Strategy Analysis of Coca Cola Md Ismail Hossain, Department of Accounting Information Systems, University of Dhaka, Email Ismail ais217gmail com i Executive summary In this report, an inner view of Coca Cola Company has been revealed Here, different types of strategy analysis tools have been used and we try to find out the actual position or environment of the Coca Cola Company Basically, we use different types of the matrix such as SWOT matrix, EFE matrix, IFE matrix and QSPM matrix for thi.
Company overview
Name The Coca-Cola Company
Geographic areas served Worldwide (more than 200 countries)
Headquarters Atlanta, Georgia, United States
Revenue (US$) 35.410 billion (2017) 15.4% decrease over 41.863 billion (2016) Profit (US$) 1.182 billion (2017) 81.9% decrease over 6.527 billion (2016)
Main Competitors PepsiCo Inc., Dr Pepper Snapple Group, Inc., Unilever Group,
Mondēlez International, Inc., Groupe Danone, Kraft Foods Inc., Nestlé S.A and many other companies in the beverage industry.
Historical Background
Coca-Cola, created by pharmacist John Stith Pemberton in 1886, was initially designed as a healthful beverage aimed at promoting vitality and stamina Before Coca-Cola, Pemberton developed a cocawine known as Pemberton’s French Wine Coca in 1885 while working in Columbus, Georgia.
In response to prohibition laws in his county, Pemberton developed a refreshing non-alcoholic syrup that could be mixed with carbonated water, which he initially sold for five cents a glass at Jacob’s Pharmacy in Atlanta, Georgia During the first eight months of sales, he averaged nine glasses a day, marking the beginning of a new beverage trend.
In 1891, Asa Candler acquired exclusive rights to the Coca-Cola formula after purchasing Pemberton's remaining interest in the company, leading to a tenfold increase in sales by the following year This success prompted Candler to sell his pharmaceutical business and focus entirely on Coca-Cola's growth Alongside his brother John and Pemberton’s former partner Frank Robinson, Candler established The Coca-Cola Company The trademark "Coca-Cola" was officially registered on January 31, 1893, and Candler further propelled the brand's success through aggressive advertising and the distribution of thousands of free drink coupons.
In 1894, Coca-Cola was first sold in bottles, marking a significant milestone in its history By 1899, independent bottling companies were granted licenses to bottle the beverage, a practice that continues to thrive today.
In the early 1920s, Robert Woodruff, president of The Coca-Cola Company, implemented strict standards for soda fountains to ensure a consistent and high-quality product His "Quality Drink" campaign emphasized the importance of trained staff at these locations to guarantee that Coca-Cola was served properly.
In 1926, Woodruff founded the Foreign Department, which evolved into The Coca-Cola Export Corporation in 1930, reflecting his commitment to international expansion By this time, production facilities had been established in several countries, including France, Cuba, and the Philippines Woodruff also innovated with the introduction of 6-bottle cartons, facilitating easier transportation of Coca-Cola Notably, by 1928, sales from bottles surpassed those from soda fountains, and in 1929, the company launched metal, top-opening coolers to provide consumers with ice-cold Coca-Cola at stores and filling stations.
In 1933, Coca-Cola unveiled the Dole Master Dispenser at the Chicago World’s Fair, marking the introduction of the first automatic soda dispenser This innovative machine combined carbonated water and cola syrup automatically, allowing users to enjoy their favorite beverage with just a simple pull of the handle.
When World War II began, Robert Woodruff expressed his commitment to ensuring that every soldier received a bottle of Coca-Cola for just 5 cents, regardless of their location or the costs involved.
During World War II, Coca-Cola established 64 bottling plants strategically located near combat zones in North Africa, the Pacific, and Europe Military personnel consumed over 5 billion bottles of Coca-Cola during this time, showcasing the brand's significant presence and support for troops.
In 1955, Coca-Cola was initially canned for military personnel in Japan and the Pacific, but it wasn't until 1960 that bottlers fully adopted this packaging The iconic beverage became available in 10-, 12-, and 26-ounce bottles, with the introduction of the first plastic 2-liter bottle occurring in 1977.
Launched in 1982, Diet Coke marked the first extension of the Coca-Cola and Coke brands Within just two years, it became the world's best-selling diet soft drink.
In 1985, The Coca-Cola Company made a significant change to the formula of its iconic beverage, releasing a new version of Coke However, this alteration sparked a massive backlash from loyal customers, prompting the company to re-release the original formula just a short time later.
In July 1985, Coca-Cola Classic made history by becoming the first soft drink consumed in space aboard the Space Shuttle Challenger, utilizing specially designed containers known as the “Coca-Cola Space Can.”
In February 1995, Diet Coke made history as the first diet soft drink consumed in space during the Space Shuttle Discovery mission, which also introduced soda fountain equipment for the first time in a zero-gravity environment.
Today, Coca-Cola produces nearly 450 brands in more than 200 countries and rates as one of the most recognizable trademarks in the world.
Products
Coca-Cola boasts an extensive product portfolio of over 3,500 beverages across 500 brands, including sodas, energy drinks, and soy-based options With such a vast selection, it would take more than 9 years to sample each drink if you enjoyed one every day.
Competitors
The main competitors of Coca-Cola are-
PepsiCo, formed in 1965 through the merger of Pepsi and Frito-Lay, stands as Coca-Cola's primary competitor In 2017, the brand experienced notable growth in organic revenue, highlighting its strong market presence.
PepsiCo boasts a diverse product portfolio featuring 20 billion-dollar brands, with the United States being its largest market, where it competes fiercely with Coca-Cola In 2017, PepsiCo generated net revenues of $63.5 billion and a gross profit of $28.8 billion (The Coca-Cola Company, 2018) The rivalry between these two giants spans various categories, including soft beverages, health and energy drinks, bottled water, and juices, leading to the well-known competition referred to as the "Cola Wars."
