STRATEGIC MANAGEMENT CASE OF COCA COLA

1. Introduction. Coca-Cola, the product that has given the world its best-
known taste was born in Atlanta, Georgia, on May 8, 1886. Coca-Cola Company is the
world’s leading manufacturer, marketer and distributor of non-alcoholic beverage
concentrates and syrups, used to produce nearly 400 beverage brands. It sells beverage to
bottling and canning operators, distributors, fountain retailers and fountain wholesalers.
Coca-Cola was first introduced by John Pemberton, a pharmacist, in the year 1886 in
Atlanta, Georgia. Early growth was impressive, but it was only when a strong bottling
system developed that Coca-Cola became the world-famous brand it is today.

2. Aim. The aim of this presentation is to give you an overview of Coca-Cola

Company.

3. Sequence of Presentation.
a.
b.
c.
d.
e.
f.
g.

4. Existing Vision, Mission, Objectives and Strategies. .

a. Vision. To achieve sustainable growth, the company has

established a vision with clear goals.

(1) Profit. Maximizing return to shareowners while

being mindful of our overall responsibilities.

(2) People. Being a great place to work where people are

inspired to be the best they can be.

(3) Portfolio. Bringing to the world a portfolio of beverage brands

that anticipate and satisfy peoples; desires and needs.

(4) Partners. Nurturing a winning network of partners and

building mutual loyalty.

(5) Planet. Being a responsible global citizen that makes a

difference.

b. Mission. The Roadmap starts with the mission, which is enduring. It

declares the purpose as a company and serves as the standard against which the

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 company weighs the actions and decisions. It is the foundation of company
manifesto.

(1) To refresh the world in body, mind and spirit. (Market,

Customer, Philosophy)

(2) To inspire moments of optimism through the brands and actions.

(Products)

(3) To create value and make a difference. (Self concept)

d. Objectives.
(1) 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.

(2) 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 the aim.

(3) To establish a core group of enablers and activists to lead on the

different aspects of this campaign.
(4) To monitor the progress of the campaign and ensure that any trials
and roll-outs are effectively monitored and evaluated.
e. Strategies. The strategic goals are decided by the top management.
However, they are reviewed every year in the annual meeting to make sure that
they are in line with the changing environment. These are:

(1) To continue to be an organization providing the quality products to

the valuable customers.

(2) To select and retain the professional people for the organization.

(3) To project an outstanding corporate image.

(4) To satisfy the customer through extra ordinary service and an

excellent service along with the complete tactical and operational support.

5. Analysis of Vision and Mission Statement of Coca- Cola.

a. Vision Analysis. While we talk about Vision statement of Coca-cola,

it simply tells us that this company wants to achieve something new in future
which will consist sustainability, Quality and growth. This is not an easy task to

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 achieve but apart from this, we can see that statement is clear and having brief
meanings which explains a lot, about what coca-cola wants accordingly.
Moreover this statement tells us that, they are going to achieve these three things
which are sustainability, Quality and growth by the help of six variables which are
people, Portfolio partners, planet, profit and productivity. There people, partners,
productivity and portfolio will give them to achieve better quality and growth in
future where as there responsibility towards planet and partners will help them to
achieve sustainability. So Vision of Coca-Cola is clear and good for future.

b. Mission Analysis. In Mission statement of Coca-Cola Company, it

contains Philosophy, Self concept, customers, Products and services, market. The
mission statement is satisfactory because it is containing five components out of
nine. Vision is clear and mission statement of Coca-cola is also supporting its
vision.

6. External Assessment.
a. Major Competitors.

(1) Pepsi. Caleb Brandhum, a North Caroline Pharmacist, structure

Pepsi Cola in the 1890’s as cure of Dyspepsia (indigestion). In 1902,
Bradhum applied for a trade mark, issued ninety seven share of stock and
began selling Pepsi syrup in earnest. In his first year of business he spends
$1900 on advertising a huge sum that he sold only 8000 gallons of syrup.
In 1905 Bradhum built Pepsi’s bottling plant. By 1907 he was selling
10,000 gallons a year, two years later; he hired a New York advertising
agency. After passing through many troubles for some period now Pepsi is
a market leader in internationally and is available in 187 Nations
throughout the world.
(2) Cadbury Schweppes PLC. Cadbury Schweppes are joined force
of Cadbury found in 1824 of U.K. and Schweppes of Ireland founded in
1783. Cadbury Schweppes is unified bussing which manages the relations
with over 240 franchised bottling operations on Zambia and Zimbabwe.
Cadbury Schweppes has partnership operations in 14 countries around the
world.

b. External Opportunities and Threat.

