Advance Strategic Management - Coca Cola
1.
Introduction
1.1 company
and products/services
The Coca-Cola Company produces a carbonated soft
drink called coke or Coca-Cola. John Pemberton in the 19th century
ion 8th may 1886 invented it and a businessman Asa Griggs Candler’s
marketing tactics made Coca- Cola to dominate the soft-drink market globally in
the 20th century. it was originally originated in United States.
Caffeine-free Coca-Cola, Coca-Cola Zero Sugar, Diet Coke Caffeine-free,
Coca-Cola Vanilla, Coca-Cola Cherry and special versions with coffee, lime and
lemon are the various other cola drinks that have been introduced under the
name of coke. After Apple and Google, the third most valuable brand as per the Inter
brands’ study of 2015 under its ‘Best global brand’ category is Coca-Cola. The
products from the Coca-Cola brand were sold in over 200 countries all over the
world and the company was serving more than 1.8 million beverage drinks all
over the world each day
1.2
Case’s time setting and analysis
As a large decline was reported in the sale of sodas
in the year 2016 therefore it can be said that it was quite a challenging year
for the company. For the past consecutive 11 years the sale of sugary sodas is
declining due to the rise in the level of health-conscious customers. Coca-Cola
is planning to remake its portfolio observing the rise in the non-carbonated
industry especially in mineral water bottles under their new appointed CEO i.e.
James
Quincey
The current vision of the company is “To achieve our
mission, we have developed a set of goals, which we will work with our bottlers
to deliver which
includes people, portfolio, partners, planet, profit, productivity”. The
current mission of the company is “To refresh the world in mind, body and spirit, to inspire
moments of optimism and happiness through our brands and actions and to create
value and make a difference”
The two major competitors of Coca-Cola are Pepsi and
Red Bull.
The
Vision of Competitors: The vision of Pepsi co is "to
continually improve all aspects of the world in which we operate - environment,
social, economic - creating a better tomorrow than today." The vision of
Red Bull is to be "a great place to work; where people are inspired
to be the best they can be."
The
Mission of Competitors: The mission of Pepsi co is “to be
the world's premier consumer products company focused on convenient foods and
beverages”. The mission of Red Bull is “to be
the premier marketer and supplier of Red Bull in Asia, Europe, and other parts
of the globe”.
Mission of Coca-Cola is “To refresh the world in mind, body
and spirit, to inspire moments of optimism and happiness through our brands and
actions and to create value and make a difference”.
|
Component |
Y/N |
Notes |
|
Customer’s |
Y |
Aim at providing
guaranteed customer’s satisfaction. |
|
Product/ Service |
Y |
Aim at providing
superior quality products. |
|
Markets |
N |
No description
regarding markets. |
|
Employees |
N |
No description
relating to Employees. |
|
Technology |
Y |
No description
relating to technology. |
|
Growth/survival/
profit |
N |
N/A |
|
Public image |
Y |
They have a good
public image. |
|
Self-concept |
Y |
Good |
|
Philosophy |
N |
Not Applicable |
|
Business strength vs Market attractiveness |
High |
Medium |
Low |
|
High |
Invest /grow |
|
|
|
Medium |
|
|
Provide support to employees |
|
Low |
|
Sell resources |
|
|
Business strength vs Market attractiveness |
High |
Medium |
Low |
|
High |
Coca-Cola |
|
|
|
Medium |
|
Pepsi Co |
|
|
Low |
|
|
Red Bull |
As per the nine factor matrix, Coca-Cola needs to
align its vision and mission with the growth of the food and beverage industry
and must place its focus on the employees’ contribution.
The study clearly shows that Coca-Cola has a
stronger business unit strength and market attractiveness based on its mission
and vision. The Pepsi co has medium business unit strength and market
attractiveness whereas among the three Red bull has the lowest business unit
strength and market attractiveness. Therefore it is necessary for Red bull to
place its focus on its mission statements and making it specific and accurate by
making major improvements in the same that are of highest possible standards.
