SWOT Analysis of Coca Cola Enterprises Inc - Research Paper Example

Coca Cola Company Background John Pemberton was the founder of the Coca-Cola Company back in 1986. He was a Civil War veteran and Atlanta pharmacist and he discovered the first soft drink out of curiosity. The new drink was sold at five cent per cup in Jacob’s Pharmacy after gaining praise from his customers on the wonderfulness of the drink’s taste. During this time, little people would have thought that the company would grow to become one of the biggest and the most profitable global company it is today since at the time John only sold nine cups a day for that year. Frank Robinson named the drink Coca-Cola and up to date the company still uses the name (Kemp, 2002). Pemberton who was more of an inventor not a businessperson sold his invention to Griggs Candler for only $2300. Candler began to instill his strategies in the company in 1891, he brought the first real vision of the company, and the Coca Cola brand (Pendergrast, 2000). Candler being a natural born’ salesperson transformed Pemberton’s invention into a business between 1893 and 1904. The fact that people were thirsty gave Candler the first innovative strategy. These first promotion strategies made people conversant with the Coca-Cola brand everywhere and in 1895, Candler expanded and relocated syrup plants in major cities (Pendergrast, 2000). The brand was becoming more popular in time thus Joseph Biedenharn, who was a businessperson from Mississippi, tried to convince Candler on the necessity of bottles but this idea did not excite Candler. He failed to anticipate that success of Coca-Cola brand would be portability. In 1899, Benjamin Thomas and Joseph Whitehead, were allowed to bottle the Coca-Cola brand by Candler. Bottled Coca Cola soda made the drink’s popularity increase rapidly. By 1905, the company was very successful and the only challenge Coca Cola faced was imitation of the drink by businesspersons who used the advantage of Coca Cola’s success to sell copycat beverages. The company thus used promotions to protect their brand by advertising reminding customers to “Demand the genuine” and “Accept no substitute” promotion. This worked but it would not stop the imitations thus the company had to invent a unique and distinctively shaped bottle that would be easier to identify thus limit imitations thus the contour bottle became Coca Cola’s brand bottle. This led to rapid increase in popularity of the drink due to the attractiveness of the bottle and the taste of the drink. This led to the company’s growth internationally (Pendergrast, 2000). Ernest purchased the company from Candler in 1918, and in 1923, Robert Woodruff Ernest son became president of the company. Woodruff legacy is termed as the most efficient in the company. He is regarded as the most successful president the company has ever had, as it is through his marketing efficiency that Coca Cola Company dominated the world. Woodruff’s main vision was to ensure the company’s growth in the international market. His first promotion strategy was in the Amsterdam Olympics where it travelled with the United State team to provide refreshment drinks as a marketing strategy (Pendergrast, 2000). He used different strategies to ensure he could win as many customers as possible, by introducing six-pack he targeted men whereas installation of openers and home deliveries targeted women. This strategy attracted customers from both genders and age thus making Coca Cola part of people’s lives. Some of the other promotion strategies by Woodruff include identifying Coca Cola with Christmas in 1931, where popular artists for instance Sundblom created an illustration of Santa Claus pausing for a Coke. During the Second World War, Woodruff ensured that every troop man got coke for the lowest price 5 cents. The strategy to provide subsidized coke to the troops played a key role as the company widened it market as Europeans enjoying the first taste of coke during the war, the company had established overseas businesses (Pendergrast, 2000). The rapid growth and development of the Coca Cola Company made the company establish different brands to ensure they produced different tastes to customers with different preferences. The company’s growth was marked by the introduction of Sprite, TAB and Fresca in 1961, 1963 and 1966 respectively. These new brands and advertisements increased the success of the company to other countries for example Cambodia, Turkey, Paraguay among others. In 1978, Coca Cola Company gained major boost being awarded the cold soda package right in China, which boosted Coca Cola’s growth in Asia (Pendergrast, 2000). In the 1980s, the company took several changes from its CEO and strategies. Roberto Goizueta became the chairperson of the board and president of Coca Cola Company. He formulated his strategies, which were risky but intelligently taken. He pioneered diet Coke that was low in calories. This brand became a huge success coming second only to Coca Cola. In 1985, he changed the formulation of Coca Cola, which turned out to taste better. Over the years, the company has introduced various brands and has acquired different other companies to reduce competition and improve their brands for instance the acquisition of Minute Maid company in 1960’s (Pendergrast, 2000). In 1990’s people in the world became cautious of their health thus sales of coke reduced and the company had to invent new diet sodas that would still have the original taste but low calories. This strategy