The Coca-Cola Company External Analysis - Case Study Example

The Coca-Cola Company (Name) (Institution Affiliation) (Date) The Coca-Cola Company 1.0 Introduction Established in May 1886, the Coca-Cola Company, is the world largest soft drink manufacturer, and operates in approximately two hundred countries. Being one of the most successful multinationals globally, the Coca-Cola produces and sells more than four hundred nonalcoholic beverages (Puravankara, 2007). Besides, Coco-cola is considered as the most valuable brand across the globe (Puravankara, 2007). Headquartered in Atlanta, Georgia in the United States of America, the Coca-Cola Company has an operating income of approximately $9.8 billion and revenue of $45 billion (McGowan, 2014). In effect, this paper will analyze the Coca-Cola Company in terms of its growth, international engagements as well as the challenges facing it. 2.0 The Company’s History and Growth Interestingly, Coca-Cola was founded through John Stith Pemberton's curiosity, a pharmacist, who was fascinated by medicinal formula thus loved to play with them. In his curiosity, one afternoon as he was searching for a hasty cure for headaches, he made a mixture of a fragrant and caramel-colored liquid in a pot and took it to Jacobs’ Pharmacy. In the pharmacy, the mixture was mixed with carbonated water and later sampled by consenting patrons, who affirmed that the drink was unique and palatable. Consequently, Jacob’s Pharmacy put it in on the shelves for sale and Frank Robinson, Pemberton’s bookkeeper named the new mixture Coca-Cola (Pendergrast, 2013). In the first year, the company managed to sell only nine glasses of Coca-Cola each day. However, a century later, the company recorded a production of over ten billion gallons of syrup. Sadly, the inventor of Coca-Cola, Pemberton, was more interested in innovation than business and as such, he had no clue that had invented one of the greatest beverages across the globe. Between 1888 and 1891, Pemberton sold the firm to Asa Griggs Candler, an Atlanta business person, for nearly $2300. Thus, as the Company’s first president, Candler brought a real vision to the brand vision since he was a natural born salesperson (Puravankara, 2007). As a business person, Candler knew that people were thirsty out there and as such, used his passion and brilliance to transform the innovation into a big business. He used his inborn sales skills such as giving away coupons for complimentary first Coca-Cola tastes as well as giving out clocks and calendars bearing the Coca-Coca brand to the pharmacists. With this brilliant marketing idea, soon the Coca-Coca brand was everywhere and by 1895, Candler had established new plants in Los Angeles, Dallas, and Chicago. Soon the Coca-Coca soda popularity led to the invention of soda drinking bottles (Pendergrast, 2013). Between 1905 and 1918, the Coca-Coca Company had to safeguard its brand as imitation beverage drinks were taking advantage of Coca-Coca long built success (Pendergrast, 2013). At the onset, the Company began by advising consumers to be aware of imitations and as such demand for genuine every time they need to purchase the Coca-Coca beverage. Besides, the company also decided to come up with a unique bottle shape that would differentiate the Coca-Coca product from others. It was not until 1916 that the typical contour Coca-Coca bottle found today was developed by an Indiana glass company known as Root Glass Company of Toronto. As America involved itself in major industrialization, so did the Coca-Coca Company as it also opened Bottlers in Puerto Rico, Cuba, and France among other U.S territories. By 1920, the Company had over a thousand Bottlers around the world (Pendergrast, 2013). During the World War II, in 1941, the Coca-Cola President, Woodruff, ordered that every man and woman engaged in defending America to be given the Coca-Cola drink (Pendergrast, 2013). Consequently, many Europeans enjoyed during the war enjoyed their first taste of the Coke-Cola beverage and after the World War II, the Coca-Cola Company enjoyed a new market internationally. Evidently, Woodruff’s desire for the Company to expand was realized, as between the 1940s and 1960s the company’s overseas operations doubled. The postwar America was associated with liveliness, optimism as well as prosperity and as such Coke-Cola was part of the carefree American lifestyle, which involved the imagery of its advertising. With respect to advertising, Coke-Cola used happy couples driving expensive convertibles to indicate how it was fun to be associated with drinking Coke-Cola beverage. With seventy-five years of successful business, Coke-Cola Company invented new flavor Sprite®, which came in 1961, TAB® IN 1963 as well as Fresca® in 1966 (Pendergrast, 2013). Subsequently, the Coke-Cola was rapidly growing and as such, many countries including those in Africa begun enjoying the drink as well. Much of the Company’s success can be related to its focus on advertising as the company believed in marketing to expand its market share. Accordingly, the Company’s advertisements associated the