Coca-Cola Company Business Performance - Essay Example

Coca cola company report Introduction Coca Cola is an American multinational company. It mainly deals in manufacturing and selling of non alcoholic beverage. The company has its headquarters in Atlanta, Georgia. John Stith Pemberton invented Coca Cola in 1886 and the company was formed in 1892. The company operated its business throughout the world by franchisee distribution system. It is the world’s leading soft drinks manufacturing company which operates its business in more than 200 countries of the world. For more than a century the company continues through depression, prosperity, war & peace, economic burst and boom etc. During this long time of its business Coca Cola has done many mergers and acquisitions with various companies. The company has also diversified its business in health drinks, bottled water, fruit juice etc. Coca Cola has created a huge customer base and maintains a strong connection with its targeted customers. Company Profile Coca Cola is one of the recognizable brands in the world. It is a 16 billion dollar brand. Coca Cola produces the top five soft drinks like Diet coke, Fanta, Coca cola, and Sprite etc. It is also involved in manufacturing other products like vitamin water, Minute maid, powerade etc. The company has the license to market more than 500 beverage brands including water, sparkling drinks, juice, sports & energy drinks, ready to drink coffee or tea etc. Coca Cola has the world’s largest distribution system (Isdell and Beasley, 2011). It has many bottling partners throughout the world for selling its beverage. Its present employee strength is 130,600. In 2013 the company has earned revenue of US$ 46.854 billion. In 2013 Coca Cola has its total assets of US$ 90.055 billion. The company has many subsidiary companies. In 1920 Coca Cola became a publicly trading company. History Coca Cola was innovated in 1886. From that time it has become the catalyst for inspired innovation and social interaction. This non alcoholic beverage created a global brand which provides refreshment to its customers throughout the world. This product was invented by John Stith Pemberton in 1886. In this year the first newspaper ad of Coca Cola appeared describing it as refreshing and delicious beverage. The Coca Cola syrup and extract was labeled as copyright under John Pemberton. In 1889 the formula of Coca Cola and the brand was bought by Asa Griggs Candler. He started the company Coca Cola in 1892. The company’s Spencerian script and its trademark were registered in 1892 with the Patent office of U.S. In the company’s second annual meeting the investors received their first dividend. The annual report of the company in 1895 declared that Coca Cola is sold and drunk in all the states of US. Business positioning The company has positioned itself very strategically within the market of soft drinks. Coca Cola believes in the concept of think globally and act locally. The company thus keep its core product same and adapts policies and strategies according to the local needs. It uses strategic positioning for maintaining same image throughout the world. This brand positioning strategy become successful because it has became a part of everyday life. The perception of this brand increases consumer’s loyalty. Coca Cola sells its products by using unique selling prepositions which is related to happiness and joy. This brand is associated with consumer’s emotions. Products of Coca Cola are diet soft drink, other soft drinks like Fanta, Sprite, and ThumpsUp. It is also involved in manufacturing healthy beverage like minute maid juice, powerade. The company with its joint venture with Nestle produces Nestea. Its Minute made division launched orange juice. The company has newly launched its green tea Enviga. Services Coca Cola provides service to its customers in such a manner that which increases the respect and dignity of the brand. Its accessible policy of client service involves third parties like distributers. The company builds true partnership for offering excellent service to its distributer and suppliers which adds the company’s profitable growth. The company also provides the service of communication with the customers in many ways which includes face to face interaction, emailing, telephone call etc. By offering this service the company records the accessible need of its customers regarding their product. Coca Cola give training to its employee who deals with distributers and customers. Sales by division Concentrates operation of the company include the sales of the company by authorized boiling partners for manufacturing fountain syrup. The bottlers sell the fountain syrup directly to the wholesalers. Finished product operation includes the fountain syrup produced by the company sold to fountain retailers. Sales by business region Coca Cola has its business throughout the world. It has covered its business in more than 200 countries of the world by its franchisee system. According to the last report of Coca Cola on 31st December 2013, the company is experiencing its maximum sales in North