Coca-Cola is suggested to build a stronger workforce
for itself in order to align its strategic plans with it that is based
understanding how distinguished communities play their roles in the market and
on the analysis of the strengths and weaknesses of the competitor
Sales Growth Rate
|
Sales Growth Rate |
2017 |
2016 |
2015 |
|
|
|
|
|
Operating Income Margin
|
Operating Income Margin |
2017 |
2016 |
2015 |
|
|
26.6% |
23.3% |
23.1% |
Net Income Margin
|
Net Income Margin |
2017 |
2016 |
2015 |
|
|
-1.43% |
-3.86% |
-1.43% |
Return on Assets
|
Return on Assets |
2017 |
2016 |
2015 |
|
|
1.42% |
7.36% |
8.07% |
The governing and management of operations of the
company is determined with the help of its organizational chart. The Coca-Cola
Company follows a functional hybrid structure through its organizational chart
that was used as a product structure set-up at first but later resources were
shared through each product line within all the varied departments in line.
Functionality duplicity can be avoided following this structure. Coca-Cola will
not only be able to gain a strong market share domestically but also will to
obtain higher growth in the markets worldwide by adopting such a new
organizational structure. Also a Customer Relationship Department has been
established by the company that works towards developing customer’s loyalty
towards the company’s products on the basis of analyzing the market as well as
internal data regularly.
A hybrid organizational structure is followed by
Coca-Cola as per the chart above. This results in rise in costs level due to
rise in the level of overhead. As the charts clearly display an enhanced level
of connectivity in between the varied function departments therefore it is
vital for the company to make some changes. In case of making a decision some
confusions tend to appear due to the hierarchical organization structure that
the company follows. It was quite evident that during the planning process such
an organization structure leads towards neglecting the specialists leaving the
key personnel feel more burdened. This will be in creating confusions for the
employees as well as they are unable to analyze their line of management in
terms of their accountability in reporting some specific issues. While deciding
the course of strategic plan for the company in future this point acts as a
most essential point. As Coca-Cola is determined to increase its revenue from
its operations globally due to the slowdown in the markets in Dubai, it becomes
essential for the management function correctly by avoiding confusions on all
costs. Thus it becomes essential for Coca-Cola to focus on making its workforce
stronger as well as to avoid all kinds of confusion it needs to make certain
common improvements.
3.4
map showing location of coca-cola’s operations and discussion in light of
strategies envisioned.
The picture above displays all the major and big cities where Coca-Cola is regulating its operations. Based on its operations in different locations it becomes essential for the company to adopt some major steps for the purpose of enhancing policies relating to people. It is very essential for the company to attain information regarding what factors impact the human resource policy of the company by comparing both the internal and external factors covering all its locations. Also it becomes essential for the company to develop its strategies for the purpose of having a holistic development that will help the company to find out ways to align its overall business objectives with its internal processes.
For the purpose of raising its funds the company has
tapped itself in the equity and bond markets that has lead towards raising
funds in millions for the company and is considered Coca-Cola’s good point in
terms of market strategy whereas as the company is unable to maintain
environment stability therefore it is considered as a bad point in terms of its
market strategy
|
Key Internal Factors |
Weight |
Rating |
Weighted Score |
|
Strengths |
|||
|
High brand value in the
market |
0.20 |
3 |
0.60 |
|
Availability of
distributors or bottlers globally. |
0.15 |
2 |
0.30 |
|
Diversified
geographically |
|
|
|
|
Holds a largest market
share |
|
|
|
|
Due to the demand for its
products in the market the company has the largest distribution network. |
|
|
|
|
Weaknesses |
|||
|
It is established
relatively in the markets in which it operates. |
0.20 |
4 |
0.80 |
|
Increase in the level of
consumers who are health-conscious. |
0.10 |
3 |
0.30 |
|
Has a low product
diversification. |
|
|
|
|
Absence in the sector of
manufacture of health related beverages. |
|
|
|
The analysis of the internal factors above shows
that the improper segmentation approach as well as the improper diversification
is connected with the most critical factors and at the time of decision making
process these can be overcome by implementation of better and effective
strategies that more emphasis will be laid on the markets that are highly
diversified.
