Professional Documents
Culture Documents
2015
0 | C A S E S T U D Y: C O C A C O L A C O M P A N Y
Table Of Contents
ITEMS
ABSTRACT
INTRODUCTION
CONTENTS : COCA COLAS LIFE CYCLE & VALUE CHAIN OF COCA COLA
SPACE MATRIX
MAL
ANALYSIS OF ISSUES & PORTERS FIVE COMPETITIVE FORCES
ALTERNATIVE ACTION
CONCLUSIONS
RECCOMENDATIONS
BIBLIOGRAPHY
ABSTRACT
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INTRODUCTION
History
Coca Cola have been known as carbonated soft drink and been sold in mall,
vending machines and restaurants and all around the world .It is produced by The
Coca-Cola Company of Atlanta, Georgia. It is category as one of multinational
company. Since March 27, 1944 Coke has become a trademark of Coca-Cola
Company that has been registered in the United States.
In 1885, Pemberton registered his French Wine Coca nerve tonic. In 1886 The
Coca-Cola have been founded by John S. Pemberton and served Coca-Cola at a local
Pharmacy in downtown Atlanta, Georgia on May 8, 1886. It been sold as a patent
medicine for five cents for the first time. Candler purchased and incorporated the
Coca-Cola Company as a Georgi Corporation in 1892. Fourteen years later, under
Candlers leadership, bottling operations began in Canada, Cuba, and Panama. In
1919, the Coca-Cola Company was purchased by a group of investors lead by Ernest
Woodruff and W. C. Bradley for $25 million (Christopher H., 2014).
From its early years, Coca-Cola Company made significant innovations in the
beverage industry, such as six-bottle carton and steel 12-ounce cans. Additionally, it
continued to expand internationally. After four years have gone by into 1923, Robert
W. Woodruff which is Ernest Woodruffs son was elected as president of the CocaCola Company, who also served as a Chairman of the Board in 1939. The very first
new product distributed by the Company was Fanta Orange in Naples, Italy. After the
success of this product, it established a diverse portfolio through acquiring Minute
Maid Corporation and adding a line of juice products. In 2008, Sprite became the
third Company product to sell more than 2 billion cases annually, joining Coca Cola
and Diet Coke. Their product variety is also impressive with the current brand list
reaching up to 3,500 different beverages. Apart from soft drinks, Coca Cola
produces fruit juices, waters, energy and sport drinks, teas and coffees.
In 2014, the Coca-Cola Company has been serving for more than 127 years
and is one of the largest beverage companies headquartered in Atlanta, United
States. The company is engaged in the production, distribution, and marketing of
non-alcoholic beverages and syrups. It is listed on the New York Stock Exchange
(NYSE) and the Dow Jones Industrial Average. On March 16, 2014, the share price of
the Coca-Cola Company is recorded at $38.17 under NYSE (The Coca-Cola
Company).
The Coca-Cola Company has over 3500 products and serves over 200
countries. Some of its brands include Coca-Cola, Sprite, Fanta, Diet Coke, Dasani,
Minute Maid, Power Ride, Simply Orange, Fresca, and Vitamin Water. Moreover, it
has partnered with approximately 250 bottling companies worldwide. The
companys segments include Eurasia and Africa, Europe, Latin America, North
America, Pacific, Bottling Investments and Corporate (MintGlobal, 2014). Some of
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Current Status
The underlying effective annual tax rate on operations in 2015 is currently
expected to be 22.5%. Today, The Coca-Cola Company is the world's largest
beverage company. Coca Cola Company operational reach encompasses of more
than 200 countries worldwide across six operating regions which include Eurasia,
Africa, Europe, Latin America, North America, Pacific and Bottling Investments. The
Company is targeting net share repurchases of $2.0 to $3.0 billion. The company
owns the majority of the soft drinks available in coolers and in vending machines in
the western world. Some of these brands include, Coca-Cola and sub brands Dr
Pepper, Fanta, Sprite, Oasis and PowerAde.
