13886348 Coca Cola Report on Strategic Management Case 2007

A Report on

Strategic Management Case

Of

COCA COLA (Year 2007)

Subject: Managerial Policy

Section: “B” [MBA – Evening Program]

Faculty: Brig. (ret.) Shakeel Ahmed

Prepared & Presented by:

Group 2Faraz Ahmed Zohaib Genda Mehboob Hassan Zakia RasheedArshad Khan Muhammad Tabish Taha Sehrish Anwar Obaid Ullah

AleemMohammad Waqas Ashok Kumar Tariq KhanZeeshan Ul Haque Tariq Hamidi Babar Raza

Managerial Policy

Table of Contents

1- EXECUTIVE SUMMARY 3

2- HISTORY OF COCA COLA 4

3- BRANDS OF COCA COLA 7

3.1- Energy Drinks 7

3.2- Juices/Juice Drinks 7

3.3- Soft Drinks 8

3.5- Tea and Coffee 8

3.6 Water 8

3.7- Other Drinks 9

4- CONSUMER CHOICE AT A GLANCE 10

5- DIFFERENT PLAYERS IN THE SOFT DRINKS MARKET 11

5- DIFFERENT PLAYERS IN THE SOFT DRINKS MARKET 12

6- OUR MISSION 12

6- OUR MISSION 13

7- OUR VISION 13

8- IMPROVED MISSION STATEMENT 14

9- IMPROVED VISION STATEMENT 14

10- COCA COLA - RATIO ANALYSIS 17

10.1 RATIO ANALYSIS 18

11- FINANCIAL HIGHLIGHTS 19

12- UNIT CASE VOLUME 19

13- CURRENT ORGANIZATIONAL CHART 21

14- VALUE CHAIN ANALYSIS FOR COCA COLA 21

15- E-COMMERCE 24

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16- VALUE OF THE FIRM 24

Table of Contents

17- KEY INTERNAL FACTORS 28

18- KEY EXTERNAL FACTOR 29

19- COMPETITORS 30

20- SWOT ANALYSIS 31

21- SPACE MATRIX STRATEGIC MANAGEMENT METHOD 34

22- BCG MATRIX 38

23- IE MATRIX 40

24- QSPM OF COCA COLA 41

25- PROJECTED RATIO ANALYSIS 45

26- CONCLUSION 46

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1- EXECUTIVE SUMMARY

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 concentrates and syrups to bottling and canning operators, distributors, fountain retailers and fountain wholesalers. Coca-Cola was first introduced by John Syth Pemberton, a pharmacist, in the year 1886 inAtlanta, Georgia when he concocted caramel-colored syrup in a threelegged brass kettle in his backyard. He first “distributed” the product by carrying it in a jug down the street to Jacob’s Pharmacy and customers bought the drink for five cents at the soda fountain. Carbonated water was teamed with the new syrup, whether by accident or otherwise, producing a drink that was proclaimed “delicious and refreshing”, a theme that continues to echo today wherever Coca-Cola is enjoyed. Coca-Cola originated as a soda fountain beverage in 1886 selling for five cents a glass. 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. Coca- Cola was the leading soft drink brand in India until 1977, when it left rather than reveal its formula to the Government and reduce its equity stake as required under the Foreign Regulation Act (FERA) which governed the operations of foreign companies in India. In the new liberalized and deregulated environment in 1993, Coca-Cola made its re-entry into India through its 100% owned subsidiary, HCCBPL, the Indian bottling arm of the Coca-Cola Company. The main objective of this study lies in understanding the organization and studying and understanding the consumers’ perception and opinion about the latest product, Minute Maid Pulpy Orange, introducedinto India, by the Coca-Cola Company. A consumer sampling involving 5.5 lakh people was conducted in a span of 30 days across major cities in order to give the product the required marketing push and to recognize the prospective consumers and their opinion in order to develop and market the product in a better way in the near future. The methodology used in studying and understanding the perceived views of consumers towards the product was ‘SAMPLING’. The findings of the activity have been drawn out in form of graphs and suggestions have been offered there from

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2- HISTORY OF COCA COLA

Coca-Cola® originated as a soda fountain beverage in 1886 selling for five cents a glass. 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.

1894 – A modest start for a Bold Idea

In a candy store in Vicksburg, Mississippi, brisk sales of the new fountain beverage called Coca-Cola impressed the store's owner, Joseph A. Biedenharn. He began bottling Coca-Cola to sell, using a common glass bottle called a Hutchinson.

Biedenharn sent a case to Asa Griggs Candler, who owned the Company. Candler thanked him but took no action. One of his nephews already had urged that Coca-Cola be bottled, but Candler focused on fountain sales.

1899 The first bottling agreement

Two young attorneys from Chattanooga, Tennessee believed they could build a business around bottling Coca-Cola. In a meeting with Candler, Benjamin F. Thomas and Joseph B. Whitehead obtained exclusive rights to bottle Coca-Cola across most of the United States (specifically excluding Vicksburg) -- for the sum of one dollar. A third Chattanooga lawyer, John T. Lupton, soon joined their venture.

1900-1909 … Rapid growth

The three pioneer bottlers divided the country into territories and sold bottling rights to local entrepreneurs. Their efforts were boosted by major progress in bottling technology, which improved efficiency and product quality. By 1909, nearly 400 Coca-Cola bottling plants were operating, most of them family-owned businesses. Some were open only during hot-weather

months when demand was high.

