leading and controlling from top to bottom. When we look at the planning procedure of the Coca Cola it runs very smoothly in every department. There is very well integrated effort of all the department of the organization to organize and control an individual for a particular task. its forecasting planning system is according to the company requirements in which each department has to justify the employees it required in the Annual Business Plan of the year. Taking about organizing and controlling all the work done by their respective departments as the company is divided in different departments planning starts (strategic planning) from top authority and afterwards organizing and leading and controlling is done as per the requirements of each and every department
Coca cola is a multinational company and running their business successfully. Americans took over the organization in 2000. They introduced many advantageous programs to the employees which were very lucrative such as life insurance, health and safety insurance and many other reward-giving policies. But there are some draw backs in there organization, these are: Coca cola does not use advertisement media extensively as most of the jobs are filled by referrals and unsolicited applications files. Unsolicited applications files are good approach but most of the people do not know about such methods. Coca cola does not hire fresh graduates at middle level management, this creates bad Image of the organization. They should hire fresh graduates as it may give them new and fresh ideas. 44
To some extend they include the lower management staff in decision mailing so their should be De-centralized structures of planning to some extend. Their should be proper communication cycle from top to bottom employees so their should be no chance of miscommunication. And at the end their should be proper motivational practices should be implement to increase the moral of employees so they work more efficiently. The Coca-Cola Company has a high level of uncertainty when it comes to the raw materials it uses. For a few of the ingredients, the company only has one or two viable suppliers. This could be extremely problematic for a variety of reasons. Another problem could arise if a supplier experiences an event that economically devastates them. If a supplier goes bankrupt, or is in some type of natural disaster, the Coca- Cola Company would suffer greatly as well. The Coca-Cola Company can improve and secure relationships with suppliers. The most optimal method would be to use backward vertical integration and purchase a supply.
This report gives complete briefing about all the planning process carried out in an Organization. When planning is completed how to carried out all the phase of organizing different tasks in different departments according to the requirements. This report gives complete information about the working of coca cola in market, a complete overview of strengths, Weakness, opportunities and threat.
o www.Companies.Online.com o Thomas register of American Manufacturers o www.Wikipedia.com o Www. Question. com o www.cocacola.com o www.world.book.com
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