Coca-Cola Performance Analysis - Essay Example

? Coca Cola Enterprises Contents Introduction 3 Products/services and geographic scope 3 Competitors 4 PEST analysis 4 SWOT analysis 6 Porter’s five forces for Coca Cola 8 Recommendations 9 Conclusion 10 Appendix 10 References 14 Bibliography 15 Introduction The company selected for this project is Coca Cola. The company is listed on the New York Stock Exchange, and stands as one of the largest beverage manufacturers in the world, producing and selling a number of branded drinks. The extensive distribution services of the company have the potential to serve 200 countries. In order to establish itself an enhanced space in the market, the company engages in social responsibilities. Coca Cola acts as a global employer and is ranked within the top 10 organisations (The Coca Cola Company, 2012). Products/services and geographic scope The company has launched some customised strategies while entering into international expansion plans. When entering into a new market, it tends to focus on business volumes. It invests in brand promotion through the use of visual and print media. Such brand promotional activities have helped the company to develop as well as to enhance its distribution. The distribution network is entrusted with the responsibility of the distribution of beverages to different corners of the targeted countries (The Coca Cola Company, 2010:23). In terms of expansion policies, Coca Cola is focusing on the creation of outsourced manufacturing, bottling and distribution that will work to cater for the local needs. The company engages in innovation in the realm of products, packaging, equipment and other activities designed to gain further penetration into both established and foreign markets. The invention of recyclable packaging through the use of plants helps to cement the company’s sustainable image. In Europe, Coca Cola focuses on enhancing its packaging activities. The family and economised plans serve the needs of all types of consumers. The company has formed ties with various sporting events, with a view to creating brand awareness and enhancing the loyalty of consumers. It has also diversified its business by entering into the production of juice and energy drinks (Bodden, 2008). Competitors Coca Cola’s main competitor within the soft drinks industry is PepsiCo; a firm that poses a serious threat to the company. Moreover, some local brands also provide some kind of competition for Coca Cola. Any kind of competition is healthy for a market, as it benefits the consumers (Porter, 1998). In spite of Coca Cola enjoying the major proportion of the market, it does not have the capability to exploit the market conditions, mainly because the substitute drinks companies have significant power. Some other competitors include RC Cola, Kola Real and Inca Kola (Bell, 2003). PEST analysis Political analysis: the company belongs to the non-alcoholic beverages group and falls under the Food and Drug administration. Coca Cola Company takes all the necessary steps in order to analyse whether the introduction of new ingredients will meet the required standards, and asks for advanced approval from the FDA. Coca Cola Company also abides by the rules set by the FDA on plastic bottled products. The company follows differentiated accounting policies which show a significant role in the reported results. According to the jurisdiction of various countries, the company is subject to income tax policies. It is also subject to import and excise taxes where outsourcing units are absent. Economic factors: before entering into a new market, the company always analyses the economic factors of the country in question. When a country experiences economic growth, the purchasing power of its population increases, enabling the company to market its products. Coca Cola currently uses 63 other currencies in addition to the US dollar. Fluctuating foreign currencies can impact revenue generation. The fluctuation of exchange rates affects the export of the products globally. The company uses the derivative financial instruction to deal with these fluctuations. Inflation involves additional cost for the company, which cannot be reflected in the price of the final product as the industry has significant competition. Social factors: the company is directly related to the consumer, and therefore social factors are important determinants. The prior marketing of a product is necessary in order to judge the culture of the country in question, and Coca Cola efficiently engages in this sort of activity. The second social factor in the industry is obesity. The governments of various countries are aware of the consequences of certain products on public health. The company has introduced diet coke, with zero calories, and targeted younger consumers with this product. The demand for its products is related to the awareness of the public, and this provides an opportunity for the company to enter into the health sector as well as the energy drinks sector. Technological