The below mention implications indicates the
following score levels:
‘1’ means
Poor response
‘2’ means
Average response
‘3’ means
above average response
‘4’ means
Superior response
The analysis conducted on the external factors is
displayed through the following table:
|
Key External Factors |
Weight |
Rating |
Weighted Score |
|
Opportunities |
|||
|
To grow itself in both
the existing as well as new markets. |
0.15 |
4 |
0.6 |
|
Has tremendous potential
for acquisition related purposes. |
0.10 |
3 |
0.3 |
|
Various products have
still not found maket acceptance therefore the company must market these
lesser selling products. |
|
|
|
|
Threats |
|||
|
All geographic regions imposing stronger
competition. |
0.15 |
4 |
0.6 |
|
Patriotism sold by
various local brand in the country. |
0.20 |
2 |
0.4 |
|
Rise in the level of
indirect competitors such as Café Coffee Day, Starbucks, Costa Coffee,
Tropicana, Gatorade, Real etc. |
|
|
|
|
COCA-COLA |
PEPSI CO |
RED BULL |
|||||
|
Critical Success Factors |
Weight |
Rating |
Score |
Rating |
Score |
Rating |
Score |
|
Advertising |
0.12 |
4 |
0.48 |
3 |
0.36 |
2 |
0.24 |
|
Market Share |
0.15 |
4 |
0.40 |
3 |
0.40 |
2 |
0.20 |
|
Product Quality |
0.10 |
3 |
0.30 |
4 |
0.30 |
2 |
0.20 |
|
Competitiveness |
0.08 |
3 |
0.24 |
3 |
0.24 |
3 |
0.24 |
|
Global Expansion |
0.10 |
4 |
0.40 |
2 |
0.20 |
2 |
0.20 |
|
Customer Loyalty |
0.15 |
3 |
0.45 |
4 |
0.60 |
2 |
0.30 |
|
Brand Awareness |
0.10 |
4 |
0.40 |
3 |
0.30 |
2 |
0.20 |
|
Pricing |
0.15 |
4 |
0.60 |
4 |
0.60 |
3 |
0.45 |
|
Creativity |
0.10 |
4 |
0.40 |
4 |
0.40 |
4 |
0.40 |
|
Total |
1.00 |
3.67 |
3.40 |
2.43 |
|||
The CPM score of Coca-Cola gives an idea that in the
present scenario for the purpose of keeping a prosperous and a profitable
business position the company has both the ability as well as the capacity.
The following rating conveys the below listed
suggestions:
‘1’ means Major Weakness
‘2’ means Minor Weakness
‘3’ means Minor Strength
‘4’ means Major Strength
|
|
Strengths – S ·
Have
high brand value in the market. ·
Use of expansion strategy. ·
Huge assets level base leading the company to be ahead in competition.
·
Availability
of distributors or bottlers globally. ·
The
government providing its support to the company. ·
Due to
the demand for its products in the market the company has the largest
distribution network. . |
Weaknesses – W ·
Shares in Dubai went down. ·
Unexpected fall in shares. ·
The own rules and regulations of every local government. ·
Business not favoured by the local government. ·
Business gets impacted due to occurrence of unfavourable economic
conditions. |
|
Opportunities – List Opportunities |
SO Strategies ·
Increase in the number of customers by covering more markets. ·
More
capabilities can be gained through strategic alliances. |
WO Strategies ·
New
market exploration will lead it to grow itself in both the existing as well
as new markets. ·
It must keep its focus on beverages sector for expansion
opportunities. |
|
Threats – T List Threats |
ST Strategies ·
All
geographic regions imposing stronger competition may lead to reduction in profits for the company. ·
Patriotism
sold by various local brand in the country |
WT Strategies ·
Increase
in the level of consumers who are health-conscious may discourage
the consumption of these beverages and may encourage use of alternative
sources. |
The high level of intense competition has led
towards restricting the growth as well as the market share of the company as
per the analysis above. The major weakness that Coca-Cola faces is increase in the level of consumers who are health-conscious may discourage the consumption of these beverages and may encourage use of
alternative sources. Also due the the dullness in the food and beverage
industry the Coca-Cola Company indicates an above average performance as per
its EFE score. Therefore its becomes esential for Coca-Cola to work on its
innovative skills as well as its human resource management for the purpose of
improving its susceptibility in ts external environment.
