COCA-COLA CASE STUDY

International Business Strategy

Submitted to Dr. K Rangarajan

Submitted by Group: 1
Presentation Identifier Goes Here

STATISTICS AND FACTS ON LIQUID REFRESHMENT BEVERAGE

BRANDS
The liquid refreshment beverage (LRB) market encompasses CSDs, bottled water, ready-to-drink
(RTD) coffee and tea, fruit beverages, energy drinks and sports beverages. Based on sales, CocaCola, Pepsi, Mountain Dew, Dr Pepper and Gatorade were the leading liquid refreshment beverage
(LRB) brands in the United States in 2013. All five brands combined, held a market share of over 42
percent in the U.S. in 2013. Especially to be emphasized is the performance of the carbonated soft
drink Coca-Cola, which accounted for a U.S. market share of 18.1 percent alone. Coca-Cola is owned
by The Coca-Cola Company, which is headquartered in Atlanta, GA. The brands outstanding
performance is more than present among all regions and channels. Coca-Cola is not only listed as the
leading LRB in the U.S., it also topped the list of soft drinks brands worldwide in 2014, based on brand
value. Additionally, the soft drink brand had the second highest number of fans on its Facebook site.
A big competitor of the Coca-Cola Company in the liquid refreshment beverage business is
undoubtedly PepsiCo, Inc., which is based in Purchase, NY. The company owns, among others, the
soft drink brands Pepsi and Mountain Dew and the sports drink Gatorade, which were ranked second,
third and fifth in the market share ranking of LRB.

SoftSrinks Off-Trade
RTD Volume 534.8
Billion Litres

Fruit/Vegetables
Juice 62 billion liters

Bottlked water 205.1

billion liter

Sporys and Energy

Drinks 16.

Concentrates 43.7
billion liter

RTD TEA 30.1 Billion

Liters

RTD Coffe 4.5 Billion

liters

Carbonates 169.5
billion liters

COCA-COLA
Name

The Coca Cola Company

Industries served

Beverages

Geographic areas served

Worldwide

Headquarters

U.S.

Current CEO

Muhtar Kent

Revenue

$ 48.01 billion (2012)

Profit

$ 9.01 billion (2012)

Employees

146,200 (2012)

Main Competitors

PepsiCo Inc., Dr Pepper Snapple Group, Inc.,

Unilever, Groupe Danone, Kraft Foods Inc.,
Nestl S.A. and many others.

Coca-Cola is a carbonated soft drink sold in stores, restaurants, and vending machines
throughout the world. It is produced by The Coca-Cola Company of Atlanta, Georgia,
and is often referred to simply as Coke (a registered trademark of The Coca-Cola
Company in the United States since March 27, 1944). Originally intended as a patent
medicine when it was invented in the late 19th century by John Pemberton, Coca-Cola
was bought out by businessman Asa Griggs Candler, whose marketing tactics led Coke
to its dominance of the world soft-drink market throughout the 20th century.

Logo

COCA-COLA COMPANY FACTS:

COCA- COLA FINANCIAL RATIO ANALYSIS

COCA- COLA FINANCIAL RATIO ANALYSIS

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THE COCA-COLA COMPANY'S NET OPERATING REVENUES WORLDWIDE FROM 2007 TO 2013 (IN BILLION U.S. DOLLARS)

50
46.54

48.02

46.85

40
35.12
31.94

30.99

28.86

20

10

0
2007

2008

2009

2010*

2011*

2012

2013

Revenues in billion U.S. dollars

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MARKET SHARE OF THE COCA-COLA

COMPANY AND OTHER SOFT DRINK
COMPANIES WORLDWIDE IN 2011, BASED ON
SALES VALUE
70.0%

59.6%

60.0%

50.0%

40.0%

Global market share

30.0%
25.9%

20.0%

11.5%
10.0%
3%
0.0%
PepsiCo Inc

Nestl SA

Other

The Coca-Cola Co.

