Financial Performance of Coca Cola in India - Research Paper Example

Financial Performance - Coca Cola I. Introduction Coca Cola is the world’s largest non alcoholic soft drink and it requires no introduction in any of the countries in the world. Invented by Doctor John Pemberton in May, 1886, Coca Cola is currently operating in more than 200 countries with over 50,000 employees and more than 800 production and distribution centers and 300 worldwide bottling partners (The Coca-Cola Company: Growth, Leadership, Sustainability). Bellis (2009) has mentioned that “today, products of the Coca Cola Company are consumed at the rate of more than one billion drinks per day” (Bellis, 2009). PepsiCo international is the major competitor for Coca Cola in many of the countries it is operating. Coke, Diet coke, Coke zero, Sprite etc are some of the products introduced by Coca Cola in global market to satisfy its diverse customers. Coke is a socially responsible company which gives more importance to the protection of the environment in which it is operating. For example, Spain is a country in which over 21,000 fires happening every year and “coke recently helped to restore some of the forests around Madrid that have suffered badly from forest fires, planting indigenous species and building dams” (The Coca Cola Company: Spain). Moreover, Coke helps the countries to develop new environmental legislation and protection with its waste recovery or recycling operations. Financial performances of Coca Cola in some of the prominent countries are given below. Volume (million u.c.) 2008 2007 2006 Austria 82.7 86.6 85.2 Cyprus 17.3 15.5 11.9 Greece 163.4 159.8 149.4 Italy 268.4 257.4 214.2 Ireland 79.8 80.1 77.9 Switzerland 80.5 79.2 75.9 Total 692.1 678.6 614.5 Net sales revenue 2,704.0 2,634.6 2,474.1 Comparable operating profit 256.5 291.8 277.8 (Operating and financial performance) The above statistics clearly show that Coca Cola is growing gradually in most of the countries in which it operates. Cokes revenue crossed $ 31 billion in 2009 whereas its operating income crossed 8 billion US dollar during the same period. Moreover, as per the statistics available in 2009, Coca Cola has around 49 billion dollar asset in total. Even though Coke is currently operating in most of the continents and majority of the countries, in some countries it faces some criticism with respect to the exploitation of ground water resources. Moreover Coke is involved in lot of controversies with respect to human right violations and unethical business practices across the world. Apart from ground water exploitation, Coke is accused of violating employment laws in many countries. Recession related problems hit Coke in many ways and in some countries its sales decreased considerably. Even then, Coke is still one of the favorite soft drinks of the world. This paper analyses various parameters for introducing and marketing Coca Cola in one of the rapidly developing economies in the world, India. II. Coca Cola and India India is the second most heavily populated country in the world and one of the rapidly developing countries in the world. Even though the recent recession hit some of the major developed countries like United States and U.K., India was able to escape from recession without many problems. From Fiscal Year 1980 to Fiscal Year 1989, Indian economy grew at an annual rate of 5.5 percent, or 3.3 percent on a per capita basis. Industry grew at an annual rate of 6.6 percent and agriculture at a rate of 3.6 percent. A high rate of investment was a major factor in improved economic growth. Investment went from about 19 percent of GDP in the early 1970s to nearly 25 percent in the early 1980s (India's Economic Growth since 1980). In short, Indian economic climate is brighter for Coke like international companies to try their luck. India is one country which implemented globalization and liberalization policies in order to attract foreign direct investment. Single window clearance and liberal formalities made India one of the favorite destinations of the international organizations at present. Before entering the Indian market, Coke should know more about the cultural aspects of Indian society and community. III. Cultural analysis of India India is a secular democratic country in which majority of the people believe in Hindu religion followed by Muslims, Christians, Sikhs, Buddhists, Jains etc. All the religions have the right to worship their God as per their beliefs and they can also spread their religion without any compulsion. After the demolition of the Muslim mosque “Babri masjid” by the Hindu fundamentalists, certain religious conflicts, mainly between the Hindus and the Muslims were happened at some regions of India. Moreover, Christians also suffered a lot from the hands of the majority Hindus in some states because Hindus accused Christians for compulsive conversion of Hindus to Christianity. Even amidst, these small religious conflicts, India’s credentials with respect to secularism cannot be questionable. After the independence in 1947, from the colonial rules of Britain, India became a democratic country. Probably, India is the most prominent democratic country in the world because of the immense freedom people of India enjoying at present. Judiciary, parliament and executive, the three pillars of democracy is functioning properly in India. Even the