Business Strategy - Coca-Cola - Case Study Example

Business Strategy-Coca-Cola Name Institution Course Date Table of Contents Table of Contents 2 Introduction 3 Task 1 3 1.3 Evaluate the effectiveness of techniques used when developing strategic business plans 5 Task 2 6 2.1. Analyse the strategic positioning of a given organisation by carrying out an organisational audit 6 2.2. Carry out an environmental audit for a given organisation 8 Analysis using PESTEL Strategy 8 Analysis using Porter’s Five Forces 8 2.3. Assess the significance of stakeholder analysis when formulating new strategy 10 There are there ways to assess a strategic plan before implementation and they include suitability, acceptability and feasibility. Suitability entails checking whether the proposed strategy is able to address the fundamental opportunities and threats that face an organisation. Acceptability on the other hand highlights whether a proposed strategy meet the expectations of all the central stakeholders. Feasibility assesses the way the strategy will work in the business context. It delas with issues concerning funding of the strategy, capabilities required and resources needed. 11 2.4. Present a new strategy for a given organisation 11 Task 3: 12 3.1. Analyse the appropriateness of alternative strategies relating to market entry, substantive growth, limited growth or retrenchment for a given organisation 12 3.2. Justify the selection of a strategy 13 Task 4: 14 4.1. Assess the roles and responsibilities of personnel who are charged with strategy implementation 14 4.2. Analyse the estimated resource requirements for implementing a new strategy for a given organisation 15 4.3. Evaluate the contribution of SMART targets to the achievement of strategy implementation in a given organisation 15 Conclusion 16 References 18 Business Strategy- Coca-Cola Introduction Strategic planning is very important to organisations. There are three business processes of strategy including strategy formulation, strategy implementation and strategy evaluation (Johnson et al., 2014). Strategy formulation involves performing a situation analysis and setting objectives that are parallel to a timeline and go hand in hand with organisation vision, mission and overall corporate objectives. Strategy implementation involves the allocation of resources, assignment of roles and responsibility, establishing a chain of command and managing the process. On the other hand, strategy evaluation is the measuring of the effectiveness and potential for success of an organisational strategy (Johnson et al., 2014). This paper will detail out the process of strategic planning in Coca-Cola Company and how to formulate a new strategy. It will also highlight how to evaluate strategy in the company and the implementation process of the chosen strategy. Task 1 1.1. Assess how businesses’ missions, visions, objectives, goals and core competencies inform strategic planning. The Coca-Cola Company has been in operation for more than 120 years and is considered one of the largest beverage companies in the United States (Coca-Cola Journey, 2014). It is involved in the production and distribution of non-alcoholic drinks and syrups. The Coca-Cola Company has developed a 2020 vision that acts as a roadmap to increasing their global operation revenues by focussing on profit, shareholders, productivity, planet and portfolio (Coca-Cola Journey, 2014). The mission statement for the company is to refresh the global society in mind, body as well as the spirit. To inspire optimism through their brands and operations and to create value and make a difference in everything they engage in. the company is considered the leader in the beverage industry having a reputable brand coupled with strong global presence (Coca-Cola Journey, 2014). Concerning its mission statement and its 2020 vision, Coca-Cola strategic goals include increasing profit by reducing the costs of its products through efficient production facilities. Another goal is to pay attention to environmental friendly bottling production and implement sustainability in its operations (Coca-Cola Journey, 2014). Also, it aims at diversifying its portfolio through partnership, creativity and innovation and to increase its annual income by 8 per cent for its revenue to double by 2020. The strategic plan of Coca-Cola includes growth and expansion. Through its mission, vision and culture, the company has the ability to spur this growth by 2020 (Coca-Cola Journey, 2014). The key competences of Coca-Cola include leadership, collaboration, integrity, accountability, passion, diversity and quality. Its values, mission and competences serve as a compass for its operations and define how the company behave in the world (Coca-Cola Journey, 2014). 