CONSUMPTION SHARE OF FULL-CALORIE

AND DIET SOFT DRINKS WORLDWIDE IN
2013, BY REGION
Diet soft drinks
0.0%

Eastern Europe

Southern Africa

MENA*

Latin America

60.0%

80.0%

100.0%

120.0%

3.1%
96.9%
3.3%
96.7%
4.2%
95.8%
4.8%
95.2%
7%
93%
24.5%

Western Europe

75.5%
31%

North America

69%
35.3%

Australasia

Worldw ide

40.0%

64.7%
14.1%
85.9%
Consumption share

10

Asia

20.0%

Full calorie soft drinks

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COCA-COLA BRANDS

COCA-COLA VISION AND

MISSION

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Mission
Our Roadmap starts with our mission, which is enduring. It declares our purpose as a company
and serves as the standard against which we weigh our actions and decisions.
To refresh the world...
To inspire moments of optimism and happiness...
To create value and make a difference.
Vision
Our vision serves as the framework for our Roadmap and guides every aspect of our business by
describing what we need to accomplish in order to continue achieving sustainable, quality growth.
People: Be a great place to work where people are inspired to be the best they can be.
Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate and satisfy
people's desires and needs.
Partners: Nurture a winning network of customers and suppliers, together we create mutual,
enduring value.
Planet: Be a responsible citizen that makes a difference by helping build and support sustainable
communities.
Profit: Maximize long-term return to shareowners while being mindful of our overall
responsibilities.
Productivity: Be a highly effective, lean and fast-moving organization.

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POTER 5 FORCES ANALYSIS

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COCA-COLA VALUE CHAIN

O
COCA-COLA SWOT ANALYSIS
1.
2.
3.
4.
5.

1. The best global

brand in the
world in terms of
value ($77,839
billion)
2. Worlds largest
market share in
beverage
3. Strong marketing
and advertising
4. Most extensive
beverage
distribution
channel
5. Customer loyalty
6. Bargaining power
over suppliers
7. Corporate social
responsibility
1.
2.
3.
4.
5.
6.
7.

p
p
o
r
t
u
n
i
t
y

Significant focus on carbonated drinks

Undiversified product portfolio
High debt level due to acquisitions
Negative publicity
Brand failures or many brands with insignificant
amount of revenues

Weakness
St
re SWOT
ng ANALYSIS
th
Threat

1. Bottle water consumption

Growth.
2. Increase in demand of
healthy food and
beverages.
3. Growing Beverages
consumption in emerging
markets.
4. Growth through
acquisition.

Changes in consumer preferences

Water scarcity
Strong dollar
Legal requirements to disclose negative information on product labels
Decreasing gross profit and net profit margins
Competition from PepsiCo
Saturated carbonated drinks market

SWOT
STRENGTHS
1.The best global brand in the world in terms of value. According to Interbrand, The
Coca Cola Company is the most valued ($77,839 billion) brand in the world.
2.Worlds largest market share in beverage. Coca Cola holds the largest beverage
market share in the world (about 40%).
3.Strong marketing and advertising. Coca Cola advertising expenses accounted
for more than $3 billion in 2012 and increased firms sales and brand recognition.
4.Most extensive beverage distribution channel. Coca Cola serves more than 200
countries and more than 1.7 billion servings a day.
5.Customer loyalty. The firm enjoys having one of the most loyal consumer groups.
6.Bargaining power over suppliers. The Coca Cola Company is the largest
beverage producer in the world and exerts significant power over its suppliers to
receive the lowest price available from them.

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7.Corporate Social Responsibility (CSR). Coca Cola is increasingly focusing on

CSR programs, such as recycling/packaging, energy conservation/climate change,
active healthy living, water stewardship and many others, which boosts companys
social image and result in competitive advantage over competitors.

SWOT
WEAKNESS
1.Significant focus on carbonated drinks. The business is still focusing on selling Coke, Fanta,
Sprite and other carbonated drinks. This strategy works in short term as consumption of
carbonated drinks will grow in emerging economies but it will prove weak as the world is
fighting obesity and is moving towards consuming healthier food and drinks.
2.Undiversified product portfolio. Unlike most companys competitors, Coca Cola is still
focusing only on selling beverage, which puts the firm at disadvantage. The overall
consumption of soft drinks is stagnating and Coca Cola Company will find it hard to penetrate
to other markets (selling food or snacks) when it will have to sustain current level of growth.
3.High debt level due to acquisitions. Nearly $8 billion of debt acquired from CCEs acquisition
significantly increased Coca Cola's debt level, interest rates and borrowing costs.
4.Negative publicity. The firm is often criticized for high water consumption in water scarce
regions and using harmful ingredients to produce its drinks.

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5.Brand failures or many brands with insignificant amount of revenues. Coca Cola currently
sells more than 500 brands but only few of the brands result in more than $1 billion sales.
Plus, the firms success of introducing new drinks is weak. Many of its introduction result in
failures, for example, C2 drink.

SWOT
OPPORTUNITIES
1.Bottled water consumption growth. Consumption of bottled water is
expected to grow both in US and the rest of the world.
2.Increasing demand for healthy food and beverages. Due to many
programs to fight obesity, demand for healthy food and beverages has
increased drastically. The Coca Cola Company has an opportunity to
further expand its product range with drinks that have low amount of
sugar and calories.
3.Growing beverages consumption in emerging markets. Consumption of
soft drinks is still significantly growing in emerging markets, especially
BRIC countries, where Coca Cola could increase and maintain its
beverages market share.