factors: technology has a vital role to play in the industry in which Coca Cola operates. Both the manufacturing and the distribution of its products is dependent on low technologies, but innovation is associated with the creation of a product with a perfect blend. The process of packaging the product also involves technological contributions. The company enjoys close ties with the bottling units and maintains cordial relations with them. Advancements in technology will lead to the introduction of new ways to increase the availability of the products. The company has introduced new machines for vending across the world. SWOT analysis Strengths: the company is a reputable and globally accepted brand. The brand name is the incentive for the company to enjoy a large consumer base. Moreover, its consumers come from every corner of the world. It can therefore be said that the company successfully caters for the different tastes of all consumers around the globe, offering a variety of beverages, ranging from sparkling drinks to still beverages. Coca Cola Company is a global giant, handling market portfolios in over 200 countries. Its management is well established and can work under different socio-economic factors for development. After working across the globe in a number of different sectors, the company has developed a strong and diversified distribution base. It can handle the dealers, wholesalers and retailers in an effective fashion. In these years it has accumulated a strong monetary base, which it can use when venturing into new markets and in advertising campaigns. It has formed strong partnerships with various bottling companies, which helps it to meet the bottling requirements around the globe and avoid disruption in the supply of products in the market, which ensures a stable supply of funds to the company. Weaknesses: the company has a streamlined focus for its product offerings. The offerings are all associated with the beverage demands arising within the global markets. The company has carried out various experiments in terms of product development, which in some cases have led to disruption to various pre-existing and well-known brands. In an effort to establish demand for its products, the company has eliminated many local brands through mergers and acquisitions, which has resulted in the loss of revenues from these local brands (Pride and Ferrell, 2004:44). Opportunities: following in the footsteps of its rivals, Coca Cola has the opportunity to tap into the snack market. Pepsi, the company’s principal rival, has used this opportunity and is doing well. This diversification strategy needs to be implemented soon. A competitive situation will be created in the market and consumers will benefit. The Asian and African markets are rapidly emerging, which will fuel the demand for beverages. These markets will provide enormous opportunities for companies like Coca Cola. In an attempt to visualise the long-term perspectives, the global giant coined the term Vision 2020. Therefore the company has recently announced some strategic plans, with the help of which it has opted to exploit the emerging market conditions. The product offerings should match the local tastes. Although the company has already initiated such tastes, there is still room for development in this arena. Such strategies will cement the position of the company in global markets, increase sales and thereby enabling revenue generation to be anticipated. Despite the company having ties with bottling plants, it can now try carrying out this activity itself, setting up bottling units in major markets where the company enjoys a larger proportion of the market, on an experimental basis. If it works out, the company will no longer have to depend on its subsidiaries and will be more self-sufficient (Hall, 2004). Threats: the biggest threat for the company is PepsiCo. Both companies operate with the same market structure and target the same consumers. PepsiCo has been able to develop a huge following. The target base for both companies is the younger generation and corporate consumers. Both companies use social media to good effect; this not only increases product sales but also creates a strong brand image. Through the acquisition of the Frito Lay brand, PepsiCo has cemented its presence in the snacks market; therefore, its rivals are also engaging in diversifying their product offerings. This type of strategy has been ignored by Coca Cola up until now. The Coca Cola brand reputation came under pressure when excessive chlorine content was reported in its products. Various local start-ups are willing to capture the market share, and so competition is a major threat in the market in which the company operates. The global economy can be seen to be a threat as the society is increasingly becoming aware of health issues, and the fact that the company’s products can adversely affect the health of the consumers is no secret. Porter’s five forces for Coca Cola Porter’s model is instrumental in planning strategies