Red Bull, a leading energy drink brand, competes fiercely with Coca-Cola despite its limited product range Operating in 171 countries, Red Bull is concentrating its growth efforts in core markets such as Western Europe and the USA In 2017, the brand achieved impressive sales, exceeding 6.3 billion cans and generating a turnover of 6.282 billion Euros The brand experienced significant sales growth in five key markets: Turkey, India, the Netherlands, Northern Europe, and the United Kingdom, resulting in improved financial performance, including increased operating profit and revenues As a result, Red Bull remains Coca-Cola's strongest competitor in the energy drink sector.
Dr Pepper Snapple boasts a diverse portfolio of over 50 refreshing beverage brands, including carbonated soft drinks, juices, teas, mixers, and waters, positioning itself as a key competitor to Coca-Cola in the US market In 2017, the company generated $6.4 billion in revenue, with 90% derived from its domestic operations Over the past three decades, Dr Pepper Snapple has strategically acquired various brands to expand its business and enhance its customer base.
Nestle, although not a direct competitor of Coca-Cola, competes in specific product categories, particularly in bottled water Its popular brands, Nestle Pure Life and Poland Spring, serve as major rivals to Coca-Cola's Dasani.
Parle, an Indian brand, competes with Coca-Cola in specific product categories such as bottled water and juices Its popular offerings, including Frooty, Appy, and Bailey, serve as significant competitors to Coca-Cola's Minute Maid and other juice products, as well as various juice drinks and bottled waters in the Indian market.
Analysis of Mission Statement
Mission statement of Coca-Cola Company
Coca-Cola's enduring mission statement serves as the foundation of their corporate identity, guiding their actions and decisions while clearly defining their purpose as a company.
To refresh the world in mind, body, and spirit
To inspire moments of optimism and happiness through our brands and actions
To create value and make a difference
Table 1.0: Analysis of Mission Statement
No Components of mission statements Availability Analysis of words
3 Markets Yes To refresh the world
Concern for survival, growth, and profitability Yes
To create value and make a difference
To inspire moments of optimism and happiness
8 Concern for public image No
1.5.2 Restated mission statement: The restated mission statement of Coca-Cola should be:
To serve all those global customers with the best value for money product internationally
To present the best beverages that anyone could ever think of
To inspire employees for innovations for future profitability, future growth and future financial soundness of the company
To always advance technologically to increase the efficiency of the employees
To provide values and to create happiness and moments that everyone will cherish for
To continuously explore new products and develop cost-effective processes
To ensure public safety, public health and environmental health
To assure work safety, best work environment and to provide a gratuity to the employees for their valuable services
1.5.3 Analysis of restated mission statement
No Components of mission statements Availability Analysis of words
2 Products or services Yes Best beverages( Water and soft-drinks)
4 Technology Yes Promise for advancing technology
Concern for survival, growth, and profitability Yes
Future profitability, future growth, and financial soundness
Providing values thus happiness and moments for everyone
Brand value and grabbing international market
8 Concern for public image Yes
Public safety, public health, and environmental health
Safe and sound work environment, gratuities for best performance Table 2.0: Analysis of the restated mission statement
Introduction
The external analysis involves examining the industry factors affecting a company, focusing on competitive structure, position, dynamics, and history Often referred to as macro-level analysis, it evaluates broader aspects such as political, social, global, technological, and demographic influences The primary goal of this analysis is to identify opportunities and threats within the industry that can impact profitability, volatility, and growth In this article, we will conduct an external analysis of Coca-Cola.
PESTEL analysis
Political environment
The political environment significantly influences the non-alcoholic beverage industry, as it operates under FDA regulations and government oversight Companies face potential fines for failing to comply with legal standards, while changes in laws—such as accounting standards, taxation, and environmental regulations—can impact their financial performance and market entry Additionally, the competitive landscape is shaped by pricing pressures and the need to adapt to actions taken by rivals, which can affect sales share in the global market.
The political landscape significantly influences Coca-Cola's operations in Bangladesh, particularly regarding internal markets and governmental changes that impact market entry As the leading soft drink brand in the country, Coca-Cola diligently monitors government policies and regulations Although the liberalization of the economy and the introduction of the New Industrial Policy aimed to reduce bureaucratic barriers, the political environment remains a primary challenge for Coca-Cola's expansion into the Bangladeshi market.
Coca-Cola's entry into the Bangladeshi market exemplifies the company's commitment to adhering to local regulations and cultural practices By closely monitoring the country's policies, Coca-Cola ensured compliance by labeling its products with a "Halal" stamp, catering to the predominantly Muslim population This strategic approach allowed Coca-Cola to navigate potential political challenges effectively while establishing a strong presence in Bangladesh.
Coca-Cola remains competitive in the market largely due to compliance with FDA regulations, which are essential for their products to be sold However, political changes, taxation policies, accounting standards, marketing regulations, and labor laws could significantly impact Coca-Cola's ability to supply its beverages.
Economic environment
Economic factors play a crucial role in identifying growth opportunities for firms, encompassing elements such as national economic growth, interest and exchange rates, inflation, wage levels, and unemployment The economic environment is influenced by local, national, and global conditions, including challenges like recession and inflation In countries like Bangladesh, the non-alcoholic beverage industry thrives, particularly in international markets, due to religious prohibitions on alcohol According to Standard and Poor's Industry surveys, this sector demonstrates significant sales potential outside the U.S.
Major soft drink companies are experiencing economic improvements in key international markets such as Japan, Brazil, and Germany, which are crucial for the stable growth of the non-alcoholic beverage industry, including in countries like Bangladesh Despite a decline in the carbonated drinks market, particularly for Coca-Cola, the company strategically assesses a country's economic conditions before entering the market Economic growth enhances consumer purchasing power, providing an excellent opportunity for effective product marketing Coca-Cola has successfully leveraged this insight in the past to expand its distribution across various countries.