This has been discussed already in the section 8.
EFE Matrix with 10 Opportunities and Threats of Firm Based on PEST and Porter’s
Five Forces Factors.
The above table clearly shows that the environment
stability position of Coca-Cola is unsatisfactory therefore it is essential for
the company to work hard on its external strategic position. The adoption of a
competitive strategy by the company may lead towards the business to get
involved in a higher risk. A higher level in the competitiveness within the
market is developed due to the two main competitors of Coca-Cola that are Pepsi
co and Red bull. Adopting techniques and technologies that are new and highly
innovative will help Coca-Cola to raise its level in terms of customer loyalty
In order to evaluate the volume, the new experience
opportunities as well as the balance in expansion that is available for the
company i.e. Coca-Cola, the BCG is required to be developed for the same.
Therefore, the BCG matrix for Coca-Cola is as
follows:
Cash
cow:
The products having a large market share in a no growth industry are cash cows
for the company. Such products are able to generate fair sale amounts in both
local and global markets.
Star:
The Company is a star product as it is considered as number one brand
worldwide. It offers products such as Caffeine-free Coca-Cola, Coca-Cola Zero
Sugar, Diet Coke Caffeine-free, Coca-Cola Vanilla, Coca-Cola Cherry and special
versions with coffee, lime and lemon are the various other cola drinks that have
been introduced under the name of coke
Question
Mark: Having a smaller market share in the wide expanding
industry is the question mark for the product. For the future success of the
company the products displaying a dubious outlook as considered as question
marks.
Dog:
The low market share is the dog for the company. A situation of heavy marketing
for the product or providing extreme discounts may be a result the transitory
nature of the products.
The Coca-Cola Company falls under the category of
Quadrant 1 because it indicates a strong competitive position as well as a
higher market growth rate. For the purpose of enhancing its current position
the company can involve itself in generating new and diversified products that
are health conscious keeping in view its competitive position as well as market
growth.
The Porter’s five forces model helps in the
evaluation process of various forces that cooperate and interact with the
business globally. Also with the help of this model these forces are counter
effectively by the company.
The
rationale and forces affects the following:
New
Entrants threat
·
Brand loyalty of Coca-Cola
·
Changes in the government’s rules and
regulations.
Substitute
threat
·
Diversified products offered by
competitors such as Pepsi co.
·
Willingness of customers for opting for
alternative company.
Bargaining
power of Buyer
·
Providing customers with varied products
based on measuring the perspective of the buyer.
Existing
Player Rivalry
·
Competitors who follow a growth and cash
cow strategy will have an impact in the process of accomplishing strategic
objectives.
As the company is able to build a strong brand value
of itself therefore its is necessary for the company to place all its efforts
in replicating the same business model as well as on some differential
strategies that will help Coca-Cola in increasing its growth potential in new
markets at a rapid rate and will also help in the acquisition of new markets
for the company in terms of increase in the level of sales.
As the company has set its goals for its 2020 vision
therefore it is essential for the company to use it capital smartly for the
purpose of funding its growth plans. For the purpose of raising its funds the
company has tapped itself in the equity and bond markets in the recent months.
Also for the purpose of capitalizing its growth markets the company must adopt
its strategies concerning expansion geographically
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