(1) Opportunities.
(a) Possible growing demand.
(b) Expansion – Reaching all segments.
(c) Globalization
(d) Catering to Health Consciousness of People
(e) Bottled water growth
(f) Acquisitions of smaller players.
(2) Threats.

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 (a) Health Drinks – Fruit Juice Companies
(b) Key competitors (Pepsi, etc)
(c) Commodity prices growth
(d) Image perception in certain parts of the world.
(e) Smaller, more nimble operators/players

c. External Factor Evaluation (EFE) Matrix.

(1) External factors evaluation (EFE) of Coke is as follows:

Factors Weight Rate Wt. Score
OPPORTUNITIES
Nutritional offering 0.075 1 0.075
Global expansion 0.1 4 0.4
Innovation (R&D) 0.05 3 0.15
Product diversification 0.05 3 0.15
Explore new markets 0.05 3 0.15
Digital programs 0.075 3 0.225
Sensitivity marketing 0.0375 3 0.1125
Develop customer relation 0.075 2 0.15
Coffee/tea dispensing
technology 0.0375 1 0.0375

THREATS
Changing trend of healthy
eating and drinking 0.1 2 0.2
Strong competitors 0.05 2 0.1
Substitute products 0.05 2 0.1
Bottled tea market
of competitor 0.0375 1 0.0375
High cost of production 0.05 2 0.1
Unbranded products 0.05 2 0.1
Rising price of inputs 0.0375 1 0.0375

Decreasing value of dollar 0.05 2 0.1

Tailored brands 0.05 2 0.1
Total 1.0 2.325

(2) Analysis of EFE Matrix of Coke. According to the analysis of

EFE, the rating is 2.32, which is slightly below average. This shows that
the threats being faced by Coca Cola are fierce, and it should take some
actions to prevent the threats and utilize the upcoming opportunities.

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d. Competitive Profile Matrix (CPM).

(1) CPM is as follows:

Coca-cola Pepsi Co
Key Success Weight Rating Score Rating Score
Factor
Growth of Cash 0.08 4 0.32 3 0.24
Flow
Declines in the 0.025 3 0.075 3 0.075
Material Cost
Marketing of Core 0.04 4 0.16 5 0.20
Brands
Introduction of 0.09 5 0.45 4 0.36
New Products
Advertising and 0.04 5 0.20 5 0.20
Promotional
Spending
Penetration into 0.04 4 0.16 4 0.16
Nontraditional
Distribution
Channels
Financial Strength 0.08 5 0.40 4 0.32
Market Share 0.13 3 0.39 4 0.52
International 0.09 4 0.56 4 0.56
Prospects
Risk Assessment 0.03 3 0.09 2 0.06
Credit Rating 0.03 5 0.15 3 0.09
Product Portfolio 0.03 4 0.12 4 0.12
Acquisitions in the 0.12 3 0.36 2 0.24
Future
Volatility to 0.12 4 0.48 3 0.36
Exchange Rates
Acquiring New 0.08 2 0.16 1 0.08
Technology
of Bottling
Total 1.00 4.075 3.585

(2) It can be concluded from the above given Competitive Profile

Matrix (CPM) that Coca- Cola Company is stronger in comparison with
PepsiCo. PepsiCo is the major competitor of Coca-Cola given the
particular success factors, the strategic position of Coke is better than that
of PepsiCo as it is evident from the score of both the companies. It

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 represents the overall comparison of the two companies is relation to the
factors given and the importance of the weights to the industry.
7. Internal Assessment.

a. Existing Organizational Chart.

b. Marketing Strategy of the Company

c. Internal Strength and Weaknesses.

(1) Strengths.
(a) Brand equity/image & recognition
(b) Product distribution and worldwide network
(c) Solid financial performance
(d) One of the world's most recognized brand.
(e) Product diversification (water, juices, soft drinks, sport
drinks, etc)
(f) Co-operate identity.
(g) Innovation

(2) Weaknesses.
(a) Strong & tough competition
(b) Substitute products
(c) Advertising & promotion
(d) Non availability of all flavors/ products in every operating
group.
(e) Affordability of coke products in east and south Asia

d. Internal Factor Evaluation (IFE) Matrix.