Interest rates represent the cost of borrowing money from the government, and when these rates rise, companies like Coca-Cola may be discouraged from investing further due to increased borrowing costs To manage the impact of fluctuating interest rates, Coca-Cola employs derivative financial instruments Additionally, inflation often leads to higher wage demands from employees, as they seek to maintain their purchasing power in the face of rising prices.
The rising cost of living presents a significant challenge for companies, as it leads to increased expenses that cannot be passed on to consumers due to heightened competition and associated risks This external threat emphasizes the substantial influence of economic factors on corporate behavior in varying economic conditions.
Inflation poses a significant challenge to a country's economy, impacting both consumers and businesses In Bangladesh, the high inflation rate in 2009 led to increased prices for various products, creating uncertainty in corporate decision-making Coca-Cola faced similar challenges, grappling with rising input costs, including salaries, distribution, and operational expenses Despite these financial pressures, the beverage industry, characterized by fierce price competition, has refrained from adjusting product prices.
Social environment
Social factors, including cultural aspects, health consciousness, population growth, and safety emphasis, significantly influence businesses like Coca-Cola, which must adapt to these societal changes While companies cannot alter social factors, they must implement management strategies that align with evolving trends Understanding the unique culture and attitudes of each country is crucial for effective marketing For instance, when Coca-Cola entered the Bangladeshi market, it strategically introduced a limited selection of products tailored to local preferences and cultural norms, rather than launching its entire product range.
As awareness of public health issues, particularly obesity, grows among consumers and governments, the soft drinks industry is responding by introducing healthier options This trend has led companies like Coca-Cola to develop products such as Diet Coke and zero-calorie soft drinks, catering to health-conscious young individuals who wish to maintain a fit physique By offering these dietary alternatives, Coca-Cola aims to provide a satisfying beverage choice without the added calories, addressing the serious concerns surrounding obesity in today's society.
11 it is said that “Consumer from the age groups 37 to 55 are also increasingly concerned with nutrition” Since many are aware, they are concerned with the longevity of their lives
Coca-Cola's strategic focus on the growing demand for health and energy drinks, alongside the significant influence of population growth and age distribution, has reshaped its market approach in Bangladesh Recognizing that non-alcoholic beverages primarily appeal to children and young adults, Coca-Cola initially faced challenges due to its American-centric advertising, which did not resonate with local consumers However, by refining its marketing mix, reducing prices by 15-20%, and targeting the 18-24 age group, the company successfully increased its market share and fostered brand loyalty Today, Coca-Cola's substantial investments in Bangladesh not only bolster its business but also create numerous jobs in the related supply and distribution sectors.
The soft drink industry is experiencing steady growth, driven by a strengthening middle class and low per capita consumption In response to rising health consciousness among urban consumers, Coca-Cola has launched products like Diet Coke, which offers fewer calories than traditional options This shift in focus is evident as the company pivots from carbonated beverages to fruit drinks, juices, and bottled water Additionally, Coca-Cola recognizes the rural market as a significant opportunity, targeting nearly 70% of the country's population.
Technological environment
Technology plays a crucial role in the soft drinks industry, particularly in packaging, despite the manufacturing and distribution processes being relatively low-tech Crafting a new product with the ideal blend and taste is both a science and an art A significant portion of the business relies on bottling partners, who produce and distribute approximately 83% of the global unit case volume without the company having controlling power over them Therefore, maintaining a positive relationship with these bottling partners is essential for the company's success.
12 give ample support in pricing, marketing, and advertising then the bottling industry while increasing their short-term profits, may become detrimental to the company
The technological advancements at Coca-Cola have revolutionized product availability and innovation, exemplified by the global rollout of vending machines and the introduction of popular beverages like Cherry Coke and Diet Coke In the bottling sector, innovations such as recyclable and non-refillable bottles, along with trendy cans, have appealed to younger consumers This focus on technology fosters opportunities for new product development and enhancements in marketing and production While the introduction of Cherry Coke in 1985 showcased Coca-Cola's commitment to innovation, many consumers continue to favor the classic taste of the original Coke.
Environmental analysis
The environmental analysis encompasses local, national, and global issues, with Coca-Cola Company ensuring all facilities comply with government-imposed environmental laws Recognized as an environmentally friendly company, Coca-Cola Bangladesh mirrors this commitment Through its Corporate Social Responsibility (CSR) initiatives, Coca-Cola addresses various social and environmental challenges, notably focusing on water conservation by supporting community-based rainwater harvesting projects and promoting conservation education.
The company has made sure that the following ideas are considered during their operations:
I Environmental due diligence before acquiring land
II Environmental impact assessment before commencing the project
III Groundwater and environment survey before selecting the site
IV The ban on purchasing CFC emitting refrigerating equipment
VI Compliance with all regulatory environmental requirements VII Energy conservation programs
VIII By following these guidelines Coca-Cola has helped the environment with consistent profits and success They seek to provide leadership in three different areas, these are as follows:
IX Water efficiency and water quality
XI Eliminating or minimizing solid waste
Coca-Cola, despite its commitment to environmental sustainability, has faced significant controversies, particularly highlighted by a report from the Centre of Science and Environment in Bangladesh Released on February 4, 2007, the report detailed an experiment conducted by the Pollution Monitoring Laboratory, which tested 17 packaged drinking water brands The findings revealed that Coca-Cola's Kinley brand contained pesticide residue levels 15 times higher than the permissible limits, while Bisleri and Aquaplus exceeded the norms by 59 times and other alarming levels, respectively.
The Prevention of Food Alteration Act, which governs food safety, prohibits the presence of pesticides in food items; however, it does not address their presence in soft drinks While the Food Processing Order mandates that soft drinks must contain "potable water" as a primary ingredient, the Bureau of Standards has yet to establish specific standards for pesticide levels in water.
The Bureau of Indian Standards (BIS) has established that pesticide levels in food products should not exceed 0.001 parts per million Additionally, the health ministry of Bangladesh acknowledged deficiencies in the enforcement of the PFA concerning carbonated beverages.