1.2. Analyse the factors that have to be considered when formulating strategic plans. There are many factors that are considered when formulating strategic plans. The success of a business relies on the strategic plan as it designs the direction of the company. Strategic plans are influenced by many factors and thus companies should consider those factors while creating strategic plans. The major factors affecting strategic planning is the internal factors (BPP Learning Media, 2010). Internal factors are factors found inside an organisation. Factors such as organisational culture, company’s policies and core of ethics affect Coca-Cola Company. In order for Coca-Cola Company to formulate its strategic plan, it should take into consideration these factors. In addition, stakeholders of Coca-Cola Company highly influence their strategic planning process. Some stakeholders include employees, customers, government, and community among others. These stakeholders have different expectations and needs which can influence business decisions and strategies (BPP Learning Media, 2010). External factors also affect how Coca-Cola carries out their strategic plan and therefore should change according to these factors. Some external factors include the technological, political, demographic and economic factors (BPP Learning Media, 2010). 1.3 Evaluate the effectiveness of techniques used when developing strategic business plans The effectiveness of methods used in developing strategic business plans can be evaluated using value chain analysis and life-cycle theory. Value-chain analysis is a tool that helps in identifying organisational activities that have the potential to create value and boost competitive advantage. According to the theory, Porters argued that organisational activities add value to a product or service and therefore, they should be run at optimum level for competitive advantage. Porter has split the organisation into primary and support activities. The primary activies include inbound logistics, operations, outbound logistics, service and marketing while the support activities include procurement, human resource, infrastructure and technology. Inbound logistics In Coca-Cola Company, water is the core ingredient for the products and it faces challenges in accessing water. A number of its raw materials such as Fructose corn syrup, and orange juice concentrate are sourced internationally. Inbound logistics take place through ships and trucks. Operations Coca-Cola operating divisions are divided into different groups such as North America, Europe, Africa, Corporate and Latin America among others. The company produces and sell concentrates and syrups to bottling companies but maintains the ownership of the brand. Outbound logistics Coca-Cola sells its products to about 220 nations and is the largest beverage distribution system. The company controls the distribution operations that are controlledby distributers, retailersand bottling companies. Generaly, outbound logistics are done through manual distribution with about 2500 manual distribution businesses. Marketing and sales The sales of Coca-Coa Company was $28.2 billion and $27.7 billion in 2013 and 2012. In United States, the sale was 19% of the total in 2014. The company uses intergrated marketing strategy such as advertising, sales promotion and public relation elements. Service Coca-Cola has maintained its customer service initiative thrugh online chat with the customers. The company website contain FAQ that has all the asects of its products. Task 2 2.1. Analyse the strategic positioning of a given organisation by carrying out an organisational audit Strategic positioning of Coca-Cola Company can be done using Porters generic strategies and resource and capabilities framewok. Porters has presented three generic strategies that can be used by companies to create competitive advantage. Differentiation strategy is looking for something that is valued by customer and is unique to them. Coca-Cola Company uses differentiation strategy in order boost its competitive advantage. The company has established itself as the largest beverage company in America. Coca-Cola has been able to do this by differentiating itself by spending large amount of capital in advertising and promotion to differentiate itself from the competitors and create a unique image of the brand (Coca-Cola Journey, 2014). In addition, it has provided different products that have given them a competitive edge over the competitors. Due to the fact that Coca-Cola Company is already established, it does not need to use cost leadership strategy. The price of its different products does not need to be lower than the competitors for it to gain advantage (Coca-Cola Journey, 2014). Coca-Cola differentiates itself from other market players by using unique marketing and advertising initiatives in order to entice its customers to buy its products. Differentiation strategy has enabled them to succeed and retain its competitive edge. Resources are assets that provide competitive advantage wherease cabability is the ability to carry out valuable activity and can be defined as the collection of people, process as well as technology brought together for a specific purpose. Having core capabilities enable a company beat the competitors and thrive in the long