(1) Internal factor evaluation (IFE) of Coke is as follows:
Factors Weight Rate Wt. Score
Strengths
Brand equity/recognition 0.12 4 0.48
Variety of products 0.1 3 0.3
High market share 0.1 3 0.3
Financial strength
for acquisitions 0.1 4 0.4
Strong global presence 0.1 3 0.3
Product quality 0.05 3 0.15
Geographic spread 0.05 4 0.2
New products 0.05 4 0.2
Innovative packing 0.05 3 0.15

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 Weaknesses
Strong & tough
competition 0.1 1 0.1
Substitute products 0.05 1 0.05
Advertising & promotion 0.08 2 0.16
Non availability of all
flavors/
products in every
operating group 0.05 1 0.05
Affordability of coke
products in east and south
Asia 0.075 2 0.15
Total 1.0 2.99

(2) Analysis of IFE matrix of Coke. According to the analysis of

IFE, the score of Coke is 2.99, which is above average. This shows that
Coca-Cola is internally strong and good enough. So by using their
strengths, the can overcome their weaknesses.

8. Strategy Formulation.

a. SWOT Analysis.
(1) Strength
(a) Strong Brand Name The world's most valuable
brand. Its brand value at $70.45. It is the most recognizable word
across the world after Ok is Coke. Extremely recognizable
branding is one of Coca-Cola’s 35 greatest strengths. Coca-Cola’s
brand name is known well throughout by 90% of the world today.
(b) Corporate Identity It has a very strong corporate
identity as it is very recognized company in all the parts of the
world and it is in existence since 1880’s.
(c) Global Distribution Coca cola is available in each and
every part of the world as it is operating globally in more than 200
countries with its head office located in Atlanta, USA and daily
more than 1.06 billion dollar are consumed around the world.
(d) Innovation It always launches innovative products like
diet coke, vanilla coke and many other.
(e) Local Approach It conducts business on a global scale
while at the same time maintain a local approach which is purely
visible from its advertisement.
(f) Brand Loyalty Coca cola enjoys the brand loyalty
from the customers.

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 (g) Financial Stability It is their in company as it is a very
old and prestigious brand.

(2) Weakness.

(a) Strong & Tough Competition

(b) Substitute Products

(c) Advertising & Promotion

(d) Non Availability Of All Flavors/Products In Every

Operating Group

(e) Affordability Of Coke Products In East And South Asia

(3) Opportunities.

(a) Possible Growing Demand In a country like

Bangladesh the per capita consumption of coca cola per year is the
lowest in the world that is only 6 per person.

(b) Developing A Global Brand

(c) Coca Cola’s Bottling System Also allows the

company to take advantage. It can work on its price. Most of the
bottling companies are under the control of coke which gives that
much of flexibility for its modulations in the pricing strategy which
cannot be exercised by the rival cola giant PepsiCo because it does
not own its own bottling companies hence it does not 38 enjoy that
much of flexibility in modulating the pricing strategy of PepsiCo.
(d) Sufficient Capital It gives a significant growth to
opportunities.
(e) Potentiality Has a potential to innovate and differentiate
the company's products to sustain a competitive advantage.
(f) Expansion Expansion into new market other than soft
drink market. As coke is enjoying so good brand name, then if they
enter in any other industry with same brand name it can also
succeed in that industry.

4. Threats.
(a) Substitutes Coca-Cola can be substituted by other soft
drink products made by its competitors.

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 (b) Marrying Up The soft drink industry is very
strong, but consumers are not necessarily married to it.

(c) Change of Taste Other threat which the companies

possess is of change of taste of their consumers.

b. PESTLE Analysis. The PEST analysis of Coca-Cola Company is as

follows.

(1) Political Variables and Analysis.

Political Strongly Some No Some Strongly
variables Effected what Effect what Effected
 Effected  Effected 
 
Effects of NE
government
regulations &
deregulations
Effect of YES
environmental
protection
laws if any
Import and NE
export
regulations
Effect of NE
political
conditions in
certain
countries of
Coke
As far as the above table is concerned it could be seen that there are very
little chances of “political variables” to effect the coke’s production and
selling behavior. In the “political variables” most of the things are related
to Governmental activities. So, they don’t leave any good or bad impact in
the Industry of coke.
(2) Economic Variables and Analysis.