Legal environment
Coca-Cola operates under a complex framework of legal factors, including discrimination law, customer law, antitrust law, employment law, and health and safety law, which vary across the numerous countries where it conducts business In Bangladesh, the company must comply with the Drug and Cosmetic Act, the Occupational Safety and Health Act, and various environmental regulations, impacting the production, distribution, sale, and advertising of its products Any changes in these laws could lead to increased costs and capital expenditures, ultimately affecting the company's profitability and operational efficiency.
Various jurisdictions may implement stringent regulations regarding product labeling and warnings about chemical content and health risks Companies must be prepared to adapt to these future requirements The legal landscape is influenced by both national and international legislation The Coca-Cola Company ensures it retains all rights relevant to its operations, with all inventions and product developments undergoing a patented process.
In today's market, consumers hold significant power, allowing them to file complaints against manufacturers for defective products that fail to meet established standards Coca-Cola must ensure that essential information, including pricing, manufacturing and expiry dates, batch numbers, and nutritional facts, is clearly labeled on its packaging Additionally, the Ministry of Labor is responsible for establishing laws that promote fair employment practices across the country.
They have stipulated norms on employing people from the country and getting expatriates in the company as well.
Key opportunities
Developing nations
Coca-Cola has a significant opportunity to capitalize on the growing consumption of carbonated and soft drinks in developing countries, where the market is still expanding While developed nations are shifting towards healthier beverage options, countries like India, with their hot summers, experience a surge in cold drink consumption, nearly doubling during this season This trend highlights the potential for Coca-Cola to strengthen its presence and increase sales in these emerging markets.
Supply chain improvement
Coca-Cola's business heavily relies on transportation and distribution, making the supply chain a significant area for cost management With transportation costs consistently increasing, it is crucial for Coca-Cola to continuously monitor and enhance its supply chain operations By focusing on ongoing improvements, the company can effectively reduce expenses and maintain a competitive edge.
Extended Reach
As the global population steadily rises, Coca-Cola is strategically enhancing its product offerings to align with the growing consumer demand for healthier living options.
Coca-Cola is expanding its business lines in response to rising demand for its juice and coffee products, particularly in markets like India and China Additionally, the growing clean water shortages in developing countries are expected to drive significant demand for the company's bottled water offerings Over the past year, these segments have experienced double-digit growth, indicating a shift towards a broader range of beverages beyond Coca-Cola's traditional offerings The company is committed to diversifying its portfolio and providing essential beverage options in emerging markets for the long term.
Packaged drinking water
As hygiene concerns drive the demand for clean drinking water, packaged drinking water has gained significant popularity Coca-Cola, through its Kinley brand, is positioned in this market, although its current growth is gradual Nevertheless, Kinley holds substantial potential for expansion To capitalize on this opportunity, Coca-Cola should prioritize the growth of the Kinley brand, aiming to elevate it to a level of trust comparable to that of established competitors.
Improving the lesser selling products
Coca-Cola's product portfolio includes several items that have struggled to gain market acceptance To enhance revenue, the company should focus on marketing these underperforming products effectively Given the significant investments made in launching these items, a strategic marketing push could lead to increased sales and overall financial growth for Coca-Cola.
Diversification
Diversifying into the health and food sector will enhance Coca-Cola's product offerings, allowing the company to better serve its customers This strategy will also enable increased revenue through effective cross-selling to existing clients Additionally, the existing beverage supply chain can efficiently distribute these new snack products, optimizing logistics and reducing overall supply chain costs.
Marketing opportunities
In the 21st century, the rapid advancement of digital technologies and AI has created significant marketing opportunities Pepsi is currently leading the competition by leveraging these innovations To enhance customer engagement and improve its marketing strategies, Coca-Cola can effectively utilize these emerging resources and technologies.
Market expansion through partnerships
Coca-Cola has significant potential for market expansion by forming strategic partnerships with fast food and food brands These collaborations can enhance its market share and improve brand visibility, positioning Coca-Cola for increased growth in a competitive landscape.
Key threats
Intense competition
Coca-Cola operates in both local and international markets, competing primarily with other soft drink companies While the Coca-Cola Company focuses on producing non-alcoholic beverages, it faces increasing competition from various companies, including PepsiCo, which is one of its major rivals This intense competition centers around capturing a larger market share in the beverage industry.
Changing health-consciousness attitude
As global consumers increasingly prioritize health, there has been a significant decline in the consumption of carbonated beverages, posing a serious challenge for Coca-Cola, a leading provider of such drinks.
Water scarcity
As global water scarcity intensifies, the rising costs of water pose significant challenges for Coca-Cola, which relies heavily on this vital resource for its soft drink production This increasing demand for water not only affects operational efficiency but also contributes to negative environmental impacts, complicating the company's efforts to maintain smooth business operations.
Strong dollar
Coca-Cola Company earns more than 60% profit from the outside of United States Due to strong dollar performance against other foreign currencies firm’s overall income may fall.
Legal issue
Coca-Cola's beverages can have negative health effects, prompting governments to consider legislation mandating clear disclosure on product labels This transparency could lead to unfavorable perceptions among consumers, potentially resulting in a loss of customers for the company.
EFE matrix for Coca-Cola
Evaluation of Weighted Score
Coca-Cola's weighted score on the EFE matrix is 3.39, indicating strong performance in leveraging opportunities and mitigating threats, as it exceeds the average score of 2.50 However, with a maximum possible score of 4, there remains room for improvement within the company.
Reasons for weight and rating in EFE Matrix
Serial Opportunities for Coca-Cola Reasons for weight and rating
Coca-Cola is seizing the opportunity presented by increased consumption in developing markets, rapidly expanding its business in these regions With a weight of 0.14 and a rating of 3, there are significant growth prospects for the company in these emerging economies.