1916 … Birth of the contour bottle

Bottlers worried that the straight-sided bottle for Coca- Cola was easily confused with imitators. A group representing the Company and bottlers asked glass manufacturers to offer ideas for a distinctive bottle. A design from the Root Glass Company of Terre Haute, Indiana won enthusiastic approval in 1915 and was introduced in 1916. The contour bottle became one of the few packages ever

granted trademark status by the U.S. Patent Office. Today, it's one of the most recognized icons in the world - even in the dark!

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1920s … Bottling overtakes fountain sales

As the 1920s dawned, more than 1,000 Coca-Cola bottlers were operating in the U.S. Their ideas and zeal fueled steady growth. Six-bottle cartons were a huge hit after their 1923 introduction. A few years later, open-top metal coolers became the forerunners of automated vending machines. By the end of the 1920s, bottle sales of Coca-Cola exceeded fountain sales.

1920s and 30s … International expansion

Led by longtime Company leader Robert W. Woodruff, chief executive officer and chairman of the Board, the Company began a major push to establish bottling operations outside the U.S. Plants were opened in France, Guatemala, Honduras, Mexico, Belgium, Italy, Peru, Spain, Australia and South Africa. By the time World War II began, Coca-Cola was being bottled in 44 countries.

1940s … Post-war growth

During the war, 64 bottling plants were set up around the world to supply the troops. This followed an urgent request for bottling equipment and materials from General Eisenhower's base in North Africa. Many of these war-time plants were later converted to civilian use, permanently enlarging the bottling system and accelerating the growth of the Company's

worldwide business.

1950s … Packaging innovations

For the first time, consumers had choices of Coca-Cola package size and type -- the traditional 6.5-ounce contour bottle, or larger servings including 10-, 12- and 26-ounce versions. Cans were also introduced, becoming generally available in 1960.

1960s … New brands introduced

Following Fanta® in the 1950s, Sprite®, Minute Maid®, Fresca® and TaB® joined brand Coca-Cola in the 1960s. Mr. Pibb® and Mello Yello® were added in the 1970s. The 1980s brought diet Coke® and Cherry Coke®, followed by POWERADE® and DASANI® in the 1990s. Today hundreds of other brands are offered to meet consumer preferences in local markets around the world.

1970s and 80s … Consolidation to serve customers

As technology led to a global economy, the retailers who sold Coca-Cola merged and evolved into international mega-chains. Such customers required a new approach. In response, many small and medium-size bottlers consolidated to better serve giant international customers. The Company encouraged and invested in a number of bottler consolidations to assure that its largest bottling partners would have capacity to lead the system in working with global retailers.

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1990s … New and growing markets

Political and economic changes opened vast markets that were closed or underdeveloped for decades. After the fall of the Berlin Wall, the Company invested heavily to build plants in Eastern Europe. And as the century closed, more than $1.5 billion was committed to new bottling facilities in Africa.

21st Century

The Coca-Cola bottling system grew up with roots deeply planted in local communities. This heritage serves the Company well today as people seek brands that honor local identity and the distinctiveness of local markets. As was true a century ago, strong locally based relationships between Coca-Cola bottlers, customers and communities are the foundation on which the entire business grows.

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3- BRANDS OF COCA COLA

Coca-Cola Zero® has been one of the most successful product launch hes in Coca Cola’s history. In 2007, Coca Cola’s sold nearly 450 million cases globally. Put into perspective, that's roughly the same size as Coca Cola’s total business in the Philippines, one of our top 15 markets. As of September 2008, Coca-Cola Zero is available in more than 100 countries.

3.1- Energy Drinks

For those with a high-intensity approach to life, Coca Cola’s brands of Energy Drinks contain ingredients such as ginseng extract, guarana extract, caffeine and B vitamins.

3.2- Juices/Juice Drinks

We bring innovation to the goodness of juice in Coca Cola’s more than 20 juice and juice drink brands, offering both adults and children nutritious, refreshing and flavorful beverages.

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3.3- Soft Drinks

Coca Cola’s dozens of soft drink brands provide flavor and refreshment in a variety of choices. From the original Coca-Cola to most recent introductions, soft drinks from The Coca-Cola Company are both icons and innovators in the beverage industry.

3.4- Sports Drinks

Carbohydrates, fluids, and electrolytes team together in Coca Cola’s Sports Drinks, providing rapid hydration and terrific taste for fitness-seekers at any level

3.5- Tea and Coffee

Bottled and canned teas and coffees provide consumers' favorite drinks in convenient take-anywhere packaging, satisfying both traditional tea drinkers and today's growing coffee culture.

3.6 Water

Smooth and essential, our Waters and Water Beverages offer hydration in its purest form.

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3.7- Other Drinks

So much more than soft drinks. Coca Cola’s brands also include milk products, soup, and more so you can choose a Coca Cola Company product anytime, anywhere for nutrition, refreshment or other needs.

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4- CONSUMER CHOICE AT A GLANCE

Coca-Cola Mainly preferred by the Youngster & Kids.

Thums-Up Youngster.

Limca Common Drink.

Fanta Basically Preferred by Ladies and Kids.