America. It accounts 53.02% of the total sale of the company and generates revenue around $21,680 million. Asia ranks in the second place. It records a sale of 14.76% and revenue of $6035 million. Europe is in the third position earning $5123 million and accounting 12.53% of the total sale. Latin America is in the fourth position having 11.81% sale of Coca Cola’s products, generating the amount of $4831 million. Africa is in the fifth position accounting a sale of $2970 and covers 7.26% of the total sale of the company. All the other countries are contributing in 0.62% of the sale with revenue of $254 million. Mission & vision Coca Cola’s mission statements are to refresh the world, to make difference by creating value, to inspire moments of optimism and happiness. Competitor’s (Pepsi) mission Its mission is to become the premier company focusing on conventional beverages & foods. It seeks to give reward to its investor for providing growth opportunities to the company Vision Coca Cola’s vision statements are to build a great place to work which inspire people to become the best, to bring beverage brand of good quality that will satisfy people’s needs and desires, nurturing a compatible network of suppliers and customers who together will create mutual value, maximize profit, long term returns of the share holders. It also focuses on the sustainable development of the company. Competitors (Pepsi) vision Pepsi’s vision is to focus on environmental activities, stewardship, benefiting the society, building the share holders value by creating Pepsi a sustainable company. Existing organizational structure Muhtar Kent is presently the chief executive officer and chairman of the Board of Coca cola. He is in this position from April 2009. Earlier he was the Chief executive officer & the President of this company. Presently there are 15 Board of directors in Coca Cola. The members are Muhtar Kent, Ronald W. Allen, Herbert A. Allen, Howard G. Buffett, Richard M. Daley, Ana Botín, Barry Diller, Evan G. Greenberg, Helene D. Gayle, Alexis M. Herman, Maria Elena Lagomasino, James D. Robinson III, Robert A. Kotick, Sam Nunn, and Peter V. Ueberroth. The President of Coca Cola International is Ahmet Bozer. President of Eurasia & Africa group is Nathan Kalumbu, Europe group is James Quincey, Latin America Group is Brian Smith, Asia Pacific Group is Atul Singh, North America is J. Alexander M. Douglas Jr and lastly the president of Bottling Investments Group is Irial Finan. Organization chart analysis The organizational structure of Coca Cola is characterized with both mechanical and organic models. The company has a centralized structure but recently the company is moving towards decentralization. The divisional managers are responsible for running the company’s operation in the general regions of the world. The top level managers with well rounded backgrounds look after the different business areas of the company. This helps them to judge the problems of the company from different angles. The company wants to meet the ever changing needs of its customers. So it’s recently moving towards decentralization. The two operating groups of the company are the corporate and the bottling investments. The operating groups are also divided in different business regions, geographic regions. This system allows the company to operate business efficiently in local levels. The employee of the higher level management focuses on the long term planning of Coca Cola. Recommended organization structure The Organizational structure of a particular company should follow the overall strategy of the company. There is a close linkage between strategy and structure of a company/. When strategy and structure is aligned it leads to achievement of goals. A good and useful structure should involve team work, flexibility in making decision and sharing of ideas across the organization. No structure in modern world can be said to be perfect. The only structure that can be called a perfect one is one which allows flexibility. Although at a first glance Coca Cola’s structure seems to be decentralized but the structure allows lot of flexibility. In case off taking important decisions the team meeting is called encompassing persons from different functional heads to deliberate collectively on an issue. Another noticeable feature in the organization structure is that the structure is divided at the bottom on the basis of regions. This is essential because Coca Cola is a multinational company. It caters to different countries with different tastes. So each geographical segment receives particular and undivided attention. Current marketing strategy From the beginning Coca Cola has developed its marketing strategies based on three principles. They are acceptability, availability, affordability. In acceptability the company marketed its brand and product as an integral part of daily lives. It ensures the maximum availability of its product to refresh its customers. This company guarantees that their product prices are best in terms of value offerings and they are also easily available. The company does not market its product