A robust supply chain serves as a significant competitive advantage for companies aspiring to be market leaders While Coca-Cola boasts a strong supply chain, there remains potential for further enhancement Consequently, this aspect is rated at 3, with a weight of 0.08.
As consumers increasingly prioritize healthier lifestyles, Coca-Cola is adapting by enhancing its diverse business lines to meet this demand.
Packaged drinking water is increasingly favored for its hygiene benefits, and while Coca-Cola's Kinley brand is present in this market, it has not gained widespread acceptance among consumers Consequently, it holds a weight of 0.07 and a rating of 3.
5 Improving the lesser selling products
Coca-Cola is currently facing significant challenges in its product performance, indicating inefficiencies in its business operations With a weight of 0.07 and a rating of 3, the company must address these issues to improve its market standing.
Diversification is very important for the continuous development of business and Coca-Cola is also diversifying regularly So here weight is 0.1 and the rating is 3
Marketing through digital media is a great opportunity for business and Coca-Cola is using this media properly So here weight is 0.06 and rating is 4
Coca-Cola is exploring partnerships with fast food and food brands to enhance its market share and effectively promote its products With a weight of 0.09 and a rating of 3, this strategy reflects the company's commitment to strategic collaborations in the competitive food and beverage industry.
Serial Threats of Coca-Cola Reasons for weight and rating
Coca-Cola is facing competition nationally and internationally from different competitors but it is trying its best to sustaining in the market through different activities
So here weight is 0.13 and rating is 4
Changing attitude of Consumers is a great threat of Coca- Cola but it is trying to cope with it So weight is 0.1 here and rating is 3
As global water scarcity intensifies, the cost of water continues to rise, prompting companies like Coca-Cola to enhance their water management strategies To address this pressing issue, Coca-Cola must focus on improving efficiency in its water usage practices.
The Coca-Cola Company generates over 60% of its profits from international markets However, the strong performance of the U.S dollar against foreign currencies may impact the company's overall income To address this challenge, Coca-Cola is implementing various strategies.
Adverse health consequences of Coca-Cola is a threat for it and Coca-Cola is trying to settle this matter So here weight is 0.05 and the rating is 3
STRENGTHS
Strong brand image
Coca-Cola stands as one of the world's most influential brands, having cultivated a strong brand identity centered around the universal value of happiness (Frue, 2018) Through strategic endorsements and advertisements, Coca-Cola effectively associates its image with joy and positivity Their commitment to sustainability is reflected in the thoughtful placement of their logo, which not only reinforces brand identity but also fosters consumer loyalty.
The company experienced an increase in value share within the nonalcoholic ready-to-drink (NARTD) beverage sector, despite a net revenue decline of 8% to $8.9 billion, largely due to a 15% impact from refranchising its bottling operations However, organic revenues (non-GAAP) rose by 5%, fueled by over 2% growth in concentrate sales and more than 2% growth in price/mix.
Largest beverage companies in the world in 2017
Rank Name 2017 revenue (in US$ billions) Beverage segment
2 The Coca-Cola Company 35.410 Non-alcoholic
10 Molson Coors Brewing Co 11.002 Alcoholic
Table 3.0: Largest beverage companies in the world in 2017
From 2006 to 2018, the Coca-Cola brand consistently demonstrated significant global value, reaching 79.96 billion U.S dollars in 2018, an increase from 78.14 billion in 2017 During this period, the Coca-Cola Company also reported impressive revenue of 35.41 billion U.S dollars from its worldwide operations.
2017 The company's largest regional market was North America, accounting for 24.4 percent of the revenue The company also owns 13 other brands that each annually earn at least US$1 billion:
Diet Coke/Coca-Cola Light
The Coca-Cola Company’s billion-dollar brands
(Source: The Coca-Cola Company)
The key to a successful product is an exceptional taste, as exemplified by Coke's enduring popularity since its inception 132 years ago Introduced in the 1980s, Diet Coke caters to those seeking a lighter flavor, while Coca-Cola No Sugar offers a delicious sugar-free option for those moderating their sugar intake Additionally, Coca-Cola Stevia No Sugar provides a full-flavored experience with a natural sweetener, addressing the growing demand for healthier alternatives.
The Coca-Cola Company operates as a global business with a local focus, thanks to its extensive Coca-Cola system, which comprises the company and over 250 bottling partners worldwide This system allows Coca-Cola to produce and sell beverage bases, concentrates, and syrups to bottling operators, who then manufacture, package, and distribute the final products to vending partners and customers for retail.
The bottling partners collaborate closely with various customers, including restaurants, grocery stores, convenience stores, amusement parks, and movie theaters, to implement localized strategies effectively This partnership ensures that 24 products are delivered to consumers through tailored approaches that meet the specific needs of each market segment.
3.1.6 Investment in marketing and advertising
TV commercials continue to be a vital component of The Coca-Cola Company's advertising strategy, particularly with the global "Taste the Feeling" campaign that emphasizes the beverage's taste and functional aspects Launched a year ago, the campaign features relatable stories of young people enjoying Coca-Cola in genuine everyday moments In addition to its TV focus, Coca-Cola is re-evaluating its digital marketing approach, which has been characterized as fragmented and inefficient, with digital efforts currently representing about 20 percent of the global marketing budget Over the past 18 years, Coca-Cola's advertising expenditures have surged by approximately $2 billion.
The Coca-Cola Company and its competitors’ advertising expenses 2015-2017 (in US$ billions)
Dr Pepper Snapple Group Inc 0.547 0.477 0.473
Table 4.0: Coca-Cola and its competitor's advertising expenses
(Source: The respective companies’ financial reports)
A company's value is ultimately determined by what investors are willing to pay Coca-Cola has approximately 4.32 billion shares outstanding, with a share price around $43.50, leading to a market capitalization of about $188 billion However, market capitalization considers a company's cash and debt levels Many investors prefer to assess enterprise value, which disregards capital structure and emphasizes the actual business value generated by the company.