company’s brand with fun, freedom as well as playfulness. Interestingly, the Company’s international appeal made Coke-Cola be the only firm allowed to retail packaged cold beverages in China. In the 1980s, most known as the era of the fitness craze, legwarmers, and headbands, the Coke-Cola Company recorded many innovations. Roberto Goizueta, the Company’s Chief Executive Officer, came up with a unique strategy known as “intelligent risk taking,” which overhauled the whole Company. One of his audacious moves was changing various bottling operations in the United States into a new public company, under the name Coca-Cola Enterprises, Inc. Moreover, Roberto Goizueta released a new flavor known as the Diet Coke®, which became the most sought low-calorie beverage in the world thus boosting the company’s revenues rapidly. The other notable inventions associated with Goizuetta, was the invention of a new Coke-Cola taste 1985, which changed the typical formulation of Coke-Cola drink that was developed 99 years earlier. Upon conducting the tasting tests, it was found that people enjoyed this new taste more than the typical flavor that had been in place for many years. However, the real world had already established an attachment with the original Coke-Cola beverage and as such, pleaded with the company to bring it back. Critics, on the other hand, termed the new taste as the worst blunder that the Company had ever made in its history. However, the Company’s CEO, Goizueta, was not moved by the criticism as he had a conviction in what he did. As Warren Buffett (2013) asserts he had the knack of changing “lemons into lemonade.” Nevertheless, the original flavor was returned to the market under the brand Coca-Cola Classic thus competing with new taste. Notably, the old formula managed to perform extremely and till today. Ultimately, the 1886 invention, which brought an exciting and refreshing taste to patrons attached to the small pharmacy in Atlanta, is still being enjoyed today by billions of people across the globe. The Coca-Cola’s main objective is to continue proving magic all the time to its more than 230 ever growing brands across the globe (Pendergrast, 2013). In 2000, Doug Daft became the Company’s chairman and his vision was to have Coca-Cola operate as a pool of franchises, whereby Bottlers in different countries operated like local businesses. In essence, Coca-Cola was committed to empower the local markets and encourage the local bottlers to pay attention to the various backgrounds and cultures associated with the host country. They are encouraged to identify what, where, and how customers want to drink the various flavors produced by the Company. In every ten seconds, over 127,000 people drink various brands of Coca-Cola thus it is the company’s objective is to improve the tastes such that they are exciting as well as satisfying every single moment (Pendergrast, 2013). 3.0 Market Recognized as the world’s leader in the manufacturing of soft cold beverages, the company’s products are used in over 200 countries spread across six regions. These regions include Latin America, Pacific, Africa, Eurasia and North America (Adeyemi, 2010). Moreover, the company offers more than a thousand low-calorie products across the world (The Coca-Cola Company, 2015). With the instantly recognizable contour shape of the Coca-Cola bottle, more than 94% of the world’s population is familiar with the Coca-Cola brand and logo (Research, 2015). Besides, more than a half a million people take Coke-cola soft drink every minute. Further, the Coke-cola brand is associated with happiness thus making it one of the most valuable brands in the world. With more than 129,200 business associates, the Coke-cola Company has more than 700,000 employees situated in various parts of the world. 4.0 Coca-Cola’s External Analysis 4.1 Threat of New Entrants As far as the global soft drink industry is concerned, the threat of new entrants in the industry is low as high fixed cost of production, marketing activities, warehouses and labor are required for entry. A large amount of capital is required to build new bottling plants thus scaring away new entrants. For instance, studies indicate that a new entrant would require more than $80 million to build a new, efficient bottling plant. Moreover, the entrant will need pproximately $3.2 billion to cover the marketing expenditures (Research, 2015). 4.2 Threats of Substitutes The Coca-Cola products face challenges posed by substitutes such as bottled water, tea, coffee and sports drinks. Besides, consumers today are more informed and concerned about their heath thus choosing bottled water and sports drinks over the typical Coca-Cola brands. Blend coffee, for instance, is becoming popular because of the nutritious values as well as the caffeine in the drink (Datamonitor, 2011). 4.3 Threat of Suppliers The Company's major suppliers have lower power with regards to pricings. This is because most of the raw materials required by Coca-Cola are flavor, caffeine, sugar and color, are provided by the many suppliers. The company also depends on the Coca-Cola Enterprises Ltd. for bottling services, which has been independent since 2010 after integrated. 