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Maaza Also Ladies and Kids.

Sprite Not clearly defines.

Kinley Soda Mostly those who consume liquor.

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5- DIFFERENT PLAYERS IN THE SOFT DRINKS MARKET

PEPSI

Caleb Brandhum, a North Caroline Pharmacist, structure Pepsi Cola In2 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 spend $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 international arence and is available in 187 Nations throughout the world.

CADBURY SCHWEPPES

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 his with over 240 franchised bottling operation on Zambia and Zimbabwe. Cadbury Schweppes has fottlery and partnership operations in 14 countries around the world.

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6- OUR MISSION :

Our mission declares our purpose as a company. It serves as the standard against which we weigh our actions and decisions. It is the foundation of our Manifesto.

(1) To refresh the world in body, mind and spirit.(2) To inspire moments of optimism through our brands and our actions.(3) To create value and make a difference everywhere we engage.

7- OUR VISION:

Our vision guides every aspect of our business by describing what we need to accomplish in order to continue achieving sustainable growth.

People: Being a great place to work where people are inspired to be the best they can be.

Portfolio: Bringing to the world a portfolio of quality beverage brands that anticipate and satisfy people's desires and needs.

Partners: Nurturing a winning network of customers and suppliers, together we create mutual, enduring value.

Planet: Being a responsible citizen that makes a difference by helping build and support sustainable communities.

Profit: Maximizing long-term return to shareowners while being mindful of our overall responsibilities.

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8- IMPROVED MISSION STATEMENT:

(1) At Coca Cola we're committed to achieving business and financial success while leaving a positive imprint on society – delivering what we call Performance with Purpose.

(2) Our mission is to be the world's premier consumer Products Company focused on convenient foods and beverages. We seek to produce financial rewards to in8vestors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive for honesty, fairness and integrity.

9- IMPROVED VISION STATEMENT:

(1) Coca cola Co responsibility is to continually improve all aspects of the world in which we operate – environment, social, economic – creating a better tomorrow than today."

(2) Our vision is put into action through programs and a focus on environmental stewardship, activities to benefit society, and a commitment to build shareholder value by making Coca cola Co a truly sustainable company.

Why it is improved:

There is It is our vision to be the best and leading provider of food and beverage products in Pakistan, to facilitate the people of Pakistan and we emphasis on consumer more rather than competitors we among the top ten food and beverage companies in the world, by continually challenging present conventions and always staying a step ahead of the competition. It is our mission to be the number one food and Beverage Company in Pakistan by providing our customers with the highest product quality in terms of taste, experience, and satisfaction. We will ensure this through an unwavering dedication to the continuous development of our products and processes ensuring that we remain best in class. We will strive to hire the most competent and dedicated employees whose work ethic will set the standard in the industry. We will be paymasters, as we strongly believe that human resource is the only asset that truly appreciates over time. We will also be a responsible social corporate citizen, and strive to enhance the quality of life in the markets we serve.

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Compare Vision & mission with leading competitors

Pakola is firstly introducing in Pakistan in 1950 by Haji Ali Muhammad. It is the first Nationally branded soft drink in Pakistan, it is produced by mehran bottlers (Pvt) Ltd.

Mehran is the first bottling plant in South Asia. Which has been certified to integrated management system based on (ISO 9001:2000), (ISO 14001:1996) Standard and (RVA HACCP) standard Pakola quality and food safety system follows the FDA GMP requirements and codex. Pakola products are manufactured under strict CGMP and Hygiene controls.

Mission statement:

We are focused on driving growth in our business in selected profitable and emerging categories. To develop, implement and continuously improve the integrated management systems in a culture of continuous improvement which:(1) Directs the continual up-gradation for efficient and environment friendly

manufacturing technology. (2) Monitor and improve the efficiency and effectiveness of all business processes. (3) Promotes professional and flexible work environment, teamwork and innovation

through employee participation and process ownership. (4) Drives customer orientation at all levels within the organization. (5) Monitor and economize the Cost of Quality.

Vision statement:

To be SECOND TO NONE in exceeding customer expectations for Taste and Flavor, Product Safety, Quality and Price Competitiveness.

In comparison to coca cola the mission statement of Pakola is simple one.The players in the beverage industry have one of the moat competitive rivalries in any industry. In Pakistan the market is dominated by the two international giants. Pepsi and Coke, with market shares respectively of 77%, and 16%, leaving little room for others to grow. Yet even with approximately 5% of the total market share, Pakola can still manage to be profitable in a cut-throat Industry, and hive plan to position it strategically in order to do so. The beverage Industry is a reasonably attractive industry to be in, and with Its 55 years of established presence, Pakola is well positioned to leverage that history so as to attain a competitive edge.

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It is our vision to be the best and leading provider of food and beverage products in Pakistan, and among the top ten food and beverage companies in the world, by continually challenging present conventions and always staying a step ahead of the competition.