25 out cash and debt, Coca-Cola has an enterprise value of almost $213 billion Coca-Cola's most recent financial statements put a value of $94 billion on its assets
Coca-Cola's primary strength lies in its powerful brand image and widespread recognition, making it a globally popular choice With a commanding market share of approximately 48% in the beverage industry, Coca-Cola also boasts a robust product portfolio In response to the rising competition from health drinks, the company has introduced low-calorie alternatives such as Diet Coke, Coke Zero Sugar, Fanta Orange Zero, Lilt Zero, Schweppes Diet Lemonade, and Powerade Zero, ensuring that it meets consumer demand for healthier options across its iconic product range.
The Coca-Cola Company possesses significant strengths that provide a competitive advantage in the market, including strong customer loyalty to its flavorful drinks and a robust distribution network that supports its impressive international presence The brand employs unique marketing and advertising strategies, making substantial investments in customer engagement through viral marketing videos and social media campaigns Additionally, Coca-Cola gains publicity through sponsorships and other promotional methods With a current valuation of $83.84 billion, Coca-Cola boasts a high brand value, further solidifying its position as a market leader These key strengths are essential to Coca-Cola's ongoing success.
Brand value
From 2006 to 2018, the Coca-Cola brand experienced significant growth in global value, reaching 79.96 billion U.S dollars in 2018, an increase from 78.14 billion in 2017 During this period, the Coca-Cola Company generated impressive revenue of 35.41 billion U.S dollars through its worldwide operations.
2017 The company's largest regional market was North America, accounting for 24.4 percent of the revenue The company also owns 13 other brands that each annually earn at least US$1 billion:
Diet Coke/Coca-Cola Light
The Coca-Cola Company’s billion-dollar brands
(Source: The Coca-Cola Company)
High customer loyalty
The key to a successful product is great taste, a principle Coca-Cola mastered 132 years ago Introduced in the 1980s, Diet Coke caters to those seeking a lighter flavor and remains popular today In response to consumer demand for healthier options, Coca-Cola launched Coca-Cola No Sugar, which offers the classic Coke taste without sugar Additionally, Coca-Cola Stevia No Sugar was developed for those desiring a full-flavored beverage with a natural sweetener, reflecting the growing preference for healthier ingredients.
Extensive distribution network
The Coca-Cola Company exemplifies a global business model that effectively operates on a local scale, thanks to its extensive Coca-Cola system, which comprises the company and over 250 bottling partners worldwide The company is responsible for producing and selling beverage bases, concentrates, and syrups to these bottling operators, who then manufacture, package, and distribute the final products to vending partners and customers for retail sale.
The bottling partners closely collaborate with various customers, including restaurants, grocery stores, convenience stores, amusement parks, and movie theaters, to effectively implement localized strategies developed in partnership with the company.
Investment in marketing and advertising
TV commercials continue to be a vital component of The Coca-Cola Company's advertising strategy, even in the digital age The global "Taste the Feeling" campaign, launched a year ago, emphasizes the beverage's taste and functional aspects through a series of television ads that showcase relatable stories of young people enjoying Coca-Cola in everyday moments In addition to this television focus, Coca-Cola is re-evaluating its digital marketing strategy, which has been described as fragmented and inefficient, with digital marketing currently making up about 20% of the company's global marketing budget Over the past 18 years, Coca-Cola's advertising expenses have risen by approximately $2 billion.
The Coca-Cola Company and its competitors’ advertising expenses 2015-2017 (in US$ billions)
Dr Pepper Snapple Group Inc 0.547 0.477 0.473
Table 4.0: Coca-Cola and its competitor's advertising expenses
(Source: The respective companies’ financial reports)
High company valuation
A company's value is ultimately determined by what investors are willing to pay for it Coca-Cola has approximately 4.32 billion shares outstanding, with a share price around $43.50, resulting in a market capitalization of about $188 billion However, market capitalization considers both cash and debt levels, leading some investors to prefer enterprise value, which emphasizes the actual business value generated, disregarding the company's capital structure.
25 out cash and debt, Coca-Cola has an enterprise value of almost $213 billion Coca-Cola's most recent financial statements put a value of $94 billion on its assets
Coca-Cola's most significant strength lies in its powerful brand image and widespread brand awareness, making it a popular choice globally With a commanding market share of approximately 48% in the beverage industry, Coca-Cola also boasts a robust product portfolio To compete with the rising demand for health-conscious drinks, the company has introduced low-calorie alternatives such as Diet Coke, Coke Zero Sugar, Fanta Orange Zero, Lilt Zero, Schweppes Diet Lemonade, and Powerade Zero, ensuring it offers healthier options for nearly all of its iconic products.
The Coca-Cola Company possesses significant strengths that provide it with a competitive advantage in the market, including a high level of customer loyalty to its flavorful drinks Its impressive international presence is supported by a robust distribution network and unique marketing strategies Coca-Cola continually invests in marketing, utilizing viral videos and social media campaigns to engage customers, alongside gaining publicity through sponsorships With a current valuation of $83.84 billion, Coca-Cola enjoys substantial brand value, making its distribution network and innovative marketing approaches key factors in its ongoing success.
Weaknesses
Water-related problems
Water scarcity is a growing concern globally, exacerbated by overexploitation and increasing demands from agriculture and industry Coca-Cola, a major player in the beverage industry, relies heavily on water for its products and has faced significant criticism regarding its water management practices Despite ongoing challenges related to water consumption, the brand is actively investing in water conservation initiatives to address the ongoing water crisis.
Declining revenue
From the past five years, it can be seen that the revenues of Coca-Cola have been declined steadily
At the same time, the gross profits of the brand have also fallen consistently In 2017 net operating revenues was 35.4 billion dollars which were 41.9 billion dollars in 2016
Year Revenue (in mil USD)
Net income (in mil USD)
Relatively less product diversification
Coca-Cola's primary competitor, Pepsi, has successfully diversified into the snacks market with popular products like Lays and Kurkure, capitalizing on a lucrative revenue stream In contrast, Coca-Cola's absence in this segment may lead to a significant loss of market share in the future, highlighting a missed opportunity for growth and expansion.