4.4 Competitive Rivalry Currently, Coca-Cola’s greatest challenge is the rivalry sellers. The Company’s main competitor is PepsiCo as it has been in place for over a century struggling to outdo the Coca-Cola Company. Whereas Coca-Cola’s top brands Coke, Diet Coke, Sprite and Fanta have been doing well, Pepsi has been leading North America with sales of about $22 billion compared to Coca-Cola’s $7 billion. 5.0 Challenges and Strategic Recommendations 5.1 Declining Sales Volume. Notably, Coca-Cola’s global performance has been fluctuating in the past five years with low decrease of the net income being recorded for the last two years. According to Marketwatch.com (2015) the Company recorded a net income of $9.03B in 2012, $8.58B in 2013 and $7.1B IN 2014. Further, Coca-Cola’s major U.S markets recorded an 8% rate decrease of volume sales in five consecutive years from 2009 to 2014 (Research, 2015). Thus for Coca-Cola to regain its previous performance, it should focus more on noncarbonated drinks, bottled water and more so energy drinks. Research indicates that in 2006 the sale of energy drinks increased by 50% and as the trends indicate, healthy and energy drinks will dominate the market in the future generations as consumers are becoming more health conscious. 5.2 The Health and Wellness Conscious Trend According to a recent study done by a medical journal, The Lancet, consumers today are more conscious about their health and wellness thus purchasing beverages that have low calories content (Malik et al., 2010). Consumers tend to avoid food and drink products with high sugar and fat contents as they associated with obesity and diabetes. To handle this challenge, the Company should be engaged in health and wellness campaigns as well as producing different kinds of beverages that satisfy varies market segments. For instance, the company should consider marketing water as well as the tea beverage that have low sugar and sodium content. Further, to take care of the younger generation, the company should produce organic beverages alongside energy drinks. 5.3 The increasing competition from PepsiCo Despite dominating the soft beverage industry for over a century, Coca-Cola is facing great competition from PepsiCo. PepsiCo has managed to diversify its product mix thus incorporating healthy food in its brands and as such, PepsiCo has managed to overtake Coca-Cola with respect to market capitalization since 2006. By the end of 2011, the PepsiCo had higher gross profit income than Coca-Cola: a difference of $8.8 billion. To compete effectively with PepsiCo, Coca-Cola should employ both horizontal and vertical expansion thus focusing on beverages as well as related business such as sugar plantation, tin and glass recycling as well as bottling businesses. Moreover, the company should be engaged in new production trends that are environmentally conscious to maintain its competitive advantage. 6.0 Conclusion From the above evaluation, it is evident that the Coca-Cola Company began from humble beginning to become one of the best brands in the world with more outlets across the world. Leadership based on vision and strategy and the will to risk are the main contributors with respect to Coca-Cola’s rapid success and growth. The paper has analyzed the Company’s external analysis as well as its market. Ultimately, the paper also delineated Coca-Cola’s main challenges and the potential remedies to the problems. References Adeyemi, S. L., & Salami, A. O. (2010). Inventory management: A tool of optimizing resources in a manufacturing industry a case study of Coca-Cola bottling company, Ilorin Plant. Journal of Social Sciences, 23(2), 135-142. Cunningham, L. A., & Buffett, W. E. (2013). The essays of Warren Buffett: lessons for corporate America. Carolina Academic Press. Datamonitor. (May 2011). Global Soft Drinks: Industry Profile. Malik, V. S., Popkin, B. M., Bray, G. A., Després, J. P., & Hu, F. B. (2010). Sugar-sweetened beverages, obesity, type 2 diabetes mellitus, and cardiovascular disease risk. Circulation, 121(11), 1356-1364. Marketwatch.com,. (2015). Coca-Cola Co.. Retrieved 13 October 2015, from http://www.marketwatch.com/investing/stock/ko/financials McGowan, C. (2014). The Fundamentals of Financial Statement Analysis as Applied to the Coca-Cola Company. Business Expert Press. Pendergrast, M. (2013). For God, country, and Coca-Cola: The definitive history of the great American soft drink and the company that makes it. Basic Books. Puravankara, D. (2007). Strategic analysis of the coca-cola company (Doctoral dissertation, Faculty of Business Administration-Simon Fraser University). Research, Z. (2015). Coca-Cola CEO's 2014 Pay Rises; Skips Performance Bonus. Zacks Investment Research. Retrieved 13 October 2015, from http://www.zacks.com/stock/news/167638/cocacola-ceos-2014-pay-rises-skips performance-bonus The Coca-Cola Company,. (2015). Who We Are - The Coca-Cola Company. Retrieved 13 October 2015, from http://www.coca-colacompany.com/careers/who-we-are-infographic Read More