run. In order for an organisation to strive, it must have resources and capabilities that are rare, valuable, imitable and non-substitute. In terms of capability and resource framework, Coca-Cola has a very strong and capable financial resource. With their strong financial records, they can go forward and create markets on a large scale in different countries around the world (Coca-Cola Journey, 2014). They use their funds to build, infrastructure, expansion of distribution network as well as training of staff. It has developed capabilities in hierarchy way. For instance, there is managerial capabilities, departmental capabilities and subordinate capabilities acquired through training. The company has the ability bear losses with an attempt of investing into a potential market. Moreover, Coca-Cola owns a resourceful organization capability. They have the ability to operate more than 100,000 people as well as provide the accumulation of up to 500 brands of soft drinks in almost 200 countries worldwide (Coca-Cola Journey, 2014). In addition, the company builds an open environment that embraces its employees and allows sharing of ideas and candid comments (Coca-Cola Journey, 2014). It helps the company locate potential business and talent within the company. 2.2. Carry out an environmental audit for a given organisation The general environment of Coca-Cola Company can be effectively analysed using PESTEL, Porters Five Forces and SWOT analysis as seen from the appendix. Analysis using PESTEL Strategy The environment of Coca-Cola Company can be analysed in terms Political, Economic, Socio-cultural, Technological, Environmental and Legal factors. Coca-Cola being the world’s dominating soft drink producer and seller, they ought to abide in by the rules and regulations set by the country within which they operate. Over the past decade, there has been an increased awareness regarding human health. This has significantly pushed the society into looking for healthier alternatives (Coca-Cola Journey, 2014). This concern may affect Coca-Cola since its consumers may shift to healthier drinks. Coca-Cola’s USP is aging in developed countries which has made its brand valuation to go down. This has increased pressure on management. For more details see the appendix below. Analysis using Porter’s Five Forces The Porter’s five forces of competitive model of Coca-Cola Company involves: Threat of new entrant, power of buyer, threats of substitutes, threat from suppliers and competitive rivalry and collaboration. Threat of New Entrants The threats of new entrants are at its minimum since Coca-Cola is well-established in the market. New entrants face a huge competition since Coca-Cola Company has invested a lot in marketing its products. For example, in 2000, Coca-Cola spent up to 2.58 billion dollars in advertising. As a result, it makes the company dominate the market share than the other new entrants (Coca-Cola Journey, 2014). Power of Buyers Bargaining power from the buyers is eminent since the margins are low and also consumers buy them in bulk. Since the products are the same, the consumers will tend to purchase the products that offer more for the cheapest amount (Coca-Cola Journey, 2014). Threat of Substitutes Threat of substitutes is very high since there are a number of alternative beverages for instance, tea and energy drinks. These threats are also high since the price of the products is similar. Therefore, Coca-Cola utilizes intensive advertising so as to develop differentiation between their brands and other substitutes (Coca-Cola Journey, 2014). Threat from Suppliers The power of suppliers is moderately low since the raw materials for soft drinks are basic. Therefore, switching costs between suppliers are very low. The threat of onward integration is also low from suppliers since it requires huge capital to develop a soft drink manufacturing plant making the threat of suppliers very low (Coca-Cola Journey, 2014). Competitive Rivalry and Collaboration The major rivalries in this industry are Coca-Cola and Pepsi. The rivalries in this industry are very low. Therefore, Coca-Cola involves itself in advertising than pricing since it competes to differentiate itself from its rivals thus gaining some market share. 2.3. Assess the significance of stakeholder analysis when formulating new strategy A stakeholder is either a person or a group of people who are directly affected by the operations of the company. Stakeholders of Coca-Cola includes: shareholders, customers, employees and business partners. The stakeholders are considered either internal or external or even both. They are significant to the company since they bring very substantial impact to the performance of the company (Johnsons et al., 2014). The level of interest of stakeholders in Coca-Cola vary according to the power they have over the business. Level of interest in Coca-Cola power There are there ways to assess a strategic plan before implementation and they include suitability, acceptability and feasibility. Suitability entails checking whether the proposed strategy is able to address the fundamental opportunities and threats that face an organisation. Acceptability on the other hand highlights whether a proposed strategy meet the expectations of all the central stakeholders. Feasibility assesses the way the strategy will work in the business context. It delas with issues concerning funding of the strategy, capabilities required and resources needed. 