Absence in health beverages
Obesity has become a significant global issue, prompting individuals to prioritize healthier beverage choices to combat weight gain Carbonated drinks, particularly those produced by Coca-Cola, are major contributors to excessive fat intake Consequently, there has been a noticeable shift towards healthier alternatives, leading to a decline in Coca-Cola's revenues since 2012.
Problem with foreign currency fluctuation
Coca-Cola Company faces significant challenges due to foreign currency fluctuations, as it generates income, incurs expenses, and holds assets and liabilities in various currencies, including the euro, Japanese yen, Brazilian real, and Mexican peso In 2014, the company operated in 70 functional currencies, resulting in $26.2 billion in revenue from international operations Since its consolidated financial statements are reported in U.S dollars, Coca-Cola must convert revenues, expenses, and other financial elements into U.S dollars at prevailing exchange rates, complicating the preparation of its balance sheet This reliance on the U.S dollar poses risks, particularly due to market uncertainties stemming from factors such as geopolitical conflicts, authoritarian regimes, currency manipulation, and overall business conditions in foreign markets.
Adjusting consumer changing need
Coca-Cola faces challenges in adapting to diverse consumer preferences and cultural differences across various countries The company must understand local drinking habits and tastes while competing with restaurants and shops that provide freshly made beverages, such as flavored carbonated drinks and iced coffee Consequently, these local offerings are impacting Coca-Cola's market share, particularly as health-conscious consumers increasingly move away from soda.
28 seen through research that over the past 20 years, sales of full-calorie soda in the United States have plummeted by more than 25 percent, which includes coke drinks.
IFE Matrix
Evaluation of Weighted Score
Coca-Cola's weighted score on the Internal Factor Evaluation (IFE) matrix is 3.30, indicating strong performance as it exceeds the average score of 2.50 This suggests that the company effectively leverages its strengths while addressing its weaknesses However, with a maximum possible score of 4, there remains room for improvement.
IFE matrix for Coca-Cola
Serial Strengths of Coca-Cola Weight Rating Weighted
6 Investment in marketing and advertising
5 Problem with foreign currency fluctuation
Reasons for weight and rating in IFE Matrix
Cola Reasons for weight and rating
A strong brand image is crucial for gaining widespread customer acceptance, with a significant weight of 0.11 Despite facing competition from formidable brands like Pepsi, the company has effectively maintained its brand image, resulting in a solid rating of 3.
The company has successfully captured a significant market share, which is crucial for its ongoing growth and stability This achievement has led to a score of 0.12, reflecting its strong performance Additionally, the company's ability to maintain and expand its market presence has resulted in an impressive rating of 4.
To survive in the market you have to expand your portfolio continuously Coca-Cola is also extending its portfolio continuously But other competitors are also very strong here
So, in this case, the score is 0.05 and the rating is 3 here
Customer loyalty plays a crucial role in ensuring consistent performance for businesses While Coca-Cola has established a strong customer loyalty base, it faces significant competition from rivals with their own loyal customer segments This indicates that there is potential for growth and improvement in Coca-Cola's customer loyalty strategies Currently, the company's score stands at 0.09, with a rating of 3.
The distribution network is very important for cost structure of a company and the company has a good distribution network So here score is 0.05 and the rating is 3
Investment in marketing and advertising
Marketing and advertising expense are very important for the profitability of a company and Coca-Cola have to invest here regular basis But its revenue is not improving continuously
So there is a scope for efficiency Therefore, here score is 0.02 and the rating is 2
Value of a company is very important for investors and it has been increased rapidly So here score is 0.02 and the rating is
Serial Weaknesses of Coca-Cola Reasons for weight and rating
Coca-Cola's long-standing water problem is a significant weakness for the company, prompting it to implement various initiatives to address the issue Despite these efforts, the current score remains low at 0.10, while the overall score stands at 3.
Coca-Cola faces significant challenges that have contributed to a decline in its performance, prompting the company to implement various initiatives aimed at boosting revenue With a weight of 0.18 and a rating of 3, these efforts reflect the importance of addressing its main weaknesses to enhance overall business growth.
Products of Coca-Cola is less diversified beyond soft drinks relative to its competitors but it is on the process of diversification So here weight is 07 and rating is 3
The absence of healthy beverages
As health consciousness rises among consumers, Coca-Cola has been slow to adapt its strategies to address these concerns, resulting in a weight rating of 0.12.
Problem with foreign currency fluctuation
It is very common for multinational companies and Coca-Cola is handling it consistently but there are some chances of loss So here weight is 0.03 and the rating is
Understanding customer demand is crucial in today's rapidly changing market, and Coca-Cola is actively working to adapt to these shifts With a weight of 0.04 and a rating of 3, the company's efforts highlight the importance of staying attuned to consumer needs.
CHAPTER FOUR STRATEGY FORMULATION (SWOT)
Introduction
SWOT analysis is a versatile tool primarily utilized by businesses, but it is also beneficial for nonprofit organizations and individuals seeking personal assessment Furthermore, it can effectively evaluate various initiatives, products, or projects.
The SWOT analysis framework, developed by Albert Humphrey during the 1960s and 1970s at the Stanford Research Institute, was initially designed for business use based on data from Fortune 500 companies Today, it is widely utilized by organizations across various sectors to facilitate informed decision-making.
This SWOT analysis of Coca-Cola highlights the company's strategic use of its competitive advantages, which has positioned it as the world's second-largest beverage manufacturer It examines the critical strengths, weaknesses, opportunities, and threats that significantly impact the business By leveraging these insights, Coca-Cola can effectively navigate its market landscape and enhance its brand presence.
