Strategic Business Analysis on The Coca-Cola Company - Case Study Example

Business analysis on The Coca-Cola Company al Affiliation This paper is a strategic business analysis of theCoca-Cola Company, a leader in the beverage industry. Coca-Cola Company; headquartered in Atlanta, Georgia in the United States; manufactures nonalcoholic beverage concentrates which it sells to its bottling and canning partners all over the world. It was founded in 1886 and were currently one of the most successful businesses in the world. The company owns and markets more than 500 nonalcoholic beverage brands in more than 200 countries in the world. The paper seeks to determine ways in which the vision, mission, and stakeholders of Coca-Cola Company impacts its overall success, identifies its five forces of competition, perform a SWOT analysis on Coca-Cola and come up with strategies available to the firm, analysed the company’s leadership and governance mechanisms as well as the impact of its Corporate Social Responsibility and ethical programs. Mission and Vision Mission and vision statements are a vital component of the company’s organizational strategy, because they provide a guideline in the set-up of the company’s strategic plan. Mission statements describe an organizations purpose by clearly defining the objectives of the organization and the approach to be used in achieving them. Vision statements provide a roadmap on what the company intends to achieve its objectives in the future. Coca-Cola’s mission statement is to refresh the world; to inspire a moment of happiness and optimism and to create value and make a difference. With achieving its mission to refresh the world, the company has had to offer multiple drinks to serve different markets that have greatly contributed to its success (Girard, 2005). The statement is also focused on the customer as opposed to the product itself. This ensures a high volume of sales. One can also get clues on who exactly is the target market for the company thus the stakeholders involved can easily identify with the company’s mission and shareholders can easily allow for reinvesting of profits into developing the business. Its vision statement is centered on it employees happiness, brand portfolio, supply chain partners, the environment and sustainability, profit maximization and workplace productivity. Maintaining a work environment that employees enjoy working at as well as ensuring this doesn’t compromise the effectiveness of the company in delivering fast moving beverages to consumers has helped increase the company brand and thus reputation and sales. The company also greatly promotes sustainability in all aspects of the organization with recycling, community initiatives, and outreach programs (Coca-Cola Icecek, 2011). This increases the public image of the organization. The organization has one of the largest partner networks in the world operating in almost every country through its bottling partners and their distribution networks. This increases brand image and product availability to consumers even in the remote parts of the world (Yadav, Stapleton, & Van Wassenhove, 2013). Coca-Cola’s stakeholders include but not limited to employees, customers, the government, suppliers, and shareholders. The Company, through research, product diversification and production of quality products has won trust of its customers over the years. It has measures to ensure that the needs of its employees are met by taking them through intense training sessions and ensuring human rights are guaranteed in its workplace and with their partners. The company through a global communication system that consists of numerous advertisements in all media, annual stakeholder reports, sustainability and profit reports, ensures that it is in constant communication with its stakeholders in order to deliver on its commitments and also identify prevailing issues and ways to correct them. Coca-Cola Company has also partnered with governments and non-governmental organizations in the community based initiatives such as recycling. This constant interaction with its stakeholders has enabled them to win their loyalty over the years. Five forces of competition that impact on Coca-Cola Forces of competition are factors that influence the competitive position of the company in the industry. The competition forces can, therefore, be used to enable the company to have a clear understanding of the strengths and weaknesses of a particular market and therefore predict the viability of a new product in a particular market. One force of competition is the power that a supplier has at the market price. The main suppliers of Coca-Cola are ingredient and bottle suppliers (The Coca-Cola Company, 2013). Due to many suppliers who can supply these ingredients, the supply power remains low and thus Coca-Cola Company can keep the pricing of its products low. The company is also greatly involved in manufacturing its own bottles and beverage packaging materials and suppliers have little to no control over bottle supply to the company. Another competition force is the power that buyers have at the market price. Coca-Cola uses large distributors such as hypermarkets, supermarkets, and restaurants to distribute its beverages to consumers. The large buying capital of such distributors enables them to buy the beverages in large quantities with large bargains in price (Yadav, Stapleton, & Van Wassenhove, 2013). This keeps the product price low and therefore for an individual consumer to decide to shift preference to other products, would have an insignificant influence on the pricing of its products. Coca- Cola Company faces competition from other soft drink companies such as Pepsi. Pepsi owns 29% of the soft drink market while Coca-Cola owns 42% (The Coca-Cola Company, 2013). It also competes for the overall beverage market with other companies such as Nestle. These companies have a financial base to go toe to toe with Coca-Cola and thus present as great competition force. Another force of competition is the ease at which new competitors can enter the market. Coca-Cola has invested heavily into marketing and advertising to a global power brand (Interbrand, 2013). It also has one of the world’s best distribution networks and largest product differentiation. This makes it harder for another company to enter the soft drink industry because of the high costs involved in the setup and to win over Coca-Cola’s market share with the brand making its consumers very loyal. The company has been in existence for over a century and has greatly lowered the force of threat of substitution by winning over loyalty