to the children less than 12 years because Coca Cola believe that their parents should choose right drink for them. Innovative TV ads and different type of ads campaign are some of the unique feature of the brand which leads in the successful marketing of their product. The company associates its product with different festivals and events which attracts its targeted customers. Proposed marketing strategies Coca-Cola marketing strategy has always evolved around projecting the company associated with happiness and festivities. All the major ad campaigns have projected the company as one which spreads happiness. The main strategy that Pepsi has used is to project itself as a company that makes drinks and products catered to the youth. It purposefully tries to differentiate itself from Coke by saying that they manufacture drinks for the youth. Coke has for long used the same image of the company and it may seem that the company likes to stick to traditional view. But to stay competitive and increase its market share the company must do a few additions to its marketing strategies. It should focus on newer segments of customers like the younger generation. It should introduce new product categories. It can also change its image consciously by projecting it as a company for all times not only for moment of happiness. Map of Coca Cola’s operation (Shachman, 2004) Competitors map of operation (Shachman, 2004) Company & competitor website, required improvements PEPSI website Coca-Cola website By analyzing the websites of the two companies we see there is lot of differences. The Coca-Cola website lacks in several respects as compared to the Pepsi website. To start the discussion it is found that the whole of Coca-Cola website focuses mainly on a single product of the company product i.e. Coca Cola. It is very difficult to know about the different products that the company manufactures by looking at the company website. It seems that the company neglects its other products and focuses its attention to just one product. Another thing that is noticed is that company website lacks human face. However Pepsi’s website has lot of human faces. Pepsi also develops connection with the people of a particular country by changing faces of the people on their website depending upon the country. The third noticeable factor is that the Coca-Cola Company does not have enough links to social networking sites. So people cannot connect with the company socially. Value of the company STC s Ticker: NYSE KO 2/1/ 2014 37.82 3/11/2014 44.27 52 week high 44.87 52 week low 36.89 No. of shares 4380000000 Market capitalization as of 3/11/2014 193,902,600,000 Market capitalization on 31/11/2014 based on free float method =3960000000*44.27 = 175309200000 (Yahoo Finance, 2014) The market capitalization of Coca-Cola is found to be approximately 193.91 billion USD. By using free flow method that is excluding locked in shares while calculating market capitalization we find the new market capitalization to be approximately 175.31 billion USD. If we look at the historical share prices of the company it is showing a downward trend. The 52 week share price shows that the share prices have changes by about 10 % over this period. The beta value of the share is around .66 which shows that it moves or changes at a slower rate than the market. That is if the market moves by 100% Coca-Cola’s share will move by around 67%. SWOT analysis Strength Coca Cola is the world’s best global brand in terms of value. It has acquired largest part of the market in beverage industry. The company advertises its products in such an attracting way that people get highly influenced by this brand. It possesses strong marketing techniques. Coca Cola has world’s largest and extensive distribution channel. The company holds a strong bargaining power over the supplier. Coca Cola always performs its corporate social responsibilities. The company is also customer loyal. Weakness Coca Cola mainly focus on its carbonated drinks. Its product portfolio is undiversified. Presently the company is facing high debt due to too many acquisitions. The brand has also faced negative publicity for the assumption of pesticides in its soft drinks. Coca Cola has many brands but the company is not generating significant revenues compared to that. Opportunities The growth in the consumption of bottled water provides Coca Cola the opportunities to increase its sales. Some of the other opportunities are the increasing demand of beverage and food, growth of consumption in emerging market, acquisitions etc. Threat The market of carbonated drinks is saturated. Consumers are becoming health conscious so their preference and taste are changing. Many people are not in favor of purchasing soft drinks. Coca Cola is facing a decrease in net profit margins & gross profit. It is facing a strong competition from its rival Pepsi. External assessment Coca Cola’s competitor is Pepsi. Pepsi was introduced in 1893 by Caleb Bradham. It is an American multinational company headquarters is in Purchase, New York. The founders of the company are Herman Lay & Donald Kendall. The main