Mission Statements
Coca Cola Company mission statement is:
To refresh the world in mind, body and spirit. To inspire moments of optimism
through our brands and actions. To create value and make a difference everywhere
we engage.
Vision Statement
In order to achieve our mission there is several things to be done which is:
1. Maximizing profits in order to be able return the shareholders, while being
mindful of our overall responsibilities.
2. For people, being a great place to work, where people are inspired to be the
best they can be.
3. For portfolio, bringing to the world a portfolio of beverage brands that
anticipate and satisfy people's desires and needs.
4. For Partners, nurturing a winning network of partners and building mutual
loyalty.
5. For planet being a responsible global citizen that makes a difference.Their
Productivity need to be a highly effective, lean and fast-moving organisation.
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Coca Cola had been faced health crisis where their products get banned from
operation in Belgium that leads to decreasing sales. Around 100 people in Belgium
which most of them are children and 88 people in France suffered nausea,
headaches and diarrheal, the other of them also suffered till admitted to hospital.
The crisis effects were not felt only within Europe but also in other countries such as
Japan and India.
In the introduction phase, Coca Cola was hurled and at first promoted. Hard
work were fitted out for creating its responsiveness in the market towards the
consumers, bringing sample of the product and lock up a space in the outlet shelf.
As soon as their costs were high, sales volume were low, and there was no standing
demand for Coca Cola in this point.
In the growth phase, Coca Cola experienced swift growth in sales volume
and its rivalry began to escalate. People got more awareness about Coca Cola and
the increase in the rivalry indicates it to decrease the prices. The ineffective
competitors at making any cash or fascinating enough consumers away from the
inventors, soon will drop out of the race. As a final point, at the top of the growth
phase, only a few winners live on.
Coca Cola is in the maturity phase from years at this time. The marginal
costs of Coca Cola are low in this point, sales volume is at the uppermost meanwhile
the market is enclosed. There is escalation in rivals which are entering in the
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Decline phase in which sales of the product initiate to drop. Obviously, Coca
Cola Company has not reach this stage. Whichever everyone that desires to, has
bought the product or new, more innovative products have been produced that
substitutes that product. The only way to upsurge sales throughout this point is to
cut the cost of the product.
Here, Coca Cola Company tried to monitor their products during maturity
stage by took an account of marketing profitability analysis. This analysis aspects at
the cost on the side of marketing and the profitability of products, sales territories,
market segments and sales people. There are three ratios to observe marketing
profitability which is market research to sales, advertising to sales and sales
representatives to sales. The results of these three tools can help Coca Cola to
select any emerging tendencies, for instance the need for a different product. By
comparing these outcomes with actual results, it gives the company an indication
on when to make an adjustment.
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The term 'value chain' was projected in 1985 by Michael Porter, and he welldefined a company's value chain as a system of independent activities which are
joined by linkages. According to Porter (1985), linkages exist when the way in which
one activity is performed affects the cost or effectiveness of other activities. Every
company has an assortment of activities that are carry out to design, produce,
market, deliver and support its product. Each activity conducted by Coca Cola are
related to improvise their new value chain together with supply chain to overcome
the issues that they faced.
The figure above summarizes Coca Colas value chain by showing both the
support and primary activities. The primary activities include sales & marketing,
inbound logistics, operation, outbound logistics and services. Meanwhile, support
activities include company infrastructure, human resources, management,
technology development, and procurement. Those activities list were the things that
Coca Cola would be done in handling the problems arises.
Support activities :
Under firm infrastructure, the finance and accounting department has practiced
in public company disclosures, financial accounting, and reporting processes,
merges and acquisition. This team were in charge for maintaining detailed operating
records and preparing financial statements. Given that Coca Cola is widely traded
on the Dow Jones exchanges, its accounting reports were audited by Ernst and
Young LLP and conform to GAAP. Coca Cola Company commonly used data
warehousing together with business consolidation and planning just to ensure the
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senior executives can have admission to global consolidated results also scheme
the information based on actual and accurate data. These data were used by Coca
Cola for generate financial reports, monthly forecast on sales, operating expenses,
budget of sales also profitability.