Comments on vision and mission (in terms of how they support the strategies)

The vision statement of our company supports the existing strategies that is (generic strategy) that Coca Cola needs to pursue is that of differentiation. In their current vision and mission statements, the company says it aims to be a low cost leader, yet through our thorough analysis of the strategic direction the company needs to adopt a generic strategy of differentiation. This will allow Coca cola to do three things; 1. Charge a premium 2. Increase unit sales 3. Gain buyer loyalty However, at the expense of sounding simplistic, it is necessary that the company communicate its differentiation to its customers, otherwise these three advantages will not avail themselves. Initially Coca cola will need to adopt a focused differentiation approach, which means that they should selectively choose which markets will profit them the most and then target only those markets until such provisions are in place from where the company is able to expand its target base. After which they should opt for a broad differentiation generic strategy.

With the market just turning the bend to ‘saturation’, it is entering a phase of intense competition with all major players diversifying their product lines, ranges and even businesses into a versatile range of products to put in place more infantry on the battle ground to use to their advantage in this war of brands. Therefore, we believe that the current strategic objective of Coca cola should be to consolidate its existing brand, Coca cola through extensive strategic market research and consumer insights to be able to home in on the correct target market like a precision targeting missile rather than as an Anti-aircraft gun

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10- COCA COLA - RATIO ANALYSIS

2006 2005 2004$ Percent $ Percent $

Income Statement(in

millions)(in

millions)(in

millions)Revenue 24,088 100.0% 23,104 100.0% 21,962Cost of Goods Sold 8,164 33.9% 8,195 35.5%Interest Expense 220 0.9% 240 1.0%Tax Expense 1,498 6.2% 1,818 7.9%Income from Cont Operations 5,080 21.1% 4,872 21.1% 4,847Net Income 5,080 21.1% 4,872 21.1%

Balance SheetCash 2,440 8.1% 4,701 16.0%Short Term Investments 150 0.5% 66 0.2%Accounts Receivable 2,704 9.0% 2,281 7.8% 2,171Inventory 1,641 5.5% 1,424 4.8% 1,420Current Assets 8,441 28.2% 10,250 34.8%Long Term Investments 6,783 22.6% 6,922 23.5%Net Fixed Assets 6,903 23.0% 5,786 19.7%Other Assets 7,668 25.6% 6,469 22.0%Total Assets 29,963 100.0% 29,427 100.0% 31,327Current Liabilities 8,890 29.7% 9,836 33.4%Total Liabilities 13,043 43.5% 13,072 44.4%Stockholders' Equity 16,920 56.5% 16,355 55.6%

Cash FlowCash Flow from Operations 5,957 6,423 5,968Dividends Paid 2,912 2,679Interest Paid 220 240

Per ShareMarket Price at Year End 48.25 40.31Earnings Per Share - Basic 2.16 2.04

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10.1 RATIO ANALYSIS

Growth RatiosSales Growth 4.3% 5.2%Income Growth 4.3% 0.5%Asset Growth 1.8% -6.1%Activity RatiosReceivable Turnover 9.7 10.4Inventory Turnover 5.3 5.8Fixed Asset Turnover 3.5 4.0Profit RatiosProfit Margin 21.1% 21.1%Return on Assets 17.1% 16.0%Return on Equity 30.5% 59.6%Dividend Payout Ratio 57.3% 55.0%Price Earnings Ratio 22.3 19.8Liquidity RatiosCurrent Ratio 0.95 1.04Quick Ratio 0.60 0.72Solvency RatiosDebt to Total Assets 0.44 0.44Times Interest Earned (Accrual) 30.90 28.88Times Interest Earned (Cash) 28.08 27.76

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11- FINANCIAL HIGHLIGHTS

Year Ended December 31,

2006

($)

2005

($)Percent Change

Net operating revenues  24,088  23,104 4%

Operating income 6,308 6,085 4%

Net income 5,080 4,872 4%

Net income per share (basic and diluted) 2.161 2.042 6%

Net cash provided by operating activities 5,957 6,423 (7%)

Dividends paid 2,911 2,678 9%

Share repurchase activity 2,474 2,019 23%

Unit case volume (in billions)

   International operations 15.6 14.8 6%

   North America operations 5.8 5.8 0%

   Worldwide 21.4 20.6 4%

12- UNIT CASE VOLUME

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MAP: Showing Workforce [71,000 in 2006]

21

CEO

EVP/ President Bottling Invest/ Supply Chain

CFO and EVP

EVP/ President

MKT Strategy

President & COO

SVP & General Counsel

SVP & Director Human

Resources

SVP & Director Public

Affairs/ Communi- -

cation

President of African Group

President European

Union Market

President of Eurasia Group

President Latin

America Group

President of Pacific Group

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13- CURRENT ORGANIZATIONAL CHART

14- VALUE CHAIN ANALYSIS FOR COCA COLA

2006(in thousands)

2005(in

thousands)SUPPLIER COSTS

Raw Materials 1,641,000 1,424,000Fuel

Sufficient date is not provided, but since Inventory is increasedin 2006, hence, we can inferthat suppliers are effeciently providing Raw Materials. At the same time, increase will result in some incline in store/ ware house charges.

EnergyTransportationTruck DriversTruck MaintenanceComponent PartsInspectionStoringWarehouse

PRODUCTIONS COSTS

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Inventory System

Since cost of revenue in 2006 is34% of total revenue compared to36% cost of revenue in 2005, we can deduce that Coca Cola has improved its operating performance.