continued and led the company to introduce Simple Orange in 2001, Coca-Cola Zero in 2005 that is a Zero-calorie cola. In 2008, two fans created Coca-Cola Facebook page and it has become the most popular brand fan page on Facebook. Coca Cola Enterprises Inc. has adopted various promotion strategies where the most popular one is its partnership with FIFA World Cup, which is the biggest trophy of the most watched sport in the world. SWOT Analysis of Coca Cola Enterprises Inc. Strengths The strengths of Coca-Cola are numerous starting with the company’s popularity in the external environment. Coca Cola company being consistent and mindful of its customers’ tastes and preferences has made the company become the most popular soft drink in the world thus the company takes advantage of this to gain high profits. Coca Cola Company uses about 16% of its capital on advertisements. This ensures that their brands are well known in the whole world thus creating a vast global presence, in the more than 200 countries it is located. The company’s ability of brand equity also contributes to the company’s strengths. In the more than 200 countries, there are main brands that taste the same. This leads to customers’ loyalty where Coca Cola’s consumers are loyal to the brand as it has the same taste and its availability. Only two firms dominate the soft drink industry but Coca Cola Company has the largest market share. This is mainly due to Coca Cola marketing strategies where unlike Pepsi; Coca Cola tries to win people’s hearts from across all age groups and gender (Hays, 2005). The company valuation is another major strength. The company is classified among the most valuable companies in the current world having a valuation of 79.2 billion dollars. The high valuation makes people trust the company and its management team thus demands more Coca Cola brands. The distribution network that is the largest and efficient exploits the high demand of Coca Cola brands (Hays, 2005). Weaknesses A company as successful as Coca Cola has many strengths but for it to move to the next stage or step it has to address its weaknesses. Although there are few weaknesses, these weaknesses can result to the downfall of the multinational company. Competition with Pepsi is a major weakness facing Coca Cola. Although Coca Cola is the clear market leader, Pepsi’s diversification and marketing strategy that targets the youth may prove costly to Coca Cola in the near future. Lack of diversification within Coca Cola Company is another major weakness of the company (Hays, 2005). The company has in over 125 years has produced soft drinks but unlike Pepsi it does not produce food or snacks. This may result in the change of power between the two competitors, as people want soft drinks to accompany snacks. The global community is becoming more cautious on diet. Coca Cola products are carbonated beverages that contribute to obesity thus people are limiting their consumption, which will result in low profits and losses. The Coca Cola Company has created a bad image due to their poor water management. The company has welcomed criticism by polluting water thus many people have negative image of the company thus do not consume their products. Lastly, most Coca Cola brands are unknown to many. The company has about 500 brands but people know only about 100 (Hays, 2005). This limits their consumption thus the company suffers losses by producing them. Opportunities The world is changing randomly thus creating several opportunities that will ensure more success if the management lay strategies to exploit these opportunities. The essence that people are going after diet to improve their health, it is the high time for Coca Cola to diversify its products. They should introduce snacks, healthy foods and drinks that will exploit their large and effective distribution chain thus grant more profits. The company should also exploit new markets in developing nations. This will ensure higher consumption from the natives since they are not as health cautious as developed nations. Clean water in recent years has been a major issue in the world; Coca Cola Company should lay a strategy that will increase packaging and distribution of water since Kinley is not exploiting the market. Since most Coca Cola brands are unknown to many, the company should change its marketing strategies where less known beverages are advertised more that it has been the case. This will create awareness to consumers thus increase the company’s revenue and profits. Threats The main threat facing Coca Cola is the health consciousness among the global community. People are no longer consuming carbonated drinks as they lead to obesity (Kemp, 2002). The company also faces threats of complying with different government requirements and regulation while ensuring that they maintain their brands. Water scarcity due to global warming is a major threat as water is the main raw material of the industry. Coca Cola is accused of polluting water thus bears the burden. The increased health cautiousness has made the carbonated market saturated thus limiting progress. Economic slowdown and inflation has played part in the decline in profits, as the soda is more expensive thus less consumption. Lastly, indirect competition of the company that involves tea and coffee snack shops may not appear to pose notable threat but the fact that people prefer their drinks rather than carbonated Cola proves that their competition is rising (Hays, 2005). Financial Analysis In the previous financial