The Human Resource Department on the other hand were responsible for
trained, recruited, payroll the employees which is related to the overall
organizational development. Coca Cola are very concern that the company itself
took a whole elements to reward and recognize employees to ensure a complete
work have been done. Developing a program to unleash the employees potential
were conducted such as Coca Cola University. The management accountant is
responsible to allocate the cost of the program to make sure the continuity
companys growth.
For technology development, Coca cola are focusing more on R&D
(research and development). The company is investing in technology product and
process. One of the ambitious project is implementing under process development
is the six-sigma project which merely a tool to improve an operation or a process.
Just before, there are various technology adopted by Coca Cola which is reduce the
cost simultaneously has a strong setup such as Water Treatment at Coca Cola
Company.
Procurement states purchasing the necessary resources, raw materials or
inputs for Coca Colas primary value adding activity. The purchasing function
significantly enhance cost position relative to the rivals and an emerging issues.
Coca Cola are using EBP (Enterprise Buyer Professional) for many its procurement
functions. EBP makes the procurement becomes convenient that the paper-based
via process online. Procurement practices letting Coca Cola to achieve a significant
amount economic of scale.
Primary activities :
Inbound logistics refers on how to handle inputs and inventory or stocks.
The operational procedures and tasks surrounding inbound logistics include storage,
warehousing and control of inputs. It became the first activity because they
represent the beginning of Cola Colas adding conversion of raw materials. The
initiatives in handling the storage are improved such as location of distribution
facilities to minimize shipping times, inventory control system. These initiatives
were implemented to improve Coca Colas cost position and significantly capital
investment are required.
The operation in Coca Cola are the process of transforming the inputs into
an outputs which is the products. It is essentially to make a syrup and concentration
and sells to the canning and authorized bottling for packaging and distributions.
Finally, the product will be transferred to warehouses. Some of the important key
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that the company done is efficient plant operation to minimize the cost such as
choose an appropriate level of automation in manufacturing, enhance quality and
efficient plant layout and workflow design also quality production control system to
cut expenses.
Meanwhile, outbound logistics carried out the management of the flow
and distribution concentrate to the bottlers. The activity are mostly referred in
handling the inventory control, storage, warehousing and also the transportation of
the finished goods. Coca Cola company in outbound logistic had really have an
outstanding responsibility in making an efficient shipping process to ensure quick
delivery, minimizes damages, and reduce the transportation cost incurred.
For marketing and sales department, marketing is vigorous in helping
Coca Cola to determine the competitive scope and to recapture the attention from
their customers. The key competencies of this department are selection of the most
appropriate distributions channel, proper identification of customer segment and
needs, highly motivated, also innovation approaches to advertising and promotion
under controllable budgeting manner.
Coca Cola redefining the customer service as the method to copes its
customer service activities. It is crucial part as Coca Cola needs to solicit customer
feedback after certain issues arise. The other activity have to be done such as
furnished replacement product as required, effective management of product
inventory, appropriate product quality and quality of service personal. Customer
service is important for Coca Cola because it enables the company to bring back the
trustworthy from their customers.
SPACE Matrix
The purposes of SPACE Matrix analysis to determine the organization's strategic
posture in the industry upon two internal and two external strategic dimensions.
The SPACE matrix is based on four areas of analysis which is financial strength (FS),
competitive advantage (CA), environmental stability (ES) and industry strength (IS).
Most of the factors in SPACE Matrix are underneath the internal strategic position.
Obviously the financial strength factors are from the accounting department which
plays a crucial part in Coca Cola Company. The SPACE matrix calculates the
importance of each of these dimensions and places them on a Cartesian graph with
X and Y coordinates.