Economic Strongly Some No Some Strongly

variables Effected what Effect what Effected
++ Effected +- Effected __
+
 _
Do soaring Yes
interest
rates

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 make
business
task any
harder
Any effect Yes
due
to inflation
Anything Yes
done
to reduce
unemployme
nt
Any effect of NE
11th
September
2001,
incident
at Coke in
India

It could be seen that “economical variables” highly affects the Coke’s

resolution. Economic factors are those actors who effect the production of
any industry. So, Coke is not the out of question. If the economic
conditions of the country is not that strong and Coke increases its Price in
this situation. Then it would impact highly negative. And inflation is also
not a good position for any country’s production point of view. It also
impacts highly negative in the Coke’s production.

(3) Social Variables and Analysis.

Social Strongly Some No Some Strongly

variables Effected what Effect what Effected
++ Effected +- Effected __
+
 _
Effects of Yes
advertisement
of Coke on
Public
popularity
How will do Yes
Coke’s
contribution
affect charity
organizations

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 Has rising Yes
consciousness
s of natural
resources in
people
effected your
“save
environment
activities.

(4) Technological Variables and Analysis

Technological Strongly Some No Some Strongly

variables Effected what Effect what Effected
++ Effected +- Effected __
+
 _
Have business Yes
innovations
effectively
promoted your
business
Has the Yes
government’s
regulations
ever hindered
in importing
technical
equipment
Does Coke Yes
help in
promoting
paperless
environment

Of course business innovation leaves highly good impacts in the business

of Coke. As coke use more advance technology in its production process.
It will result in increment of their production through out the country. As
far as the “governmental hindrances” are concerned the impacts highly
bad on coke’s production. Ever year when budget in announced
government taxes rates always shoot up. This approach of government
decreases the profit margin of Coke. As the coke helping in promoting
“paperless environment” .it impacts good, because computers are the basic
need of any person now a days. And though it’s a big industry so it is
promoting the trend of paperless environment. And it is giving the way of
other industries to come to new technologies and into a new world of

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 business. Through computers coke can increase the efficiency of its
business and can have up –to-date data about their productions.

c. Porter’s Five Forces Model Analysis. Applying Porter’s 5 forces

allows the potential attractiveness in terms of profitability of the company. The
analysis below will concentrate on the industry from COCA COLA perspective:
(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. Most of the suppliers in the industry are the strategic
partners of different players in the industry and there are many suppliers
available. Therefore the suppliers are not in a position to threaten the
companies.

(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. The buyers are also
not in a position to bargain the prices from the companies as there are a
few dominant sellers in the industry who have the major market share of
non-alcoholic drinks.
(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.

(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

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 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. The intensity of the rivalry in the
industry is not very strong as the products are differentiated.

(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. It is not easy for the new
entrant to enter the industry and raise the level of competition for Coca-
Cola right away. This is because high barriers of entry exist in the industry
such as economies of scale, customer loyalty with the existing brands,
requirement of high initial investment and the access of industry
distribution channels. A new entrant is also not likely to be successful
because of possible retaliation from the existing industry players. There
are many substitutes available to non-alcoholic beverages therefore this
lowers the attractiveness and profitability of the industry. But the relative
pricing of the substitutes are higher therefore the industry does not suffer.

d. Strategic Position and Action Evaluation (SPACE) Matrix.

INTERNAL STRATEGIC EXTERNAL STRATEGIC POSITION

POSITION
COMPETITIVE INDUSTRY STRENGTH
ADVANTAGE
Market share -1 Growth potential 5
Product quality -2 Profit potential 5
Customer loyalty -3 Financial stability 6

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 Control over suppliers and Ease of entry into market 1
distribution -1

AVERAGE -1.75 AVERAGE 4.25

TOTAL X-AXIS SCORE 2.5
FINANCIAL STRENGTH ENVIORMENTAL STABILITY
Return on investment 5 Rate of inflation -6
Liquidity 5 Demand variability -4
Working capital 5 Price range of competing products -2
Cash flow from operations Barriers to entry -2
6 Competitive pressure -1

AVERAGE 5 AVERAGE -3
TOTAL Y-AXIS SCORE -2

SPACE MATRIX:

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9. Strategy Implementation.

a. Financial Statement of the Company.