ReceivingPlant LayoutMaintenancePlant LocationComputerR&D nilCost Accounting nil

DISTRIBUTION COSTSLoading Income statements shows just

one head and that is Selling, Gen.and Admin. Expenses, which were 39% of total revenue in 2005and 40% in 2006. Hence, there isincrease in these expenses. We see Net Income proportion remain same in year 2006 as it was in year 2005 i.e. 21% of total revenue. Therefore, despite of the fact that some expenses were increased, Coca Cola still enjoy same percentage of Net Income. Which would be because of, efficiency of production, management or distribution departments.

ShippingBudgetingPersonnelInternetTruckingRailroadsFuelMaintenance

SALES & MARKETING COSTS

SalespersonsWebsiteInternetPublicityPromotionAdvertisingTransportationFood and Lodging

CUSTOMER SERVICE COSTS

PostagePhoneInternetWarranty

MANAGEMENT COSTSHuman ResourcesAdministrationEmployee

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BenefitsLabor RelationsManagersEmployeesFinance and Legal

Analysis:We do not see R&D head of expenses, which would show that Coca Cola does notassign sufficient amount to its R&D department which is key to excel in the market.If we see the proportion of Income generated by different regions, we can easily infer that Coca Cola, because of innovative advertisements or because of intelligent decision making, still enjoys a competitive market position. We can still suggest them to make an efficient R&D head/ department which will surely make them compete in market, effectively and profitably.

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15- E-COMMERCE:

Good points:

Brand Promotion Attractive products selection Look and feel 8 Provision of multimedia product, catalogue pages Personal attention Community relationships

Weak points:

Performance and service: that is not easy navigation, shopping and purchasing, and prompt shipping and delivery.

Discount pricing is not being offered.

16- VALUE OF THE FIRM

Financial and Value Review

Defensive:

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1) Size of firmNet worth of $16.92billion

2) Financial conditionwith a weighted current ratio of 0.94 Coke falls below the required 2, therefore they fail this test.

3) Earnings stabilitythere has been positive net income for the past ten years and they 8pass this test.

4) Earnings growthEarnings are greater than five years ago. Pass.

Overallwe would not suggest Coke being placed in the defensive investor’s portfolio at this time.

Opinion:Seeing that currently Coke is trading at a much higher price than our internal valuation we would be skeptical to purchase this security at this time. However, Coke is an excellent firm with great management, products, dividend history, and earnings. This stock we would place on our review list and periodically watch the share price to see if it dips and falls more in line with what we would be comfortable paying.

Strengths

World’s leading brand Coca-Cola has strong brand recognition across the globe. The company has a leading brand value and a strong brand portfolio. Coca-Cola is one of the leading brands in their top 100 global brands ranking in 2006.8The value of the Coca-Cola was $67,000 million in 2006. Coca-Cola ranks well ahead of its close competitor Pepsi which has a ranking of 22 having a brand value of $12,690 million Furthermore; Coca-Cola owns a large portfolio of product brands. The compan8y owns four of the top five soft drink brands in the world: Coca-Cola, Diet Coke, Sprite and Fanta. Strong brands allow the company to introduce brand extensions such as Vanilla Coke, Cherry Coke and Coke with Lemon. Over the years, the company has made large investments in brand promotions. Consequently, Coca-cola is one of the best recognized global brands. The company’s strong brand value facilitates customer recall and allows Coca-Cola to penetrate new m2arkets and consolidate existing ones. Coca-Cola Company, The large scale of operations with revenues in excess of $24 billion Coca-Cola has a large scale of operation. Coca-Cola is the largest manufacturer, distributor and marketer of nonalcoholic beverage concentrates and syrups in the world. Coco-Cola is selling trademarked beverage products since the year 1886 in the US. The company currently sells its products in more than 200 countries. Of the approximately 52 billion beverage servings of all types consumed worldwide every day, be8verages bearing trademarks owned by or licensed to Coca-Cola account for more than 1.4 billion. The company’s operations are supported by a strong infrastructure across the world. Coca-Cola owns and operates 32 principal beverage

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concentrates and/or syrup manufacturing plants located throughout the world. In addition, it owns or has interest in 37 operations with 95 principal beverage bottling and canning plants located outside the US. The company also owns bottled water production and still beverage facilities as well as a facility that manufactures juice concentrates. The company’s large scale of operation allows it to feed upcoming markets with relative ease and enhances its revenue generation capacity. Robust revenue growth in three segments Coca-cola’s revenues recorded a double digit growth, in three operating segments. These three segments are Latin America, ‘East, South Asia, and Pacific Rim’ and Bottling investments. Revenues from Latin America grew by 20.4% during fiscal 2006, over 2005. During the same period, revenues from ‘East, South Asia, and Pacific Rim’ grew by 10.6% while revenues from the bottling investments segment by 19.9%. Together, the three segments of Latin America, ‘East, South Asia, and Pacific Rim’ and bottling investments, accounted for 34.8% of total revenues during fiscal 2006. Robust revenues growth rates in these segments contributed to top-line growth for Coca-Cola during 2006.