2.4. Present a new strategy for a given organisation As mentioned earlier, the competition in the beverage industry is very low but the threat of substitute is very high. The change in preference of customers to wanting healther alternatives willaffect the company in the long run. In order to survive in the industry,Coca-Cola should look for ways to tackle these challnges and remain competitive. In addition, since the main focus for the company is to satisfy key stakeholders such as the customers, topmanagement, shareholders and partners, the Coca-Cola should come up with strategy that is effective in doing this. One strategy that will enable the company do so is merger and acquisition. Therefore, Coca-Cola can merge with a company that produces snacks and form a company that offers both soft drinks and snacks to its customers. It can also merge with companies producing healther products. This diversifies their products therefore offering more to its customers creating a large share market. This might create a synergy which increases the value of the combined company more than the sum of the two parts. Task 3: 3.1. Analyse the appropriateness of alternative strategies relating to market entry, substantive growth, limited growth or retrenchment for a given organisation One strategy that can be used in Coca-Cola Company is the vertical integration (Press Center, 2013). Vertical integration can be defined as a competitive strategy where an organization takes control over a number of stages in the production, marketing and distribution of a product. An organization can prefer to use vertical integration in order to ensure complete control over the manufacture and distribution of its products. Vertical integration has the advantage of smoothening supply chain by making sure that there is ready supply of raw materials in the exact specifications (Press Center, 2013). Also, vertical integration make distribution and after-sale services efficient and tend to surge entry barriers for new entrants. On the other hand, horizontal integration strategy is also a competitive strategy that entails the acquirement of a business activity that is at the same degree of the value chain. Coca-Cola Company chain can merge with an identical business in the same industry in another country in order to gain position in the foreign markets. In addition, Coca-Cola Company can adapt other strategies such as strategic alliance in order to boost its competitive edge (Press Center, 2013). A strategic alliance is an arrangement where two or more companies form a corporation for their mutual benefit. Creation of a strategic alliance can turn a competitor into a partner working towards a shared objective. Coca-Cola Company can utilize different types of strategic alliance. It can partner with other companies in order to achieve higher brand presence (Press Center, 2013). In addition, Coca-Cola Company can form a strategic alliance with bottlers companies to package and distribute their brands (Press Center, 2013). This can lower their cost of entering new markets, can reduce the need for resources and will streamline the company’s portfolio and operational activities. In addition, Coca-Cola Company can acquire brands and products from other companies. This will fill the gaps in the company’s brand portfolio. It can also reduce competition and prevents companies like Pepsi Co. from expanding market space. Another growth strategy that can benefit Coca-Cola Company is market penetration strategy. Penetration strategy may involve price adjustments, increased promotions and product improvement. By lowering the prices of its products, Coca-Cola Company can increase its sales by increasing the number of purchase units by making prices more appealing to the customers (Press Center, 2013). 3.2. Justify the selection of a strategy As mentioned earlier, mergers and acquisition will be an effective strategy that can be used by Coca-Cola Company to boost its competitive advantage as well as prevent future failure (Press Center, 2013). Merger and acquisition strategy can be evaluated by a model containing three key success criteria: Acceptability, feasibility and suitability. Suitability deals with the rationale of the strategy. It addresses the issue of whether the strategy would issues underlines by a company. Tools to be used for suitability include what-if analysis, decision tree and ranking strategic options. Merger and acquisition will be an effective strategy for Coca-Cola especially when ranked with other potential strategies. The strategy will be suitable especially in eliminating the threats