and trust of its consumers over time. It has also entrenched itself as a part of holidays and events such as Christmas and New Year holidays. This makes the chances of consumers switching to alternative products lower as they know no other substitutes for such events. However, the increased health and wellness campaign may have an impact on the company with more people switching to less sugary alternatives. This has seen in recent days Coca-Cola introducing diet versions of its products and investing into non-soft-drink products such as water and fresh fruit bottling (Girard, 2005). SWOT Analysis and Company Strategies SWOT analysis is a framework that a business can use in analyzing its external and internal environment. Strength and weaknesses are concerned with the internal environmental factors and opportunities and threats are concerned with the external environmental factors. Coca-Cola Company has the following strengths that increase its competitiveness Customer Loyalty is due to Coca-Cola consistently producing unique products with varying tastes. This has attracted huge customer bases that have become loyal to the company’s products. To maximize customer loyalty, the company may have to come up with a more diversified portfolio, increase marketing, and advertising efforts, ensure a consistent global taste of its products and increase their availability. Coca-Cola enjoys the biggest market share of non-alcoholic beverages and soft drinks. It controls almost 40% of the market in the world. The company may need to market consistently aggressively throughout the year to maintain their market share as well as invest into its non-traditional markets such as mixed fruit drinks or caffeinated drinks to grow its market share. The Company has an immense distribution network for its products by partnering with bottlers and canners in 200 countries in the world. This increases the reach of its products. To build upon this strength, the company may need to ensure its partners follow government regulation in their respective countries in relation to taxes, labor, and the environment. The company can also ensure partnership agreements remain attractive to ensure partners invest heavily into the distribution network. As strength, the company maintains one of the strongest and most attractive brands in the world. Interbrand in 2013 valued it at 79.2 dollars (Interbrand, 2013). The brand strength can be enhanced by increasing marketing and advertising efforts as well as ensuring consistent products all over the world. Coca-Cola has greatly invested in corporate social responsibility (CSR) programs such as recycling/packaging, energy conservation/climate change, active, healthy living, water stewardship, and waste management. These CSR programs help boosts the company’s social image and promote sustainability. The company can increase the amount of revenue injected into CSR programs for a better public image. The following weaknesses hinder the success of Coca-Cola Company; Low product diversification into non-carbonated beverages by Coca-Cola as compared to its competitors like Pepsi who have diversified into other areas like the snack market presents as a weakness and Coca-Cola might find it hard to penetrate this market if it decides to do so in future. The company’s shareholders may need to allow for the company to buy into the snack food market to reduce this weakness. Coca-Cola faces negative publicity due to the sugar content and additives in of products that have been criticized for the production of drinks as the main cause of lifestyle diseases such as diabetes and obesity. It has also been criticized for high water consumption especially in countries that experience water scarcity. To minimize negative publicity, the company may need to increase its beverage portfolio into the healthy drinks market and increased water management, recycling, and afforestation programs. With more than 400 brands to its name, only few of them sell well and thus most of their brands can be seen as failures. Increased advertising and brand ambassadors programs may help in minimizing this weakness. Coca-Cola has the following opportunities. There has been a marked increase in soft drink consumption in developing nations (The Coca-Cola Company, 2013). With the increase in buying powers of consumers, there are increased sales of Coca-Cola’s products. The company may need to increase marketing efforts in emerging markets in order to increase and maintain its beverages market share in these markets. Consumption of bottled water is growing globally more so in the developed world. With Coca-Cola’s investment in the bottled water market, it may need to increases production, reach and advertising of is bottled water brands to take advantage of this increase in consumption and get an early lead in market share. There has been an increase in health awareness programs that seek to fight obesity and thus increased demand for healthy food and beverages. The Coca-Cola Company has an opportunity to expand its product range further with drinks that have a low amount of sugar and calories. Coca-Cola will find it hard to keep current growth levels and to penetrate new markets with its existing product portfolio. With its large financial base, penetrating into new markets can be done more easily through acquiring other companies (Girard, 2005). Coca-Cola Company has the following threats to its future business Consumers globally are becoming more health conscious leading to a change in consumer tastes. Consumers may reduce their consumption of carbonated drinks, drinks that have large amounts of sugar, calories and fat. This poses a serious threat as Coca-Cola mainly serves carbonated drinks. Diversification into health drinks reduces this threat. Coca-Cola uses large amounts of water in production of its products and with water scarcity globally, this presents as a future problem. The company may need to invest more heavily in water management efforts and environmental programs. With more than 60% of The Coca-Cola Company income coming from outside the US, a strong dollar performance against other currencies leads to an overall fall in company income. This can be minimized by maximizing its reach in the US beverage market. Legislation requires all consumer products to disclose information on product labels. Some of Coca-Cola’s carbonated drinks have adverse health consequences. Products containing such information may be perceived negatively and lose its customers. The company may need to switch up its formulas for more acceptable ingredients. Due to increase in water and costs of ingredients, the