Weaknesses

Negative publicity, Company received negative publicity in India during September 2006.The Company was accused by the Center for Science and Environment (CSE) of selling products containing pesticide residues. Coca-Cola products sold in and around the Indian national capital region contained a hazardous pesticide residue. These pesticides included chemicals which could cause cancers, damage the nervous and reproductive systems and reduce bone mineral density. Such negative publicity could adversely impact the company’s brand image and the demand for Coca-Cola products. This could also have an adverse impact on the company’s growth prospects in the international markets. Sluggish performance in North America Coca-Cola’s performance in North America was far from robust. North America is Coca-Cola’s core market generating about 30% of total revenues during fiscal 2006. Therefore, a strong performance in North America is important for the company.

Summary in points:

Strengths:

Leading brand value and a strong brand portfolio Coca-Cola, Diet Coke, Sprite and Fanta Large investments in brand promotions sells its products in more than 200 countries Company also owns bottled water production and still beverage facilities as well as a

facility that manufactures juice concentrates. These three segments are Latin America, ‘East, South Asia, and Pacific Rim’ and

Bottling investments

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Return on total assets increases over the period consistently 2005, 06, 07 15.47%, 16.55%, and 16.95% respectively.

Weaknesses:

Negative publicity in India Inventory turnover decreased by 13.29% Return on equity decreased by 40.50% Sluggish performance in North America Coca-Cola’s performance in North America

was far from robust Collection form debtors decreased by 15.68%

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17- KEY INTERNAL FACTORS Weight Rating weight Score

Strengths

Average customer purchases increased by 18.54% 0.11 2 0.22

Employee moral 0.05 3 0.15

Technical support and research efficiency 0.08 1 0.08

Newspaper advertisement expenditures increased 0.09 4 0.36

Revenues from other segments 0.14 4 0.56

Debt to total asset ratio decline 0.05 2 0.10

Locations in the world 0.15 4 0.20

Weaknesses

Inventory turnover decreased by 13.29% 0.10 3 0.30

Return on equity down decreased 80.11 1 0.11

Website 0.04 2 0.08

Supplier time delivery 0.08 1 0.08

Total 1.00 2.24

Ranked 1 to 4. Low to High respectively.

Current Evaluation: 2.24

Less than average of 2.50

Need efficiency in the Management, Marketing, finance, MIS, R & D, and other operations..

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18- KEY EXTERNAL FACTOR

S. No.

Factor Weight Rate Score

Opportunities1 Entering into snacks business (Pepsi earns 60% from snacks) 0.100 3.50 0.352 Expansion by taking over Cadbury division or product line 0.050 4.00 0.203 Expansion by introducing new ready-to-drink products (tea, coffee,

etc.) 0.050 4.00 0.20

4 Entering into or introducing new sports events (e.g. Formula I) to introduce energy drinks

0.025 3.50 0.09

5 Strong financial and assets support available worldwide to take financing for expansion

0.015 1.50 0.02

6 Introduce soft drink with focus of "healthy soft drink" - eliminate obesity concept

0.075 3.50 0.26

7 Diversification of bottling business to other industries like pharmaceuticals

0.050 2.50 0.13

8 Link with computer internet/network/cell gaming business to focus on youth worldwide - to take advantage of technology

0.025 2.50 0.06

9 0.025 3.00 0.0810 0.015 3.00 0.05

Opportunities - Total 0.430 1.4311 Hurting products containing sugar & sugar-substitute based drinks

(trend towards more healthy eating & drinking) 0.100 4.00 0.40

12 Increase in raw material costs 0.075 3.50 0.2613 Government policies may hurdle in expansion 0.075 4.00 0.3014 Government policies - for disclosure of health warning 0.100 4.0015 Ban in public schools due to obesity issues 0.075 3.5016 Lack in snacks business 0.075 3.50 0.2617 Lack of share in homeland market (refer Exhibit 8) - room for other

brands 0.015 2.00 0.03

18 Availability of purified water (being main component) in different parts of the world

0.025 3.50 0.09

19 Competitor may access unreached parts of the world prior to Coca Cola 0.015 3.50 0.05

20 Salesman not equipped with sales ordering devices 0.015 2.00 0.03Threats - Total 0.570 1.43

Grand Total 1.000 2.86

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19- COMPETITORS

Cadbury Schweppes plc

Nestle S.A.

PepsiCo, Inc.

Unilever

Procter & Gamble

Cott Corporation

Kraft Foods, Inc.

National Grape Cooperative

National Beverage Corp.

Quilmes Industrial S.A.

Quinenco SA

Yeo Hiap Seng Limited

Wimm-Bill-Dann Foods OJSC

Co-Ro Food A/S

Rynkeby Foods A/S

Spadel SA

Delta Holding S.A.

Spendrups Bryggeri AB

Pago

Hermann Pfanner Getraenke GmbH

J Garcia Carrion

Vitasoy International Holding Ltd

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20- SWOT ANALYSIS

SWOT Analysis is a strategic planning tool used to evaluate the Strengths, Weaknesses, Opportunities, and Threats inside a company, project, or a business venture. It involves identifying the internal and external factors that are favorable/unfavorable for business to succeed

SWOT ANALYSIS FOR COCA COLA COMPANY

STRENGTHS

1. Brand equity/image & recognition2. Product distribution and worldwide network 3. Solid financial performance 4. One of the world's most recognized brand.5. Product diversification (water, juices, soft drinks, sport drinks, etc) 6. Co-operate identity.7. Innovation

WEAKNESSES

1. Credit rating 2. Customer concentration, particularly in the US (Wal-Mart accounts for more than 10%

of Coca Cola's business in the US) 3. A lot of loyal Pepsi customers are not enough loyal Coca Cola customers4. Does not enjoy the number one position in India, Pakistan.