facing the company. Feasibility on the other hand deals with the resources required to institute the strategy. These resources may include information, people, capital and time. Feasibility can be evaluated using cash flow analysis and resource deployment analysis. Coca-Cola has the necessary financial resources to implement merger and acquisition strategy in their operations but lacks enough human resource as well as time (Press Center, 2013). In addition, the company lacks enough capabilities required by management and subordinates in order for the strategy to be effective. Also, acceptability involves the expectations of the stakeholders in relation to expected performance outcomes. Merger and acquisition have the potential to bring about good returns to the stakeholders and probability of failure of the strategy is very low. Task 4: 4.1. Assess the roles and responsibilities of personnel who are charged with strategy implementation Personnel capabilities may result to competitive advantage if they are rare, durable, valuable and non-substitutable. The value of capabilities is founded upon their ability to avert threats and take advantage of the opportunities that are presented in the business environment. On the other hand, capabilities and resources rareness establishes that competing companies cannot access a particular resource or core competence. Capabilities are considered imitable if the competing companies find it hard to imitate or copy. If there lacks another capability that can be utilized as a substitute of the existing capability, resources are not substitutable. Capabilities should be durable in that competitors encounter challenges when trying to imitate them. Coca-Cola should therefore invest in capabilities and resources rarity, durability, valuability and non-substitutability for the new strategy to be effective. Therefore, in order for the strategy to be effective there would be some changes in staff responsibilities and role. Acquiring core capabilities will require the company to train and develop their management and employees. Management is expected to oversee the strategic implementation process to ensure success and prevent resistance from the employees. Managers and executives are required to create an environment that is suitable for the new strategy to be implemented. Employees on the other hand are expected to work balance between their existing responsibilities and their responsibilities in implementing the new strategy. 4.2. Analyse the estimated resource requirements for implementing a new strategy for a given organisation Gap analysis can be used to assess the gaps between the existing resources and the desired respources needed in the strategic implementation. a resource gap analysis willassist in assessing how current resources such as time, capital and human resource assist in meeting set goals. In Coca-Cola Company, financial resources of the company are considered enough in implementing new strategy (Johnson et al., 2014). However, due to the limited number of personnel, the company should hire additional human resource in order for the new strategy to be effective. Apart from the already existing personnel, Coca-Cola should hire and train other employees in order to avoid employee overwork and increase productivity. The company’s marketing department lacks enough employees who can take part in the implementation of the new strategy. In addition, due to the existing operations and activities of the company, employees are busy with work and may lack time to take part in the strategicimplimentation process. Employees and management must have enough time for strategy implementation. Therefore, the company should relieve some responsibilities from employees in order to create time for the new strategy. 4.3. Evaluate the contribution of SMART targets to the achievement of strategy implementation in a given organisation Use of SMART objectives is very important since it is fast to identify missed targets and monitor progress of a strategic plan (Johnson et al., 2014). In addition, with specific details of the SMART objectives, it is very easy to visualize success of a strategic plan. Some SMART objectives for Coca-Cola Company may include: Increase the number of employees who would be involved in the strategic implementation by the end of the year. This will lead to enhanced productivity and performance. Merge with onother company in the period of 2 years in order to bring to the customers a portfolio of quality products that satisfy the customer’s needs and expectations. Build on the company’s core capabilities among the employees through training and development as this will enable effective strategic implementation. Reduce the cost of its operation by a third as a result of its strategy of merger and acquisition. Conclusion To sum up, Coca-Cola is one of the largest beverage companies in the United States. The company strategic plans are affected with factors such as organizational culture, company’s policies, company’s stakeholders and core of