Period Ending FY2009 FY2008 FY2007 FY2006 FY2005

Net Sales/Revenues 31.07 B 31.94 B 28.86 B 24.09 B 23.10 B

Cost of Goods Sold (Excluding 9.82 B 10.15 B 9.23 B 7.22 B 7.31 B

Depreciation)

Depreciation, Depletion and 1.24 B 1.23 B 1.16 B 938.00 932.00 M

Amortization M

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 Period Ending FY2009 FY2008 FY2007 FY2006 FY2005

Gross Income 20.02 B 20.57 B 18.46 B 15.93 B 14.86 B

Selling, General & Admin 11.38 B 11.77 B 10.94 B 9.43 B 8.74 B

Expenses

Other Operating Expense 107.00 M 55.00 M 0.00 0.00 0.00

Operating Expenses - Total 3.65 B 3.68 B 4.13 B 3.05 B 1.29 B

Operating Income 8.53 B 8.74 B 7.52 B 6.50 B 6.12 B

Extraordinary Credit - Pretax 149.00 M 0.00 0.00 0.00 47.00 M

Extraordinary Charge - Pretax 253.00 M 1.98 B 268.00 M 189.00 M 89.00 M

Non-operating Interest Income 249.00 M 333.00 M 236.00 M 193.00 M 235.00 M

Other Income/Expenses - Net -166.00 M 53.00 M 173.00 M 195.00 M -70.00 M

Earnings Before Interest & Taxes 8.51 B 7.15 B 7.66 B 6.70 B 6.25 B
(EBIT)

Interest Expenses On Debt 341.00 M 438.00 M 456.00 M 220.00 M 240.00 M

Pretax Income 8.16 B 6.71 B 7.20 B 6.48 B 6.01 B

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 Period Ending FY2009 FY2008 FY2007 FY2006 FY2005

Income Taxes 2.04 B 1.63 B 1.89 B 1.50 B 1.82 B

Current Domestic Income Tax 588.00 M 761.00 M 739.00 M 655.00 M 1.06 B

Current Foreign Income Tax 1.10 B 1.23 B 1.04 B 878.00 M 845.00 M

Deferred Domestic Income Tax 340.00 M -386.00 M 85.00 M -42.00 M -97.00 M

Deferred Foreign Income Tax 13.00 M 25.00 M 24.00 M 7.00 M 9.00 M

Minority Interest 82.00 M 0.00 0.00 0.00 0.00

Equity in Earnings 781.00 M 726.00 M 668.00 M 102.00 M 684.00 M

Net Income Before Extra 6.82 B 5.81 B 5.98 B 5.08 B 4.87 B

Items/Preferred Div

Net Income Before Preferred 6.82 B 5.81 B 5.98 B 5.08 B 4.87 B

Dividends

Net Income Available to 6.82 B 5.81 B 5.98 B 5.08 B 4.87 B

Common

b. Analysis of Financial Position. The financial position is very

encouraging. Every year the net income of coca-cola is growing. This is because
of their sound marketing strategy, fine human resource management etc.

10. Recommendations. Some recommendations are as follows:

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 (a) Coca- cola must use advertisement media extensively.

(b) 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.

(e) Proper motivational practices should be implementing to increase the

moral of employees so they work more efficiently.
(f) 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.
(g) Coca Cola Company should try to emphasis more on providing their
infrastructure in the market to facilitate their customers.

(i) Marketing team should try to increase the availability of Coke in rural
areas.

(j) They should also focus the old people.

(k) Young generation has a trend to drink a coke 2 regular bottle at same time,
so providing more satisfaction to them company should introduce ½ liter
disposable bottle.

11. Conclusion. The Coca Cola Company has a very rich history and spread over
the world, the study in this report specially the particular SPACE matrix tells us that Coca
Cola Company should pursue an aggressive strategy. Coca Cola Company has a strong
competitive position in the market with rapid growth. It needs to use its internal strengths
to develop a market penetration and market development strategy. This includes focus on
Water and Juices products, and catering to health consciousness of people through
introduction of different coke flavor and maintaining basic coke flavor. Further company
should integrate with other companies, acquisition of potential competitor businesses,
innovation in branding and aggressive marketing strategy can bring long term
profitability.

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