OPPURTUNITIES

1. Possible growing demand.2. Expansion – Reaching all segments.3. Globalization4. Catering to Health Consciousness of People5. Bottled water growth 6. Acquisitions of smaller players.

THREATS

1. Health Drinks – Fruit Juice Companies2. Key competitors (Pepsi, etc) 3. Commodity prices growth 4. Image perception in certain parts of the world.5. Smaller, more nimble operators/players

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Suggestion To Stay ahead Of Competition

The three main ways are through innovation, relations or reputation.  

First of all innovation can be used. This may certainly give coca cola competitive advantage because it introduces a new product, which many people will want to try. People will like to purchase the commodity even though price is high because no substitutes are available. It may also give coca cola brand loyalty which means customers will stay loyal to them no matter what happens.(S1,S2,S4,S5,S7,T1,T2,T3)

 Another factor is marketing. This is a very important factor for coca cola. In order for the company to maintain its strong market position, Coca Cola needs to continuously strengthen its brand to maintain brand loyalty and positive responses and differentiate itself from its competitors.(W2,W3,W4,O1,O2,O3,O4)

 If coca cola used strong marketing with environment friendly attitude it may raise barriers to entry, thus decreasing the threat of new entrants to the industry.  (T1,T4,T5,S2,S4,S5,S6)

Coca Cola's brand represents quality, taste and excitement to the market, qualities that remain unmatched by the company's competitors, thus severely reducing any threat of being substituted. (S1,S4,S2,O1,O2,O3)

Reason of not being popular in India is the mis-utilization of rear water resources. This put negative effect on the brand image, because of cola plant water level in the area decreases which makes the resident life miserable. If Cola Company wants a number one position in India they have to follow following criteria

Environmental due diligence before acquiring land or starting projects Environmental impact assessment before commencing operations Ground water and environmental surveys before selecting sites Compliance with all regulatory environmental requirements Ban on purchasing CFC-containing refrigeration equipment Waste water treatment facilities with trained personnel at all company-owned bottling operations Energy conservation programs

They should installed hi-tech water recycling system so that they can save 50% water savings of its operations. (W3, W4, T4)

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Many of coca cola’s plastic bottles are recycled and as a result less resources are lost and costs decrease. Through diversification & innovation in water & juices business supported with aggressive advertising strategy Coca Cola Company can attracts a new market segment. This will mean they will have a higher revenue increasing long term profitability and improve credit rating.(W1,W4,T1,T3,T4)

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21- SPACE MATRIX STRATEGIC MANAGEMENT METHOD

The SPACE matrix is a management tool used to analyze a company. It is used to determine what type of a strategy a company should undertake. The Strategic Position & ACtion Evaluation matrix or short a SPACE matrix is a strategic management tool that focuses on strategy formulation especially as related to the competitive position of an organization.

The SPACE matrix can be used as a basis for other analyses, such as the SWOT analysis, BCG matrix model, industry analysis, or assessing strategic alternatives (IE matrix).

The SPACE matrix calculates the importance of each of these dimensions and places them on a Cartesian graph with X and Y coordinates.

The following are a few model technical assumptions:

- By definition, the CA and IS values in the SPACE matrix are plotted on the X axis.-CA values can range from -1 to -6.- IS values can take +1 to +6.

-The FS and ES dimensions of the model are plotted on the Y axis.- ES values can be between -1 and -6.- FS values range from +1 to +6.

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Internal Strength Position External Strength Position

Competitive Advantage Industry Strength

(Worst -6,Best -1)

(Worst +1,Best +6)

Product Quality -1 Barriers to entry 5

Axis x Market Share -1 Growth Potential 5

Brand & Image -1Access to Financing 4

Product Life Cycle -2 Consolidation 5

Average Score =-1.25 Average Score =4.75

Total X-Axis score: 3.5

Financial Strength Environment Strength

(Worst +6,Best +1) (Worst -6,Best -1)