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4.Growth through acquisitions. Coca Cola will find it hard to keep current
growth levels and will find it hard to penetrate new markets with its
existing product portfolio. All this can be done more easily through
acquiring other companies.

SWOT
THREAT
1. Changes in consumer tastes. Consumers around the world become more health conscious and
reduce their consumption of carbonated drinks, drinks that have large amounts of sugar, calories
and fat. This is the most serious threat as Coca Cola is mainly serving carbonated drinks.
2. Water scarcity. Water is becoming scarcer around the world and increases both in cost and
criticism for Coca Cola over the large amounts of water used in production.
3. Strong dollar. More than 60% of The Coca Cola Company income is from outside US. Due to
strong dollar performance against other currencies firms overall income may fall.
4. Legal requirements to disclose negative information on product labels. Some Coca Colas
carbonated drinks have adverse health consequences. For this reason, many governments
consider to pass legislation that requires disclosing such information on product labels.
Products containing such information may be perceived negatively and lose its customers.
5. Decreasing gross profit and net profit margins. Coca Colas gross profit and net profit margin
was decreasing over the past few years and may continue to decrease due to higher water and
other raw material costs.
6. Competition from PepsiCo. PepsiCo is fiercely competing with Coca Cola over market share in
BRIC countries, especially India.

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7. Saturated carbonated drinks market. The business significantly relies on the carbonated drinks
sales, which is a threat for the Coca Cola as the market of carbonated drinks is not growing or
even declining in the world.

PESTEL ANALYSIS

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Political and Economical

PESTEL ANALYSIS

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Political and Economical

SUMMARY
Coca Cola in 90s
Coca cola desires to increase sales in Europe through following
steps:
PR Strategy

Act Local, Think Local.

Different in Consumption between USA & EU.

- US 190 12 ounce servicing per annum.
- EU Germany 111, Great Britain 61, France 35 Servicing per
12 - Ounce
Concern expressed by various government agencies (EU, UK,
Italy)
Coke is focused to increase in market and wining preposition.

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Formation of European Union has helped coke to give cheaper

and rapid offering due to elimination of Tariff between EU
countries.

QUESTION:
Case Study discussion:
Why and how coke is making FDI in Europe?
MNE features of coke.

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IB challenges facing coke.

WHY AND HOW IS COKE

MAKING FDI IN EUROPE
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4

WHY AND HOW IS COKE MAKING FDI

IN EUROPE

Why did Coke engage is foreign direct investment in Europe:

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Why:
Market Potential and Share
European market has great potential and Cokes Market Share in Europe is low as compared to
its competitors.
Improve Market Position :
Coke made these investments in order to improve its market position. This is being done in
Four ways.
First, the construction of new bottling plants is helping the company produce a low-cost product.
Second, marketing expenditures are helping the firm gain the product recognition needed for
growth.
Third, direct investments in facilities closer to the market are reducing delivery time and
eliminating associated expenses.
Fourth, relook at it existing Franchise distribution network and realign or replace the same
with more effective and market driven sellers.
Formation of European Union:
It was the period were Formation of European Union was to take place and this would lead to
no tariff between EU countries and hence making it possible for coke to utilize it Manufacturing
and bottle assets and partners to efficiently supply its products to retailers taking into
consideration that it was cheapest and most rapidly available factors.

WHY AND HOW IS COKE

MAKING FDI IN EUROPE
How is Coke making FDI in Europe.

Coke opened its first bottling plant in Europe in Paris and Bordeaux in 1919

The first bottling plants are opened in Europe in Paris and Bordeaux.

This was through acquisition backward vertical FDI.

Coca-Cola has also used Network Model(Alliance and Joint Ventures)

Mode of Entry:
Assembling Assembling is a compromise between exporting and foreign
manufacturing. The firm produces domestically all or most of the components
or ingredients of its product and ships them to foreign markets to be put
together as a finished product. By shipping completely knocked down (CKD),
the firm is saving on transportation costs and also on custom tariffs which
are generally lower on unassembled equipment than on finished products
(Lambin, 2007). Another benefit is the use of local employment which
facilitates the integration of the firm in the foreign market. Coca-Cola ships its
syrup to foreign markets where local bottle plants add the water and the
container (Soto, 2000).

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Licensing Licensing is another way to enter a foreign market with a limited

degree of risk. Coca-cola had licensed bottlers in Europe and UK.