year that is 2014, Coca Cola Company registered the following increases and decreases in their finance department. The global growth volume of the company was 2% of the whole year 2014. Net revenues grew by 4%. Equity per share in 2014 was $0.44. Cash operations increased to $10.6 billion from the previous financial year. The global sparkling beverages volume grew by 1% and Coca Cola brand also slightly increased. The global still beverages also grew by 4%. Sparkling beverage volume grew 3% (The Coca-Cola Company, 2015). Graph 1: Earnings Per Share Summary (The Coca-Cola Company, 2015) The above graph on EPS indicates that in the first quarter of 2014 financial year there, the EPS was low but it increased in the second whereas it declined constantly in the third and fourth quarter. This has improved in the 2015 first quarter thus proving there are better strategies now. The second quarter was the highest earner due to the success of the FIFA World Cup in Brazil. It is common for the value to decline in the third quarter due to the expenses the company had in organizing the world cup. It was lowest in the fourth quarter but the first quarter of 2015 shows improvement and since the rise is not very high it shows that, the EPS is constantly increasing (The Coca-Cola Company, 2015). Graph 2: Price wars between Coca Cola and Pepsi (The Coca-Cola Company, 2015) Competition with Pepsi has led the company in price wars in order to dominate the soft drink industry. The graph above portrays the different changes in price of the two companies’ brands. Coca Cola Company has dominated the market for several years. As the leader, it has the power to make market price rather than take unlike Pepsi that suffers from the being dominated meaning it has taken price as a higher increase than that set by Coca Cola it will lose its customers. The price increase over the years proves that Pepsi does not increase it products’ price with a high number as compared to the dominant Coca Cola Company (Kemp, 2002). Recommendation The Coca Cola Company data statistics of the increased EPS from $2.44 to $2.63 shows progress in the company. The fact that the company spent billions in organizing the FIFA World Cup in 2014 shows that 2015, which will have fewer, expenses the EPS will rise. I recommend investors to purchase short time stocks from the company. The positive gain from the last quarter in 2014 to the first quarter in 2015 shows that the rise is steady thus the EPS may rise gradually within the next two quarters (The Coca-Cola Company, 2015). The company has increased volumes of sparkling water that helped raise revenue this increase is expected to continue increasing due to the consciousness of people in hygienic water. The company has embraced production of some non-carbonated drinks that the global community is embracing as illustrated in the previous financial year this will increase profit and revenue thus a higher EPS returns. The economic crisis may limit the success of the company thus; it is not wise to purchase long-term stocks of the company. This is because of the increasing inflation that is increasing at a stable rate for now but it is unpredictable on the inflation rate in the long-term. Conclusion The historical background of the Coca Cola Company shows the progress and growth of Coca-Cola brand and Company due to the great strategies by their presidents. The SWOT Analysis provides the details that are important when analyzing a company’s strength and opportunities to exploit for the success of the company. It shows the weaknesses and threats the company faces that would tampers with its growth and development. The financial analysis portrays the summary of the Coca Cola Company Financial Year 2014 to enlighten us on the progress of the company while giving the best recommendation to investors. The different skills and strategies by the intelligent men who used exceptionally marketing strategies to ensure that Coca Cola Company is the leading soft drink company proves that great managers can turn a small business into a multinational company. The strengths possessed by the company are down to their unique and continued way ensuring similar taste that have satisfied their customers tastes and preferences. The weaknesses and threats are factors limiting the growth of the company both internally and externally. There different marketing strategies that have worked in favor of the company but the lack of advertising unknown brands is a key limitation since the profit margin are lowed as the unknown brands generate lower revenue than their cost of production. The loss is covered by the super normal profits generated by the known brands. In conclusion, change of marketing strategy is essential to generate more profits, diversification, overcoming other weaknesses and threats for a more successful Coca Cola Company. References Hays, C.L. (2005). The Real Thing: Truth and Power at the Coca-Cola Company. Broadway, Manhattan: Randon House. Kemp, K.W. (2002). Gods Capitalist: Asa Candler of Coca-Cola. Macon, Ga.: Mercer University Press. http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=8341673&fileId=S0007680500079009 Pendergrast, M. (2000). For God, Country and Coca-Cola: The Definitive History of the Great American Soft Drink and the Company That Makes It, 2nd edition, New York: Basic. The Coca-Cola Company. (2015). The Coca-Cola Company Reports Fourth Quarter And Full-Year 2014 Financial Results http://www.coca-colacompany.com/press-center/company-articles/ Read More