company may find it harder to maintain its gross profit and net profit margin and still sell its products at a low cost for its customers. This may continue to decrease due to higher water and other raw material costs. PepsiCo is fiercely competing with Coca-Cola over market share in BRIC countries, especially India (The Coca-Cola Company, 2013). Coca-Cola may need to increase advertising and product availability in such countries to increase brand loyalty. Levels and Types of Strategies to Increase Profitability and Competitiveness At the corporate level, growth and strategies can be used to increase profitability and competitiveness. Growth strategies are decisions made to enable the company to expand in terms of its sales, profits, market share or coverage. Stability strategies are decisions made at the corporate level to ensure the continual existence of the firm in the industry. Another level of setting strategies is a business level. It is concerned with the firm’s competitiveness in the market with regards to the forces of competition. Strategies used in this level include Cost-leadership strategies are decisions aimed at ensuring the firm becomes the lowest cost producer or distributor in the industry. Differentiation strategies are the decisions that require a firm to create products that are perceived unique within the market with desirable features not common with competing products. Another type of strategy is focus strategies that involve concentration on production of a particular product, market niche, geographical area and so forth. Strategies can also be formed on a functional level. These are the decisions that involve coordinating the functional areas of the organization such that each area contributes to individual business level strategies and corporate level strategies as a whole. A type of functional strategy is the marketing department investing more to build a brand and its distribution network. Communications plans the company can use to make its strategies known to shareholders Effective communication can help build a relationship between business and its stakeholders. Communication plans are important as they describe the information to be shared, when to be shared and the channels to be used in sharing the information. The company may involve itself in advertising on TV, radio, and print publications and online platforms to communicate its strategies to stakeholders such as consumers. Coca- Cola also produces legal and legislative documents for stakeholders such as the government. The media can be communicated to through public relations materials. Shareholders can be communicated to through annual reports, meetings and conference material and speeches. Stakeholders such as the suppliers can receive communication from Coca-Cola through invoices and company branded material. The company can also deliver communication to stakeholders through signage, awards and certificates, communication within the organization and speeches. Effective Corporate Governance Mechanisms in Coca-Cola Corporate governance mechanisms are measures or processes a company puts in place to ensure that the interests of its stakeholders are balanced by increasing the accountability and transparency of a company. The board of directors who are elected by shareholders, act as the ultimate decision-making organ of the company (The Coca-Cola Company, 2013). The Board selects and oversees members of senior management. The board meets periodically five times a year to provide advice and guidance to senior management. This mechanism is highly efficient in controlling management as the board of directors outlines the companies’ long-term version strategies and thus senior management should perform their duties in accordance to the Board of director’s decisions which are decided and voted for in their periodic meetings. Another governance mechanism is Coca-Cola’s by-laws. They govern the companies interactions with its shareholders, directors, committee of the board of directors, company notices, resignations, indemnification, capital stock, corporate seal and amendments (The Coca-Cola Company, 2013). These by-laws set a legal framework for how the board of governors are voted in or dismissed, number, terms and classes of directors and all company procedure involved in the management. They thus are an effective tool to control how the management process takes place at the company. Effectiveness of Leadership within Coca-Cola Leadership is an important aspect of any organization as it sets the direction of the company in order to achieve its objectives. The company has under its current CEO, Muhtar Kent, strived to lead with a global mindset by seeking to know how each corporate decisions’ impact globally (Riaz, 2008). This is by engaging their teams found globally to know how a particular decision may impact a particular market as well as having an internationally diverse management team. The company has also heavily invested in training rising stars from around the global. The company may need to invest in changing public mindsets in cultures where their inclusive style of leadership might present as a problem. Impact of Corporate Social Responsibility and Ethical Behavior Sustainability has been key in Coca-Cola’s agenda, and energy management and climate protection are key to their sustainability strategy. Within 2011, Coca-Cola was involved in efforts to decrease their energy cost per liter of product through prioritizing efficiency in their production and supply chain as well as in reducing CO2 emissions of their carbonated products in Turkey, Jordan and Kazakhstan (Coca-Cola Icecek, 2011). This resulted in energy consumption reducing by 4% in Turkey and 7% in Kazakhstan. The Company also recorded reduced CO2 emissions in target countries that year. Coca-Cola Company thus saw a positive improvement in its operation through energy certification and reduced operational cost. References Coca-Cola Icecek. (2011). Corporate Social Responsibilty report. Available at [Retrieved December 3rd, 2014] Girard, R. (2005). Coca-Cola Company: Inside the Real Thing. Polaris Institute. Interbrand. (2013). Best Global Brands.Available at [Retrieved December 3rd, 2014] Riaz, S. (2008). Leadership at Coca-Cola: The Real Thing. Ontario: University of Western Ontario. The Coca-Cola Company. (2013). Annual Meeting of Shareholders. Available at [Retrieved December 3rd, 2014] The Coca-Cola Company. (2013). Annual Report. Available at [Retrieved December 3rd, 2014] Yadav, P., Stapleton, O., & Van Wassenhove, L. (2013). Learning from Cola-Cola. Stanford Social Innovation Review. Read More