WHY AND HOW IS COKE MAKING FDI IN

EUROPE
How is Coke Making FDI in Europe?

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The company do this in three ways.

First, the construction of new bottling plants is helping the company
produce a low cost product.
Second, marketing expenditures are helping the company to gain
the product recognition needed for growth.
Third, direct investments in facilities closer to the market are
reducing delivery time and eliminating import duties.
The Coca-Cola company is having extensive production abroad
with foreign direct investment and all functions like exporting and
importing and also franchasing. For example in Turkey Coca-Cola
gives first franchising to IMSA(Has Group) in 1964. Coke is making
FDI in order to improve its market position especially in Europe.

MNE FEATURES OF
COKE.

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8

MNE FEATURES OF COKE.

The Coca-Cola Company indeed is an MNE because it operates a headquarters
in Atlanta, Georgia with other local operations in nearly 200 countries around
the world. Coke succeeded as a multinational because of its understanding
and appeal to global commonalities (Rugman, A. M. & Collinson, S., 2006).
- Standardization in terms process and quality.
-Modification of operations to meet local need local needs & marketing
strategies developed per country.
-Have international network of franchise and partners that help them run the
operation and sales.
-Its is Global -> the US and Canada occupy 1/3 of the revenues.
-Whereas EU & Asia ( even they occupy less of the revenue) they are equally
important for the company.
-There revenue is more from outside US and the revenue is spread among all
continents

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-> Global View and Global Strategy.

Coke is an multinational enterprise because it conducts

production and distribution activities in nations other than its
home country.

In terms of strategy and management orientation, the firm does

three things that illustrates its multinational nature.
- First, Coca-Cola adjusts its operations to meet local needs. The
firm markets on a country-by-country basis.
- Second, Coke has international partners who help to run the
operation and do not report directly to the company on day-to-day
matters.
- Third, the organization relies heavily on team work by all involved
parties and service more as a coordinator and leader for the product
than as an on-site manager.

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MNE FEATURES OF COKE.

MNE FEATURES OF COKE.

Revenue distribution share of the Coca-Cola Company worldwide in 2013, by operating segment
50.0%
46.1%
45.0%

40.0%

35.0%

30.0%

25.0%

20.0%
16.2%
15.0%
11.5%
10.1%

10.0%

9.9%
5.9%

5.0%
0.3%
0.0%
North America

Pacific

Latin America

Europe

Eurasia/Africa

Bottling Investments

Corporate

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Revenue distribution share

IB CHALLENGES
FACING COKE.
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2

IB CHALLENGES FACING COKE.

The road to success has never been smooth and easy. For Coca-Cola
Company the phrase seems perfectly matched, the Company faced a
lot of challenges in some countries as it was trying to globalize.

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Some countries prohibited the used of Coca-Cola products with the assertion
that the products are health threatening and cheering obesity, which are two
major concern for people nowadays.
Aside from these assertions so many suits had been filed against the CocaCola Company with the allegation of child labour sweatshops other countries
suits the Company for being selective in providing healthcare to their workers.
Some government agencies and companies are concerned about the way in
which Coca-Cola is pushing aside those who are unable to lower costs and
generate more business. The British Monopolies and Mergers Commission is
investigating possible anti-competitiveness in Cokes joint venture with
Schweppes in England. In Italy, San Pellegrino, the mineral water company,
has filed a complaint with the Commission of the European Communities,
contending that Coca-Cola has abused its dominant position by giving
discounts to Italian retailers who promise to stock only Coke.
Another major challenged faced by the Company was the infiltration of the
beverages market by other strong Companies such as Pepsi and co

IB CHALLENGES FACING COKE.

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Fluctuation of monetary capital exchange between countries: This

was due to the policies and regulation concerning transfer of funds
between different countries, with barriers in some countries it makes
transactions unattractive.
Health Concern raised and Negative Publicity: In 2003, the Centre
for Science and Environment (CSE),a non-governmental
organisation in New Delhi, said aerated waters produced by soft
drinks manufacturers in India, including multinational giants PepsiCo
and Coca-Cola, contained toxins including lindane, DDT, malathion
and chlorpyrifos pesticides that can contribute to cancer and a
breakdown of the immune system. Tested products included Coke,
Pepsi, and several other soft drinks (7Up, Mirinda, Fanta, Thums Up,
Limca, Sprite), many produced by The Coca-Cola Company.
In March 2004, local officials in Kerala shut down a $16 million Coke
bottling plant blamed for a drastic decline in both quantity and quality
of water available to local farmers and villagers.

Thank you

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