that are necessary to analyse the level of competition prevalent in the operating market of a certain company. The nature of the market is irrelevant in the model. The five factors that are taken into account in the model include the buyers’ power, threats posed by new entrants, the power of suppliers, the power of substitutes and competition within the industry (Fortenberry, 2012). Threat of new entrants: it is unquestionable that Coca Cola enjoys a large proportion of the market, yet it faces some tough competition from local competitors which can deliver products at cheaper prices. In order to deal with this kind of competition, the company provides brand value. Power of buyers: the company operates in the beverage segment and is under the purview of the FMCG sector. This segment is characterised by low-priced products, and there is also fairly low product involvement.. Success for any company operating in the FMCG sector is dependent upon the methods of distribution used by the company. If buyers are not well catered for, they will move to the next available alternative. As the products are cheap and are easily available in the market, the buyers have huge market power. Power of suppliers: as the company has a large consumer base, it enjoys significant power when dealing with its suppliers. Therefore, the suppliers do not have much power. This significant authority of the global giant has been achieved through its brand image over all these years. Power of substitutes: local brands are emerging in most parts of the world; therefore, the power of substitutes is tremendously high in this industry. The power of substitutes is positively associated with distribution methods and advertising campaigns. As Coca Cola has already found its place in the minds of consumers, the power of substitutes plays a significant role in the market-capturing possibilities of the company. Competitors: the company’s arch rival, PepsiCo, offers similar products to Coca Cola, and also offers a diversified product mix. Local brands additionally offer stiff competition, with low prices and sound distribution methods. Recommendations Coca Cola needs to target the new developing and emerging markets. The company can diversify its offerings according to the tastes and preferences of the consumers in different markets. However, the main recommendation that can be made for the company is to improve its ability to diversify the products offered. Competitors within the same business structure have been taking steps to cement their presence in various other sectors, but such an initiative is still missing from Coca Cola’s strategies (Jones and Hill, 2012). The company can conduct research in order to identify the potential of the markets and make strategy decisions with long-term perspectives. Funds are to be allocated in order to conduct various social programmes with the aim of promoting the brand. Transparency is important for the success of any company; therefore, ethical foundations should be laid which will present a picture of confidence to consumers. The company’s investors will also be reassured by the long-term strategies, and investments will not be a problem in the company’s future expansion plans. Conclusion It can be conclusively stated that Coca Cola is on track to taste further success. Despite having a large consumer base across the world, the company involves itself in innovation, which paves the way for the further growth of the company. The only recommendation that can be made for the company is to diversify its products, with the aim of targeting consumers of every age group. The company has clear knowledge of its strengths; therefore, initiatives are taken by the company to exploit those strengths. The company has clear expansion plans and is socially responsible. Although competition exists in the market structure, the company is doing well in cementing its consumer base. A whole range of opportunities are waiting for the company, and the emerging markets of Asia and Africa are yet to be exploited in full. The company has introduced some zero-calorie products with the aim of targeting young consumers; it can therefore be stated that the company planners are taking the marketing segments into account. Consequently, the present and future opportunities collectively seem to be promising strong annual reports in the years to come. Appendix SWOT: The above diagram provides a representation of the SWOT analysis for Coca Cola Company. It has been mentioned that the company has a large distribution network. The distribution base helps the company to provide its products even in remote areas. The collaboration with the distribution networks is effective, so there is less shortage of supply, even in seasons of high demand (Green and Williams, 1997). The public’s increasing health awareness poses some degree of threat for the company, but it has taken some initiatives to abide by the rules and regulations of the FDA norms. The emerging markets provide a happy playing field for the soft