ethics. Coca-Cola Company therefore can use strategies such as Profit Impact of Marketing, BCG growth-share matrix, dimension policies as well as SPACE strategies to ensure their business success. The company has a very strong resource which helps the company create markets on a larger scale. It also has a large number of loyal consumers who ensure continuous business for the company. In addition, the company is affected by various factors which include: political, economic, socio-cultural, technological, environmental and legal factors. These factors influence the operations of the company depending on the policies of their locations. Also, the company faces factors such as threats of new entrants, power of buyers, threat of substitutes, threat from suppliers and competitive rivalry and collaboration. In addition, Coca-Cola Company has its strengths, weaknesses, opportunities and its threats. This considerations helps the company identify where and when to apply its strategies for effective operations. The company can utilize new strategies such as merger and acquisition in order to diversify and expand its market shares. This can also help the company boost its competitive advantage. References Coca-Cola Journey 2014, "Our Company: Mission, Vision & Values." Global. http://www.coca-colacompany.com/our-company/mission-vision-values Johnson, Scholes, Whittington, Angwin & Regner 2014, Exploring Corporate Strategy, Prentice Hall Ed 10. BPP Learning Media 2010, Business Essentials: BusinessStrategy, London, BPP Learning Media. Press Center 2013, The Coca-Cola Company, Web. 16 Mar. 2014. http://www.coca-colacompany.com/press-center/press-releases/the-coca-cola-company-reportsfull-year-and-fourth-quarter-2013-results Appendix 1. PESTEL Analysis Political Factors Coca-Cola being the world’s dominating soft drink producer and seller, they ought to abide in by the rules and regulations set by the country within which they operate. For instance, in Canada, there are standards on the amount of caffeine tolerable in a soft drink (Coca-Cola Journey, 2014). Economic Factors Between the year 2006 and 2012, inflation rates in the United States imposed on food and beverage was very high (Coca-Cola Journey, 2014). This directly affected the disposable income the consumers used on such commodities. This problem combined with increased cost of transportation globally caused by inflation in oil prices affected the transportation of their products. The increased in costs in the industry has caused a decrease in the disposable income of the potential customers. This therefore translates into lower revenues for Coca-Cola Company. Socio-cultural Factors Over the past decade, there has been an increased awareness regarding human health. This awareness has pushed the social movement towards a lifestyle that embraces healthy living all over the world. Soft drinks have been considered to be the cause of type-two diabetes. This has significantly pushed the society into looking for healthier alternatives (Coca-Cola Journey, 2014). This concern may affect Coca-Cola since its consumers may shift to healthier drinks therefore; the company is continually developing products that meet their customer’s needs. Technological Factors In order to boost brand awareness, many companies result to social media tools. This has been due to their high traffic of users. Therefore, Coca-Cola uses this sites such as Facebook in order expose their brand to a larger market (Coca-Cola Journey, 2014). Environmental Factors The company is bound by powerful regulatory scrutiny from Environmental Protection Agencies concerning the conduct of its service. Green issues have also affected Coca-Cola as the nature of its products has been considered unfriendly on the basis of its bottling and packaging (Coca-Cola Journey, 2014). Legal Factors There are countries where Coca-Cola doesn’t sell its products. For instance, Cuba and North Korea had earlier trade embargos. This is because of the policies that are in existent in those countries (Coca-Cola Journey, 2014). Coca-Cola’s USP is aging in developed countries which has made its brand valuation to go down. This has increased pressure on management. 2. SWOT Analysis of Coca-Cola Company SWOT Analysis Strengths They have a unique brand entity with the highest award a wide global presence. They also have the largest market share over their competitors they have a brilliant marketing strategy Weaknesses They face tough competition from their rivals, Pepsi. Their brand diversification is very low since they have only concentrated on soft drinks. they lack healthier beverages. Opportunities Their rate of diversification is significant since their focus in health and business enhances their offering to their customers. Threats sourcing their raw material and indirect competition. vast consumption of water. Since water scarcity is on the rise, the company faces huge threats. indirect competition from coffee chains such as Starbuck who are offering healthier drinks than carbonated Coca-Cola Read More