products of Pepsi are carbonated drinks, bottled water, chips, health drinks etc. In 2013 the total revenue of Pepsi is US$ 66.415 billion; its operating income is US$ 9.705 billion and its net income is US$ 6.74 billion. Porter’s 5 Forces Analysis Potential Competitor Beverage industry has low entry barriers. The capital requirements for this industry are also less. So the increasing number of brands is appearing the market which has similar products like Coca Cola. But the companies have to incur a huge advertising cost to beat the giant players like Coke and Pepsi. So the threat of new entrance is low. Threat of substitute Many kinds of substitute products of Coca Cola are present in the market. The products of Coca Cola do not really have unique taste or flavor. So it can be easily substituted by other company’s products. Therefore the company faces a strong threat from its substitute products. Bargaining Power of buyer The bargaining power of the buyer is low here. Individual buyer cannot pressurize the company about its price. Only the large retailers have a little bargaining power on the company because they place huge order. Bargaining power of the supplier The supplier of Coca Cola has low bargaining power. It is a giant company and has many suppliers. So the competition among the suppliers is high. Moreover the main ingredients of soft drinks are easily available which obstruct the suppliers to inset pressure on the company. Existing competition Coca Cola is facing high competition from its strong rival Pepsi. Its wide rand of beverage products of same price gives a tough competition to Coca Cola. Both of these companies are predominant in the industry of carbonated beverage. They both sponsor many outdoor activities and events. Recently some of the other soda companies are becoming very popular in the market for its unique flavors. Projected financial ratios Items 2013 2014 E 2015 E 2016 E Sales Revenue 10.90b 10.65b 11.20b 12.20b Net Profit 10,228,000 10,739,000 11,168,976 11,280,665 EBITDA 11,940,000 14,925,000 17,910,000 19,700,100 ROA 9.67% 9.00% 8.90% 9.12% ROE 29% 28% 30% 30% P/E 24.61 20.89 21.00 21.12 EPS 1.80 2.4 2.56 2.81 Strategy formulation & implementation There are a few problems facing coca-cola at the moment. The main problem facing the company currently is that it is failing to keep itself updated with the changing times. It has focused all its attention and concentration over the years to a particular segment which is very risky. The company must use its strength that is its high brand image to target other segments of the market. The company also must develop advertising to focus on the fact that it can be used as a thirst quencher at all times. Its website also needs some touches here and there and it should give equal focus to the entire product category it has. Recommendation The Coca Cola as a brand is very old and the fact that the brand has succeeded till now shows that the company rests on strong fundamentals. The company enjoys good brand image and has a strong market share but an analysis of the company’s website and the company’s portfolio tells us that the company does not focus on other business segments. In fact it has focused all its attention and concentration on carbonated drinks and that too particularly on its flagship product Coca-Cola. The risk of focusing on a particular segment is immense and is not recommended in the long run. The company must start developing a diversified portfolio. It must cater to the tastes of different peoples of different countries where it operates to stay relevant and to ward off competition in the long run. Conclusion Coca Cola is a giant company in food and beverage industry. It has a global presence. The company y is doing its business for a long time. With many mergers and acquisitions the company has become one of the leading companies of the world. But presently the company is facing some problems for the change of taste for its consumers and of increasing healthy awareness attitudes in them. The company mainly focuses on its carbonated drinks which now a days are less consumed by the people. Therefore Coca Cola needs to increase its product varieties of health drinks, juice, tea and other beverage food for increasing its revenue. Its competitor Pepsi manufactures a wide range of products in food & beverage which gives it a strong competition. Coca Cola uses many innovative and attracting marketing strategies for targeting its customers. It also creates different types of technology for managing its warehouse, customers and products. It has been success in setting up barriers for entering in the beverage industry. References Isdell, N. and Beasley, D. (2011). Inside Coca-Cola: A CEOs life story of building the worlds most popular brand. NY: Macmillan. Paul, J. (2008). International marketing: Text and cases. New Delhi: Tata McGraw-Hill Education. Shachman, M. (2004). The soft drinks companion: A technical handbook for the beverage industry. New York: CRC Press. Yahoo Finance. (2014). The Coca-Cola Company (KO)-NYSE. Retrieved from: https://in.finance.yahoo.com/q?s=KO. Read More