Pak terrorist, Ajmal Kazab, who was caught alive from the Mumbai attack site, able to enjoy a fair trial in Indian courts which was praised by many foreign political analysts. Education has given more prominence in India and currently India is one of the prominent manpower banks in the world. Skilled and semiskilled workforce along with highly educated professionals made India one of the largest countries as far as manpower is concerned. In fact many of the professionals working in America, UK and other European countries are from India and moreover, many foreign organizations outsource their work to India in order to exploit the cheap labor market there. In short, India is a country with immense skilled and professional manpower and Coke will never face any manpower shortage or problems in India. India is currently consists of 28 states and seven union territories. Even though Hindi is the national language, in most of the states, local languages like Malayalam, Tamil, Kannada etc were also prominent. Living conditions in India developed a lot for the last couple of decades because of the huge economic developments. Most of the recreational activities prominent in the western countries are popular in India also. Unlike the western countries, the relationship between the family members in Indian families is one of the strongest in the world. Even though nuclear families are more prominent, the family members have a strong bondage between each other. Divorce rate in India is one of the lowest when we consider the global statistics. IV. Economic analysis of India According to the 2010 statistics, birth rate in India is 21.72 births/1,000 populations (India Birth rate). India’s birth rate is growing along with the economic growth. But with the help of family planning measures, India was able to control the birth rate from going out of control. “Sex ratio (the number of females per 1000 males) for India is 933 females per 1000 males. The availability of technology to determine the sex of the fetus and the practice of aborting a female fetus are given as the reasons for such adverse sex ratios” (India's Population by Age & Sex) Income distribution in India is not even like many other countries in the world. Apart from rich and poor, medium income people are also a prominent segment in Indian communities. “While the top 10% of India’s population enjoys 31.1% of the country’s income, the lowest 10% suffers with merely 3.6%” (India's Income Distribution). In other words, majority of the income is controlled by the richest while the poor enjoy only a low portion of the income. In short, even amidst huge economic growths, India failed to raise the living standards of the poor adequately. India’s per capita income doubled in the last seven years. Reuters has reported that India’s per capita income was $460 in 2000/01 whereas it is expected to rise to $1,000 by the end of the 2007/08 fiscal year (Reuters). Indian agriculture sector and industrial sector contributed heavily to India’s economic growth. Apart from that, revenues from tourism, outsourcing etc were also increased a lot for the last few decades. Business climate in India has improved a lot after the introduction of globalization and liberalization policies and many of the foreign organizations already established their units in India which helped India to achieve a substantial volume of foreign direct investment. From April, 2010 to May 2010, the cumulative amount of FDI flows into India was US $ 168943 million whereas the cumulative amount of FDI equity inflows from August 1991 to May 2010 was US $ 136855 million (FACT SHEET ON FOREIGN DIRECT INVESTMENT (FDI), p.1). One American dollar may yield around 46 Indian rupees at present whereas it was more than 50 rupees a couple of decades before. Even though India is growing at a rapid pace, unemployment rates were also increasing for the last few years. Unemployment rates in India from 2003 to 2010 are given at the table below. Year Unemployment rate Rank Percent Change Date of Information 2003 8.80 % 110   2002 2004 9.50 % 105 7.95 % 2003 2005 9.20 % 83 -3.16 % 2004 est. 2006 8.90 % 91 -3.26 % 2005 est. 2007 7.80 % 92 -12.36 % 2006 est. 2008 7.20 % 89 -7.69 % 2007 est. 2009 6.80 % 85 -5.56 % 2008 est. 2010 10.70 % 117 57.35 % 2009 est. (India Unemployment rate) Inflation rates in India in 2009 were around 11.49% which is one of the highest in recent times. The increase in inflation rates is a big worry for the Indian government even amidst the rapid economic growths. But Reserve Bank of India (RBI), the controlling body of the Indian financial institutions, interferes in economic activities time to time to prevent the inflation rates reaching uncontrollable proportions. India has improved a lot, both technologically and scientifically. Indian technologies can match any of the technologies developed in developed countries like America or UK. One of India’s satellites succeeded in landing on moon recently and provided valuable information about the water presence in moon. A diverse media consisting of print and audiovisual channels contribute heavily to the advertisement and sales promotion activities of big companies in India. Coke need not worry much about the advertising options available in India. V. Issues facing by India Terrorism is one of the major issues threatening India at present. Apart from terrorism, fresh water