We have identified 33 threats and developed various strategies to leverage opportunities and enhance the strengths of Coca-Cola These strategies are designed to mitigate threats and reduce weaknesses Additionally, we utilized the QSPM matrix to evaluate the attractiveness scores (AS) of the different strategies, allowing us to recommend the most suitable approaches for Coca-Cola's growth and sustainability.
SWOT Analysis
6 Investment in marketing and advertising
4 The absence of healthy beverages
5 Problem with foreign currency fluctuation
4 Market the lesser selling products
1 Increase marketing expense by 15% (By using a strong brand image, Coca-Cola can avail the over-population of Asian countries like Bangladesh and India) (S1,7; O1,6)
To enhance market share, it is essential to increase investment in packaged drinking water by 20-25% Given the scarcity of hygienic water in developing nations, Coca-Cola can leverage its strong brand value and high customer loyalty to differentiate its products, similar to its successful strategies in the juice and coffee sectors.
3 Diversification of products to cake, biscuits to the developing nations (It will reduce the water- related problems every year about 10 %.) (O5;
4 Focus on the diversified products through partnerships to reduce the water-related problems and to cope with customer changing needs (O7,W6)
5 Invest in the fast food products by
$100million (As they can diversify the competition since they have high customer loyalty and high distribution network.) (S4;T1)
6 Use hedging and open L/C with their strong brand value of $79 billion to reduce the strong dollar issue (S7;T4)
7 Reduce investment in soft drinks by 20% in increase investment in fast food products, chips, cake, and homemade products by 20%
8 Invest in healthy beverages by $200million to avoid the health-consciousness attitude of customer.(T2;W4)
QSPM
Improving the lesser selling products
Investment in marketing and advertising
Problem with foreign currency fluctuation
Based on the score of QSPM matrix we have ranked strategies and we would suggest that Coca-
Coca-Cola Company should prioritize its strategies based on their ranking, but implementing all at once is challenging due to limitations in time, budget, and resources Therefore, we recommend focusing on three key strategies to enhance the company's performance and sustainability.
Strategy 7: Reduce investment in soft drinks by 20% in increasing investment in fast food products, chips, cake, and homemade products by 20%
Strategy 4: Focus on the diversified products through partnerships to reduce the water-related problems and to cope with customer changing needs
Strategy 3: Diversification of products to cake, biscuits to the developing nations (like India,
It is expected that by implementing these strategies Coca-Cola Company will be able to avail its opportunities and avoid its threats by gaining competitive advantages
Internal and External (I/E) Matrix
The score of EFE matrix is 3.39 and the score of IFE matrix is 3.03
To enhance growth and development, we should implement strategies such as market development, product development, market penetration, and integration, as indicated by the EI matrix These strategies align with the insights gained from the SWOT analysis, supporting a comprehensive approach to achieving our business objectives.
Product Development: Reduce investment in soft drinks by 20% in increasing investment in fast food products, chips, cake, and homemade products by 20%
Horizontal integration: Focus on the diversified products through partnerships to reduce the water-related problems and to cope with customer changing needs
THE IFE TOTAL WEIGHTED SCORES
The Coca-Cola Company stands as one of the world's leading corporations, and this article delves into its key components We begin by examining Coca-Cola's mission statement, identifying nine critical elements: customer focus, product and service offerings, corporate philosophy, self-concept, technological innovation, commitment to survival and profitability, public image, employee welfare, and market presence Following this, we analyze both the external and internal environments using PESTEL analysis, uncovering significant opportunities such as expansion in developing nations, increased market reach, and diversification, alongside threats including intense competition and shifting health trends Our evaluation yields an External Factors Evaluation (EFE) matrix score of 3.39 and an Internal Factors Evaluation (IFE) matrix score of 3.03, indicating a robust market position Finally, we synthesize these insights into a SWOT analysis, considering strengths, weaknesses, opportunities, and threats, which leads us to develop eight strategic initiatives based on the Quantitative Strategic Planning Matrix (QSPM) results.
3 strategies Finally, the selected strategies are –
Reduce investment in soft drinks by 20% in increasing investment in fast food products, chips, cake, and homemade products by 20%
Focus on the diversified products through partnerships to reduce the water-related problems and to cope with customer changing needs
Diversification of products to cake, biscuits to the developing nations
The remarkable success of Coca-Cola is the result of many years of development, beginning with John Pemberton's creation of the secret recipe in 1886 Few could have predicted that over a century later, his invention would evolve into a globally recognized brand with a significant impact on the world.
The Coca-Cola Company employs stringent quality procedures and establishes high standards to ensure the consistent production of its world-renowned beverage, meeting consumer expectations with every bottle or can of Coca-Cola.
Despite Coca-Cola's strong performance and growing consumer trust, the company must enhance its efforts to maintain its competitive edge in the beverage industry and sustain growth To increase shareholder wealth, Coca-Cola should focus on boosting sales and reducing costs, leading to higher revenue and net profits.
We would like to propose the accompanying proposals for the Coca-Cola Company:
In today's rapidly evolving market, organizations must adapt to survive, and innovation offers a competitive edge The Coca-Cola Company can introduce new products to attract consumer interest while continuously strengthening its brand to maintain loyalty and differentiate itself from rivals By diversifying into complementary products such as fast food, chips, and cakes, Coca-Cola can address market competition and contribute to solutions for water scarcity Increasing marketing expenditures will enhance brand visibility, allowing Coca-Cola to capture consumer attention more effectively than competitors Despite its robust global market position, investing in marketing and product diversification can further solidify its standing in this competitive landscape.
Maintaining coherence among the workforce is essential for large organizations to foster a positive direction, achieve shared goals, and continuously set new objectives.
To ensure effective measures, the Company has developed a strong partnership with its franchisees, focusing on a shared commitment to quality Central to this approach is Total Quality Management, which emphasizes consistently meeting quality standards and continuously seeking innovative ways to enhance performance.