ROA 5 Inflation -2.5

Axis Y Leverage 4.5 Technology -1

Liquidity 5 Demand Elasticity -2.5

Cash Flow 4.5 Taxation -4

Average Score =4.75 Average Score =-2.5

Total Y-Axis score: 2.25

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Conservative Aggressive

Defensive Competitive

-6.00 -1.00 +6.00

+6.00

-6.00

+1.00 +3.5

+2.25

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22- BCG MATRIX

Sr# Division RevenuesPercent

Revenues ProfitsPercent Profits

Percent Market Value

Percent Growth

Rate1 Africa $1,140 4.48% $227.75 4.00% 5 -8

2East South

Africa & Pacific Rim

$872 3.43% $174.42 5.00% 10 -5

3European

Union$4,364 17.16% $871.17 18.66% 45 +7

4Latin

America$2,616 10.29% $522.27 11.20% 35 +3

5North

America$7,029 27.64%

$1,567.72

25.85% 60 +9

6North Asia,

Eurasia & Middle East

$4,123 16.21% $823.35 15.05% 40 +8

7Bottling

Investment$5,198 20.44% $874.42 10.48% 20 -7

8 Corporate $93 0.37% $18.88 9.76% 15 -3Tot

al-- $25,435 100.00%

$5,079.98

100.00%

- -

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BCG MATRIX

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23- IE MATRIX

Strong = 3.0 to

3.99

Average = 2.0 to

2.99 Weak 1.0 to 1.99

High = 3.0 to 3.99 I II III

Medium = 2.0 to

2.99 IV

V

COCA COLA VI

Low = 1.0 to 1.99 VII VIII IX

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24- QSPM OF COCA COLA

Ineter External Factor WeightIntroduce New

Product Outsourcing

Strength AS TAS AS TAS

1. Brand equity/image & recognition 0.08 3.00 0.24 4.00 0.322. Product distribution and worldwide

network 0.10 3.00 0.30 3.00 0.30

3. Solid financial performance 0.10 3.00 0.30 4.00 0.40

4. One of the world's most recognized brand. 0.12 4.00 0.48 4.00 0.485. Product diversification (water, juices, soft

drinks, sport drinks, etc) 0.08 0.00 2.00 0.16

6. Co-operate identity. 0.08 3.00 0.24 0.00

Weakness

1. Credit rating 0.10 1.00 0.10 2.00 0.20

2. Customer concentration, particularly in 0.10 1.00 0.10 2.00 0.20the US (Wal-Mart accounts for more than

10% of Coca Cola's business in the US) 0.08 0.00 0.003. A lot of loyal Pepsi customers are not

enough loyal Coca Cola customers 0.08 0.00 0.004. Does not enjoy the number one position in

India, Pakistan. 0.08 2.00 0.16 0.00

1.00

Opportunities

1. Possible growing demand. 0.12 2.00 0.24 0.00

2. Expansion – Reaching all segments. 0.06 3.00 0.18 3.00 0.18

3. Globalization 0.11 2.00 0.22 1.00 0.114. Catering to Health Consciousness of

People 0.12 0.00 2.00 0.24

5. Bottled water growth 0.13 1.00 0.13 1.00 0.13

6. Acquisitions of smaller players. 0.06 1.00 0.06 1.00 0.06

Threats

1. Health Drinks – Fruit Juice Companies 0.12

2. Key competitors (Pepsi, etc) 0.06

3. Commodity prices growth 0.124. Image perception in certain parts of the

world. 0.05

5. Smaller, more nimble operators/players 0.05

Total 1.00 2.75 2.78

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From our Strategic Alternatives evaluation, we see that it is more attractive to outsource our distribution networks rather than launch a diet line of products. This is in line with their current strategic direction, and will allow Pakola to fortify their market reach before introducing new products that will be harder to push through the distribution channels.

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2006 2007EPS 2.162 2.57NET INCOME 5,080,000.00 5,981,000.00

Company is performing well

Company is more stable in getting loans from financial institutionsbecause it will help in tax savingand if it will go for raising stocks, it will costs more.

PROJECTED INCOME STATEMENT

2010 2009$ Percent $ Percent

Income Statement (in millions)(in

millions)Revenue 46,573 100.0% 38,810 100.0%Cost of Goods Sold 18,693 40.1% 13,156 33.9%Interest Expense 421 0.9% 381 1.0%Tax Expense 3,027 6.5% 2,834 7.3%Income from Cont Operations 9,827 21.1% 8,189 21.1%Net Income 9,827 21.1% 8,189 21.1%

PROJECTED BALANCE SHEET

2010 2009Balance SheetCash 3,984 12.7% 3,306 10.8%Short Term Investments 324 1.0% 66 0.2%Accounts Receivable 2,704 8.6% 2,281 7.4%Inventory 1,641 5.2% 1,424 4.6%Current Assets 8,441 26.9% 10,250 33.5%Long Term Investments 6,783 21.6% 6,922 22.6%Net Fixed Assets 6,903 22.0% 5,786 18.9%Other Assets 7,843 25.0% 6,652 21.7%Total Assets 31,374 100.0% 30,638 100.0%Current Liabilities 8,942 28.5% 8,272 27.0%Total Liabilities 13,178 42.0% 12,968 42.3%Stockholders' Equity 17,256 55.0% 16,843 55.0%

Cash FlowCash Flow from Operations 11,644 9,703Dividends Paid 4,489 3,982Interest Paid 421 381

Per ShareMarket Price at Year End 92.00 77.00Earnings Per Share - Basic 4.20 3.51

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25- PROJECTED RATIO ANALYSIS

Growth RatiosSales Growth 20.0% #DIV/0!Income Growth 20.0% #DIV/0!Asset Growth 2.4% #DIV/0!Activity RatiosReceivable Turnover 18.7 34.0Inventory Turnover 12.2 18.5Fixed Asset Turnover 6.7 6.7Profit RatiosProfit Margin 21.1% 21.1%Return on Assets 31.7% 53.5%Return on Equity 57.6% 97.2%Dividend Payout Ratio 45.7% 48.6%Price Earnings Ratio 21.9 21.9Liquidity RatiosCurrent Ratio 0.94 1.24Quick Ratio 0.78 0.68Solvency RatiosDebt to Total Assets 0.42 0.42Times Interest Earned (Accrual) 31.53 29.93Times Interest Earned (Cash) 28.66 26.47

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S 26- 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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