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The Coca Cola Company are well-known by history and range over the world. Based
on the above diagram, it conveys us that Coca Cola Company had to develop an
aggressive strategy. Since the company has a strong competitive position in the
market with rapid growth, they are required to use its internal strength to develop a
market development and market penetration strategy. This comprises an activity
such as providing to health consciousness of people through introduction of
dissimilar coke flavour, emphasis on Water and Juices products, and maintaining
basic coke flavour. Moreover, the company should fit in with other companies,
acquisition of potential competitor businesses, make an innovation in branding and
aggressive marketing strategy for a long term cost-effectiveness.
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The main issues facing this company was its attempts at overcome the crisis in
Belgium as well as creating new value for Coca Colas product to gain the
customers trustworthy. The need to overcome the crisis and all the negative
perspectives about Coca Colas product could cause the company become too
exposed and risks its ability to gain the customers trust. Their main competitors
such as Pepsi could be a potential threat of competition.
Alternative Action
There are alternative actions that Coca Cola can take to overcome their crisis and
gain the customers trustworthy as well as secures its competitive advantage that it
has gained for so long. Below is the current value for Coca Cola and its competitors
PepsiCo and Dr Pepper Snapper.
60
50
40
30
Coca Cola
Pepsi
Dr Pepper Snapple
20
10
0
Price
Quality
Brand
Convenience
Locations
Variety
Dr Pepper shows a similar curve but much lower in all levels. The competition is
very tight between Coca Cola and Pepsi. The rest is similar, which shows a threat to
Coca Cola is high with Pepsi. Dr Pepper has an opposing curve, which could be a
threat but their lack of quality and varieties that limits them from competition.
In order overcome the crisis, there are several alternatives actions that Coca
Cola conducted. First, Coca Cola focused on stabilize their capital budgeting
decision process, whereby the budgeting involves all the activities that reflects the
companys past, present, and also forecasting the future (Benneth I., 2014). The
company adopts the budgeting in order to determine what should be done, to whom
it should be done for, why it should be done and how it should be done.
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Besides that, Coca-Cola also adopts the cost accounting approach (ABC)
whereby this approach is what governs Coca Colas daily business process as the
company determines the cost of each product based on the activities involved in
the production process. This production process involves three activities that are
syrup manufacturing, blending and packaging. Here, it is clear that Coca Cola
makes use of activities based on costing because it does determine the price of its
products based on the activities undertaken in the manufacturing process such
products. Coca Cola also budgets its cost of operations based on the number of
activities in the production. In other words, the higher the activities in production,
the higher the Coca Cola will budget in its production and vice versa.
By using the companys budgeting and costing method, Coca Cola also
adopts weighted average cost of capital (WACC) for its capital decision process
which means the capital for investment is known by calculating the cost of capital
at each of activities involved and proportionally weighted of capital
(Investopedia,2013). Therefore, through this process, the sources of capital are
considered and it will increase its capital investment if the rate of return for equity is
increase.
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30
20
10
0
Price
Quality
Brand
Convenience
Locations
Variety
Conclusion
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RECCOMENDATIONS
Despite Coca Cola has overcome the issues, Coca Cola Company still need to
put an attention on the health and regulatory safety at the first priority. Such as
improvise the application of Coca Cola Quality System (TCCQS) eagerly. By doing
that, the company could possibly maintained their ranking of being the top safety
beverages in the eyes of the consumers.
Coca Cola Company should also maintaining their relationship with the
bottlers under cost effectiveness. It is compulsory for maintaining it for the
continuity in supplied the product were all in controlled together with an appropriate
budgeting. For instance, working with variety of bottlers such as supermarkets,
retail chains, small grocers, school & colleagues also sport and entertainment
venues could accomplish the ideas of the company which is one face to the
customer.
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Bibliography :
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8. Umar, Fahad Muhammad. "Global Business Strategy: A Case Study of CocaCola Company." Global Business Strategy: A Case Study of Coca-Cola
Company | Fahad Muhammad Umar - Academia.edu . N.p.,
<http://www.academia.edu/8516284/Global_Business_Strategy_A_case_study
_of_Coca-Cola_Company>.
9. "Web Authentication Redirect." Accessed April 16, 2015.
http://summit.sfu.ca/system/files/iritems1/8182/etd3061.pdf.
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