drinks company. As Coca Cola engages in production activities in many countries, there is a high degree of export potential for the company, which is able to explore new areas of business. As the company operates in many countries, which differ in terms of culture or socio-economic conditions, the strategies it follows vary from place to place. The taste of the same product differs across continents according to the preferences of the consumers. The company exploits countries where the average income is high - here people have a larger amount of disposable income available, and therefore the company will find a place to market its products effectively. Competition within the market structure is present, and this is the cause of price competition among the players. Advertising and brand promotion involve huge quantities of funds, but Coca Cola has taken the credit crunch in its stride in order to cement its brand image into the minds of consumers. The company cannot ignore existing threats, a major one of which is the threat of local companies that are attempting to divert consumers to their shops and products. The threat of imports of well-known brands can affect the conditions of demand for Coca Cola. Rural demand is not always stable, and the company must therefore always be ready to deal with such situations without panicking. Porter’s five forces: The above picture shows the underlying principles of Porter’s five forces model. The greatest competition faced by Coca Cola is from PepsiCo and some local brands. These competitors are either globally established or in the process of becoming established. Although Coca Cola places itself among the top five beverage companies around the world, the year 2005 was not at all good for the company, and the sales levels dropped considerably. The management took the requisite steps during this period, and ultimately the company again managed to reach a sustainable path. The main problem for Coca Cola is that the company lacks diversification. If PepsiCo has a bad year in terms of soft drinks sales, it makes up the shortfall with the sales of other beverages. Moreover, it has entered into the snacks markets and offers a number of products which have cemented its place in this market. Diversification is necessary for Coca Cola at this time. The company has a wide consumer base and enjoys the confidence of the consumers, so the threat of new entrants is diminished. When a new product enters into a market, it first has to establish a brand, which provides sufficient time for Coca Cola to rule out this brand. The consumers vary across all age groups, so products are acceptable to all types of consumers. Technological advancements do play a role but most consumers tend to demand taste and attractive packaging systems. With ties with the bottling and packaging units, Coca Cola looks after its business efficiently and is anticipated to continue going from strength to strength in the following years, and to emerge as the strongest beverage company. References Bell, L. 2003. The story of Coca Cola. Black Rabbit Books.UK. Bodden, V. 2008. The Story of Coca-Cola. The Creative Company.USA. Fortenberry, J.L. Jr. 2012. Non Profit Marketing. US: Jones & Bartlett Publishers. Green, A. and Williams, T. 1997. Business Approach To Training. Gower Publishing, Ltd.USA. Hall, D. 2004. Business Studies. Pearson Education: India. Jones, G. and Hill, W. 2012. Strategic Management Theory: An Integrated Approach. Cengage Learning.USA. Porter, M. 1998. Competitive Advantage: Creating and Sustaining Superior Performance. Simon and Schuster.New York. Pride, W. and Ferrell, O. 2004. Marketing: Concepts & Strategies (12Th Ed.). United States: Dreamtech Press. The Coca Cola Company, 2010. “Advancing Our Global Momentum”. Retrieved from: http://www.thecoca-colacompany.com/ourcompany/pdf/Company_Fact_Sheet.pdf. [Accessed: 18th November 2012]. The Coca Coca Company, 2012. “The Coca-Cola System”. Retrieved From: http://www.thecoca-colacompany.com/citizenship/the_coca-cola_system.html. [Accessed: 18th November 2012]. Bibliography Bachmeier, K. 2009. Analysis of Marketing Strategies Used by PepsiCo Based on Ansoff's Theory. GRIN Verlag. Germany. Carbaugh, R. 2010. Contemporary Economics: An Applications Approach. M.E. Sharpe. New York. Doole, I. and Lowe, R. 2008. International Marketing Strategy: Analysis, Development and Implementation. Cengage Learning EMEA. London. Dost, C. 2006. International Marketing Strategies, Example: Coca Cola. GRIN Verlag. Germany. Mooij, M. 2009. Global Marketing and Advertising: Understanding Cultural Paradoxes. SAGE. USA. Pendergrast, M. 2000. For God, Country, and Coca Cola: The Definitive History of the Great American Soft Drink and the Company That Makes It. Basic Books.USA. Semenik, R., Allen, C. and O'Guinn, T. 2008. Advertising & Integrated Brand Promotion. Cengage Learning.USA. Thomas, M. 2009. Belching Out the Devil: Global Adventures with Coca-Cola. Nation Books. USA. Vault. 2002. The Coca-Cola Company. Vault Inc. USA. Read More