scarcity, energy crisis, air pollution, deforestation etc are some of the major problems facing by India at present. Muslim fundamentalists targeted India for the last couple of decades, especially after the demolition of Babri Masjid. India faced many terrorist attacks like the parliament attack, Mumbai terrorist attack etc after the demolition of Babri Masjid. Pepsi and Thumps Up like soft drinks are currently operating in India and there are many complaints about the exploitation of underwater resources by the soft drink manufacturers. Coke should consider all these small things in order to sell big in Indian market. India has recently signed a nuclear deal with United States in order to solve its energy crisis with the help of the nuclear equipments provided by America. Automobile industry has grown considerably over the last few years and hence the environmental pollution also started to grow. India is relying on hydroelectric power projects for its energy requirements which cause deforestation. In short, Coke should consider all these big issues faced by India while formulating their strategies to enter the Indian market. VI. Market analysis of India As mentioned earlier, Pepsi is going to be the major competitor for Coke in India. Pepsi already started operations in India and in many states it already established its base through sustainable business practices. Indian market is a huge one for Coke considering the population size. Indian population has already crossed the 1 billion mark and hence the market size in India is a huge one for Coke. Road, rail and air transport connects most of the Indian cities and hence the distribution or supply chain management is not going to be a big problem for Coke in India. Excellent road and rail facilities are available from the southern end to the northern end of India and Coke can transport its products across India with ease. It is difficult for Coke to put heavy prices for its products in Indian market considering the economic abilities of the majority of the population. Poor people are still the majority in India and Coke should consider the above fact while fixing prices in Indian market. Each state in India has local laws and regulation even though India is a federal republic. Coke should consider the local laws more seriously while formulating their strategies for Indian market. Some of the Indian states may have more business friendly climate compared to other states. For example, Gujarat and Maharashtra considered as the investment friendly states in India whereas Kerala and Bengal may not be so. VI. Market Plan Coca Cola is currently operating across different countries and cultures. They are more focused in implementing custom made strategies for each region or country it operates. Even for the same product, customization is required in different markets and hence Coke should concentrate more on giving an Indian image to its products. It is not necessary that the social, political, economical environmental, legal, cultural and communal factors of America and India might be the same. Instead of an American look, Coke should try to give its products more of an Indian look in Indian market. Youths are the major consumers of Coke all over the world and Indian market also; it is going to be the same. So Coke should formulate marketing strategies to exploit the youth community of the Indian population. Youths often drink Coke and they consider drinking Coke as a status symbol. Advertisements and sales promotions for Coke in Indian market should utilize celebrities like Sachin Tendulkar, Shah Ruk Khan etc as these people can influence the youth community immensely. For the cricket crazy Indian public, Sachin is the God whereas the Bollywood heartthrob Shah Ruk Khan also can influence the youths immensely. Packaging of Coke should be done based on the Indian culture. Indians always like attractive packaging of products and hence Coke should fill it drinks in attractive bottles or cans, printed with colorful labels. “In 2007, the Company and Foundation spent $6 million to support active, healthy lifestyle programs” (The Coca Cola Company: Products, 2009). Coca Cola has spent millions of dollars for educating the public to lead a healthy a life. Currently in many countries, lot of controversies is there about the harmful ingredients in the soft drinks. Coke should clearly mark the ingredients and its percentage on the labels provided at the coke cans or bottles. Conclusions Coca Cola have bright prospects in Indian market considering the overall political, social, economical and environmental climates in India. Globalization and liberalization has forced Indian government to do anything possible to attract foreign direct investment which is a good sign for Coke. Coke should implement sustainable business practices in Indian market taking into the account of diversely in Indian population and markets. Works Cited 1. Bellis, Mary. 2009. “The History of Coca Cola”. 19 August 2010. 2. “Coca Cola Pictures”. (n.d), 19 August 2010. 3. “Fact Sheet On Foreign Direct Investment (FDI)”. 2010. 19 August 2010. 4. “India Unemployment Rate”. 2010. 19 August 2010. 5. “India's Economic Growth Since 1980”. 2000. 19 August 2010. 6. “India Birth Rate”. 2010. 19 August 2010. 7. “India's Population by Age & Sex”. 2010. 19 August 2010. 8. “India's Income Distribution”. 19 August 2010. Read More